How to handle the R2R (rent to rent) business model

Clients using Xero can put this cost directly into the accounting software as a cost of the business and not have this relationship within Arthur. 

If the client does not have Xero then please see below how to show this relationship in Arthur:

In this example, a company R2R Ltd is renting a property from Gary Plein an owner, and subletting out the rooms (units) whilst paying the owner a fixed amount per month on the property.

The R2R landlord is a cost of the business and so the owner app is not to be used.

The process is as follows:

1. Ownership

When creating the property ensure you apply Gary Plein as the owner of the property ONLY, do not add him as the owner of the rooms.

**The owner app is not to be used for R2R owners

2. Create an analysis code for this type of rent

This is money being paid out and so we have to create an analysis code for this type of rent called R2R Rent. 

Created analysis code by going to Financials > Analysis Codes > Add Analysis Code.

Select ‘Type: Receipt’,  ‘Debit or Credit: Credit’, ‘Paid to/by Property Owner’ and ensure to select the Property Owner Statement. These transactions will sit on the Property Owner Statement as a receipt and will behave as money owed to the property owner.

If this is within Arthur and the client uses Xero we recommend selecting ‘Sync to Xero as only bill’.Please note your analysis code must be mapped to Xero.

3. Create the recurring charge

You can create a recurring charge at property or unit level, depending on your Rent to Rent setup.

If you are renting a full property with multiple rentable units, you can should the charge at the property level.

Go to Unit or Property > Recurring Charges > Add Recurring Charge

Note – This example shows the recurring charge at the property level, however, there are some scenarios where you would set the recurring charge at unit level:

If the property is single let you should create the charge at the unit level.

If you rent the unit only, you should also create the charge at the unit level.

You should now see the recurring charge set:

4. Check the Property Owner Statement

You should now be able to see any existing Rent to Rent transactions on the Property Owner Statement.

Go to Unit or Tenancy > Statements > Statement: Property Owner Statement.

5. Creating the tenancy

When creating the tenancy the chosen rent is “Direct Rent” as the transaction type, meaning the rent is the demise of the R2R company an not the owner of the property owner Gary Plein

This article is linked to setting your default rent code and adding a tenancy