Rent-to-Rent (R2R) Deal Calculator
Monthly Net Profit:
Annual Net Profit:
Return on Investment (ROI):
Break Even Point:
Understanding the R-to-R Rate Calculation
Rent-to-Rent (R2R) is a popular property investment strategy where an investor leases a property from a landlord for a guaranteed monthly rate, and then sub-lets the property (usually as a House in Multiple Occupation or Serviced Accommodation) for a higher rate to generate a profit margin.
Calculating the "R-to-R Rate" involves assessing the spread between your outgoing liabilities and your incoming revenue. Unlike traditional buy-to-let, you do not own the asset, so your primary metric is the Return on Capital Employed (ROCE) or ROI based on your setup costs.
Key Formula Components
- Gross Revenue: The total amount collected from sub-tenants or guests.
- Guaranteed Rent: The fixed amount paid to the property owner regardless of occupancy.
- Operating Expenses: These typically include Council Tax, Water, Gas, Electricity, Broadband, Cleaning, and Minor Maintenance.
- Setup Costs: The "Sunk Costs" required to start the deal, including furniture packs, light refurbishments, management agreements, and insurance.
Example Calculation
If you rent a 4-bedroom house for $1,200/month and sub-let each room for $600, your gross revenue is $2,400. If your bills (utilities/cleaning) total $400, your calculation is:
$2,400 (Revenue) – $1,200 (Rent) – $400 (Bills) = $800 Monthly Profit.
If it cost you $4,000 to furnish the house, your ROI would be ($9,600 Annual Profit / $4,000 Investment) × 100 = 240% ROI.