Any landlord or property owner wants to ensure their properties are providing a steady income. That’s why the idea of guaranteed rent is so appealing.
But what is guaranteed rent and what does it involve?
We’re about to tell you. This article will run through 5 things you might be wondering about guaranteed rent.
We might as well start at the beginning.
Guaranteed rent is a service offered by letting agents. The letting agent will lease your property for a fixed period (usually 1-5 years) and in that time they guarantee rent payments, whether the property is occupied or not.
This means even if your property is empty, you’ll still receive the agreed rent payment from the estate agent.
Whilst the guaranteed rent agreement is in place the estate agents will usually handle everything from finding tenants to property management. If you’re looking for a hands-off approach, guaranteed rent could be an ideal solution.
One of the biggest advantages of guaranteed rent is the guarantee of a steady income. This is especially appealing for landlords who rely on the rental income to cover the property’s mortgage.
Like we said earlier, once you set up a guaranteed rent agreement the estate agents handle all of the day-to-day communications and management. This includes looking for tenants, handling maintenance issues (note, you will be responsible for paying though) and dealing with any tenant complaints.
This saves you a huge amount of time and effort, you don’t need to be hands-on at all.
Since the estate agents guarantee the rent, there is no risk of rental arrears. Whether the property is empty, or the tenants are late with payment, it doesn’t impact you as the landlord.
To be able to offer guaranteed payments, the rental price is usually lower than the average market value. The estate agents need to make a profit and cover any potential void periods, so they will usually offer you less than what you could make by renting directly to tenants.
When you agree on your guaranteed rent contract, you have no minimum over the tenant selection process. This means you aren’t able to vet the tenants personally. For some landlords, this could present a concern.
Usually, a guaranteed rent agreement will last from 1-5 years. Once you agree to the contract, you have limited flexibility to pull out or make changes.
Not all guaranteed rent schemes are the same. Also, different companies will offer different levels of service.
Make sure you do your research before you sign up for any contracts. Look for companies with a strong track record and plenty of positive reviews. Also, check and double-check the terms and conditions before you sign anything!
Before signing a guaranteed rent agreement you might want to talk to someone with legal experience or a financial advisor (or both!) so you can make sure you fully understand the implications.
Make sure the contract is completely clear, paying extra attention to the duration, payment terms and the responsibilities of either party.
Guaranteed rent schemes can offer numerous benefits for landlords who are looking for a hassle-free, steady income from their rental properties.
However, make sure you take into account any potential disadvantages too. And, always make sure you read the contract carefully before you sign your name on the dotted line.
If you’d like to talk to the team LTA Direct, we can tell you more about our guaranteed rent scheme.
