Renting out properties can be a profitable venture for landlords, but it comes with risks too. And while not receiving rent on time or at all can be a common dilemma for many landlords, there’s a scheme called “guaranteed rent” that aims to protect landlords with an assurance of consistent income.
Although it seems – and certainly looks – like a win-win solution for landlords, it isn’t without its ups and downs. In this blog, we’ll explore the Pros and Cons of Guaranteed Rent so that you can make an informed choice for your property.
What Are Guaranteed Rent Schemes
In a nutshell, these schemes let you handle the process of finding tenants and managing the property with a third party, who then pays you a set amount of rent each month, regardless of whether the property is occupied or not.
In many cases, these schemes are offered by local authorities or housing associations looking to secure properties for social housing purposes. While guaranteed rent schemes can offer peace of mind to landlords, it’s worth noting that they often come with certain restrictions, and we’ve talked about these later in this article.
So, if you’re considering going down this route, it’s important to weigh up the pros and cons to decide whether it’s the best fit for you and your rental property. Looking for guaranteed rent in Croydon? Check out City Borough Housing for more!
Guaranteed Rental Schemes assure landlords of a guaranteed income regardless of any occupancy issues or payment delays from tenants. With such a scheme, the landlord agrees with an agent, who is the guarantor of the rental payments. The landlord continues to collect rent from the agent even if there are long vacancies in the property. Thus, this option provides rent certainty, which is a very lucrative incentive for landlords.
Another advantage of guaranteed rent is that it frees landlords from the hassles of tenant management and the responsibilities that come with it. Your agent who will provide this scheme will look after issues like maintenance and repairs, property inspections, finding tenants, and legal compliance.
Furthermore, guaranteed rental schemes offer landlords a sense of security that their properties will remain in good condition throughout the year. This is because the agent has the incentive to maintain your property’s condition as they need to keep it fit for tenancy.
Although cash flow certainty, less work obligations, and property protection are undoubtedly attractive, guaranteed rental schemes do come with some downsides. The landlord’s revenue under guaranteed rental models will likely be lower than what they could earn from renting in other ways, such as via the standard private rental market or high-yield holiday rentals. Agents who provide guaranteed rental services will, therefore, charge a fee for the service equal to a portion of the rent earned by the landlord.
Another disadvantage of the guaranteed rental plan is that landlords will not have full control over their properties. With guaranteed rental schemes, landlords usually need to entrust their properties to an agent, who will manage all tenant-related issues. Thus, landlords won’t have the privilege of choosing tenants and the right to decide when to refurbish their property.
Besides, Guaranteed rental schemes have fixed contract lengths, which means landlords won’t have the flexibility to sell the property or terminate an agreement until the end of the contract. Although the Revenue may be guaranteed, landlords would be adhering to predefined contracts without the power to break them.
It is essential that when faced with the decision of whether to opt for a guaranteed rental scheme or not, landlords carefully review all the advantages and disadvantages of such a scheme before making a commitment decision.
With less work, guaranteed rent, and fewer management duties – it seems like a good option at the onset.
Still, as seen earlier, it also involves a loss of control over your property and income generation. In conclusion, the choice lies with the landlord, taking into account the advantages and disadvantages presented in this blog to make the best decision they can for their property and circumstances.