One of the biggest concerns for most landlords is that they will not be able to fill their property with paying tenants every month. Guaranteed rent services can be an attractive option, especially for those who have had difficulty letting their properties in the past, or who have had to deal with non-payers. But can they really be cost-effective, or are they more likely to cost landlords money than to help them?
What are guaranteed rent services?
A guaranteed rent service gives landlords the security of knowing that they will have a regular income from their property. Landlords usually have to sign their property over to a letting agent for a fixed period of time, during which the agent will pay the landlord an agreed amount every month. This is usually a little less than the market rent. The agent is then responsible for getting tenants into the property and getting them to pay. They are also able to keep any profits that they make on the property. Effectively, the landlord sells their risk of having void periods or tenants in arrears to the agent.
Should you consider a guaranteed rent service?
Guaranteed rent services can work well for landlords who are not confident that they will be able to get reliable tenants in every month. While there is a shortage of good quality rental property in much of the UK, arrears are continuing to rise. For landlords who need their regular monthly rent payment in order to be sure of paying their mortgage, a guaranteed rent service can be ideal. ‘Accidental’ landlords in particular may feel that security is more important than profit.
For those who see being a landlord as a business that they want to grow, using a guaranteed rent service could be a mistake. With profits kept by the rent guarantee company, how can landlords find the money to expand? Expansion brings its own security, as landlords who have several properties are usually able to use the profits from one to cover the costs of arrears or void periods on another. It can be a good idea, though, to look at landlords insurance that includes rent guarantee cover. This may not offer quite the same security as a guaranteed rent service, but should help cover short-term blips, especially for landlords who are still working on building up their business.