September 27, 2022
What is a Guaranteed Rent Scheme?
Seeking the reassurance of guaranteed rent every month? Join us as we tackle the question, ‘what is a guaranteed rent scheme’, and explore how they work and what you can expect.
There is nothing that concerns private landlords more than the issue of being paid on time every month by tenants. With rent arrears by no means uncommon, landlords are often left in the perilous position of not having sufficient income to cover mortgage repayments and bills.
With this in mind, it is no wonder so many landlords across the UK are seeking out guaranteed rent schemes. But just what is a guaranteed rent scheme, and how does it work?
How do rent guarantee schemes work?
With a guaranteed rent scheme, in place of renting your property directly to tenants, you let it out to a specialist letting agent. The agent then becomes your tenant.
An agreement is made for a set period. This will usually run for anything between three and seven years. For the entire duration of the agreement, an agreed rental rate will be paid to you every month. This continues even if there are no tenants in the property, or the tenants are not paying their rent. In other words, all those major issues become a thing of the past.
Sourcing tenants is usually down to the agent, so you don’t have marketing costs to worry about either.
Guaranteed rent scheme agents work closely with council housing departments and housing associations. They let private landlords’ properties through them, helping them tackle local homelessness issues.
Can’t I just let my property directly through the council?
Whilst it is possible to let your property directly through a council private sector leasing scheme, sometimes you may find that you won’t enjoy as many benefits as you would by letting through a guaranteed rent letting agent.
For example, most guaranteed rent schemes will involve the agent taking over the daily management of the property, and some (beware – not all) will cover all the costs of doing so. Others may promise to return the property in its pre-let condition, less fair wear and tear. These are factors you may wish to check with your individual guaranteed rent scheme provider.
What does a guaranteed rent scheme include?
When explaining what is a guaranteed rent scheme, it’s important to also cover what you can expect to find included.
As we’ve already mentioned, some rent guarantee agents will include the management and costs of everyday repairs and maintenance, and will guarantee that your property is returned to you its pre-let condition at the end of the agreement, allowing for fair wear and tear.
In addition, you may also find that the likes of regular property inspections are included. These are important, as they provide the opportunity to make sure your property is being taken care of by the tenants in line with the tenancy agreement.
Does a guaranteed rent scheme pay full market rent?
A guaranteed rent scheme will pay the landlord a fair rent every month. Whilst this may not necessarily match what you could achieve if you were to let directly to tenants, it’s important to take into account all the other benefits that come with the scheme and consider the costs that they would add to your outgoings, and the pressure they would put on your time.
Daily tenant management for example can be very time consuming. Late night calls about broken boilers can become very tiresome, and having to cover the costs of sending an electrician to deal with tripped electrics or a locksmith to fix a broken lock can soon build up.
Interim property inspections will also add to your costs if you have to cover them yourself every quarter. Not to mention the outlay for sourcing tenants, and covering the costs of void periods.
A guaranteed rent scheme keeps things simple and, whilst it may not pay full market rent, it could actually end up saving you time and money in the long run.
Is a guaranteed rent scheme the same as rent guarantee insurance?
The short answer to this question is, no.
Rent guarantee insurance is a specialist type of cover that pays only when a tenant fails to pay their rent. Usually there will be a need for a month’s arrears before the payments kick in, and most policies will only pay for 12 months. There is also usually a claims limit, which isn’t always as much as the monthly rental payment, and an excess will sometimes apply too.
Loss of rent cover is different in that it covers landlords when they can’t let their properties due to damage covered on a buildings insurance policy, for example fire or flood.
A guaranteed scheme, on the other hand, assures the landlord that rent will be paid every month by standing order, for the entire duration of the agreement. This includes times when the property may be empty or the tenants are not paying their rent.
Interested in a guaranteed rent scheme?
City Borough Housing offers a guaranteed rent scheme to landlords in London and parts of Kent and Surrey. The scheme is backed by an exclusive service promise and fully comprehensive professional property management.
Property management, everyday repairs and maintenance, quarterly property inspections and a promise that your property will be returned to you in its pre-let condition at the end of the agreement, allowing for fair wear and tear, are all part of the deal.
To discover more about how our guaranteed rent scheme could benefit you as a landlord, you are welcome to get in touch with our helpful team. Why not request your free rental valuation today?