Property Investors often manage properties themselves or instruct an agent on their behalf. Though not all, there is another way.
Other property investors will rent to another Landlord perhaps a local business, local authority, housing associations or other Landlord.
A common phrase being rent-to-rent or SubLet.
Renting in this way will typically require a “special” mortgage given that your standard buy-to-let mortgage will permit renting on a single household basis usually with an only Assured Shorthold Tenancy (AST).
Buy-to-Let Lenders often do not permit other types of contracts.
On a survey of 56 Buy to Let Lenders:
- 33 do not permit subletting
- 09 had implicit restrictions
- 14 permit subletting, in theory
With 25% allowing subletting we should tamper the excitement and suggest they too would be conditional.
One common condition was to allow the renting to Local Businesses only, who would rent to there employees. Some Lenders suggested that the employees would have to be named on the agreement. Other Lenders that it had to be a large corporate business with over 1,000 staff.
Other lending conditions were that ensuring that the end tenant was “suitable” by there definition. Therefore preventing a contract with an organisation that houses “vulnerable people”. Ruling out housing associations helping with drug rehabilitation for example.
We have had cases declined where the end tenant would receive Housing Benefits (LHA/Universal Credit).
Others buy-to-let lenders said it was by “case by case” basis.
As well as restrictions on the type of subletting organisation that will be permitted. Other typical mortgage conditions remain.
If an organisation wanted to use the property as an HMO or AirBnB, then you would require a mortgage that allowed both Subletting and HMO. That permitted Subletting and Airbnb.
Those landlords wanting to enter into these contracts will find the Buy-to-Let Mortgage Market Restricted. Limiting the products so you may not get the market leading rates.
The takeaway from this article:
- You can get mortgages to sublet.
- The sublet mortgage market is restricted.
- If you are subletting check your mortgage conditions.