February 29, 2024

Is Guaranteed Rent Worth it?

Is guaranteed rent worth it?

The world of property management is filled with uncertainties and risks. As a landlord, you must attempt to secure new tenants, ensure rent is paid on time, and deal with property maintenance and tenant queries.

Guaranteed rent schemes have become popular as a way to overcome and mitigate some of these risks for landlords. But are rent guarantee schemes worth it?

In this post we’ll examine what is involved with guaranteed rent and the benefits and drawbacks of guaranteed rent schemes. We’ll then answer the common question, is guaranteed rent worth it?

What is guaranteed rent?

Before we answer the question “Is guaranteed rent worth it?”, let’s re-cap on what guaranteed rent means.

A guaranteed rent scheme is an agreement between a landlord and a third-party provider who is typically a property management company or agent.

This company effectively acts as your tenant. They pay you an agreed guaranteed rent each month for a fixed period which is usually anywhere between three and seven years. The rent they pay you may be slightly below market value, allowing them to earn a small income. But the savings you make in other ways, and the peace of mind you gain, make it worth the slight deficit in rent.

When you rent your property via a guaranteed rent agreement, it becomes the responsibility of the agent to source and manage tenants, and to maintain the property.

If your property sits empty for any length of time, you will still receive your guaranteed rental payment. If tenants are late with their rent or fail to pay, this is not your issue. You still get paid, come what may.

Is guaranteed rent worth it? What are the benefits?

Let’s look now at the benefits of using a guaranteed rental scheme and identify any drawbacks.

Stable income stream

One of the most significant benefits of guaranteed rent is the assurance of a stable income stream. Landlords of course rely on a fixed amount of income every month for financial stability and to pay overheads.

Renting out properties is often risky, especially when the property sits empty. You may spend time struggling to find suitable tenants, or dealing with those who are unreliable.

With guaranteed rent schemes, you will be paid in full every month regardless of what is happening in the property, with tenants, or even in the rental market.

Whilst some might argue that you are receiving rental income at less than the market value of your property, there is no denying that there is less associated stress with receiving a regular monthly income no matter the circumstances.

Are rent guaranteed schemes worth it? From the point of view of receiving a regular, stable income, then yes, rent guarantee is worth it, as well as crucial for landlords who need it to meet their own expenses.

Mitigating void periods

Void periods can be a landlord’s worst nightmare, leading to financial strain and uncertainty.

With guaranteed rent, however, landlords are shielded from the impact of void periods. Whether the property is occupied or not, you can rest easy knowing that you will receive a steady income.

Risk reduction in tenant defaults and evictions

Tenant defaults are another common concern for landlords. Unforeseen circumstances, such as job loss or financial difficulties, can lead to tenants falling behind on rent.

Tenant evictions are costly and stressful for landlords, and this again is something you won’t have to worry about with guaranteed rent.

Whilst landlord insurance will usually pay out on rental payment defaults, you have to wait for a minimum time period before you can claim, and you will usually only be able to claim for a set length of time.

Are rent guaranteed schemes worth it? To avoid having to chase tenants for payments, then yes, they are. Rent guarantee schemes offer a safety net by covering missed payments, ensuring that landlords receive their rental income even if the tenant faces their own challenges.

Streamlined property management

Owning property undoubtedly means having to make regular repairs and maintenance and this can be another pressure for landlords to deal with in a timely manner. Engaging with a rent guarantee scheme often means comprehensive property management services are included.

Is rent guarantee worth it? With regards property management, landlords can benefit from the convenience of a one-stop solution, saving time and effort on day-to-day property management tasks.

Reduction in administrative tasks

Dealing with the administration and legal obligations associated with renting out a property can be cumbersome. There are the administrative tasks relating to marketing, legal issues and lease agreements, as well as liaising with tenants day to day.

A guaranteed rent scheme relieves the administrative burden of being a landlord.

Opportunities for new markets and aiding the housing crisis

Using a guaranteed rent scheme can access new areas for rental that you may not have considered before.

Some guaranteed rental schemes have successful partnerships with local authorities. Renting your property to the council, for example, means that your tenants may be a family or individual who are in need of somewhere to live. You can take pride in knowing that you have played your part in easing the housing crisis and helping a family in need.

Peace of mind and reduced stress

Perhaps one of the most underrated benefits of guaranteed rent is the peace of mind that it offers. Landlords can experience reduced stress knowing that their rental income is secured, even in challenging circumstances.

Maintenance and repairs are handled by the guaranteed rental management company who have forged good relationships and prices with people that they use on a regular basis.

This relief allows landlords to focus on other aspects of property investment, or to enjoy more family or leisure time.

The flipside is that you will lose some elements of control. You will not have a say in choosing tenants, as this becomes the decision of the guaranteed rental management company.

Wondering if rent guarantee is worth it? Talk to City Borough Housing.

So, is guaranteed rent worth it? For many landlords, the answer lies in the balance between the benefits offered by such schemes, and individual risk tolerance.

The stability, risk mitigation and comprehensive property management services provided by guaranteed rent schemes make them a compelling option, particularly in uncertain economic climates.

Before making a decision, however, you should carefully evaluate the terms and conditions of the rent guarantee scheme, considering factors such as fees, maintenance coverage limits and the reputation of the service provider. It is essential to choose a reputable and transparent partner to ensure a positive and mutually beneficial relationship.

City Borough Housing offers a fast and friendly service with no hidden fees. We operate throughout London, as well as parts of Kent and Surrey.

We are backed by a high quality property management service, which means that costs of everyday repairs and maintenance are all included in our service.

We will guarantee that your property is returned to you in its pre-let condition at the end of the agreement, allowing for fair wear and tear. Regular property inspections are also included, ensuring your property is being taken care of in line with the tenancy agreement.

To find out more about guaranteed rent schemes and how they work, and to request your free property valuation, please get in touch.

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