What Is The Best Guaranteed Rent Service For Landlords?
Guaranteed rent schemes are a fantastic opportunity for landlords looking to let their property for a secure monthly rental income. In the last few years, there has been a noticeable growth in the number of companies and schemes offering guaranteed rent.
From property management companies to local councils, opportunities for guaranteed rent for landlords have been growing across the UK. But what are the best options for guaranteed rent for landlords? Are there any models to watch out for or potential problems landlords should look out for?
What Does Guaranteed Rent Mean?
Firstly, let’s ensure we are all on the same page about what we mean when we say; guaranteed rent. We aren’t here to discuss schemes which pay landlords based on property performance each month depending on bookings. We are here to talk about receiving rent every month, guaranteed under contract for however extended an agreement lasts.
Guaranteed rent agreements like this only happen when a company or local authority offers to manage your property and sublet it to clients or tenants of theirs whilst agreeing to pay you a set figure for rent each month of the agreement you sign them.
Generally, guaranteed rent agreements can last for a few months or several years. It depends on the landlord and how long they’re happy to let their property through any scheme! The rent a landlord receives varies depending on who they decide to let their property to. Still, generally speaking, most offers for guaranteed rent will be close to the market rent value of that property, with a few exceptions.
Guaranteed rent schemes all work around subletting, as the company that takes over your property is essential, moving in tenants or guests as a middleman service. We’d like to add at this point that whilst there are landlords with plenty of reservations about subletting, it’s perfectly legal to let out your property in this manner, and a lot of the issues you hear from subletting or similar scenarios to this are the results of poor property management (which we will also be discussing as we carry on).
Signing up for a guaranteed rent scheme provides landlords with payment security and protection against voids. Whilst it is possible to receive guaranteed rent from private tenants if you ask them to pay their rent in advance, this is quite a stretch for most landlords, as finding tenants that can pay that much money in advance is a challenging thing!
Let’s now look at various opportunities for guaranteed rent that landlords can take advantage of whilst considering the pros and cons of each method.
As a landlord, you can let your property, as a holiday let using popular platforms like Airbnb, receive a much boosted rental income from a higher nightly stay than traditional letting. However, running a holiday let can be exhausting, and only some landlords have the time to spare to keep up with the demands for a popular holiday let.
Landlords can take advantage of the many holidays and let companies (especially those specialising in Airbnb management) take over your property and pay you guaranteed rent each month. Holiday lets companies do this by booking your property months ahead of time and thus guaranteeing the rent you’ll receive; sometimes, they even offer to pay in advance!
However, there are issues with opting for this model of guaranteed rent. Your property will receive a lot of bookings throughout the year, particularly in popular areas such as London. Whilst the majority of guests will only stay for a few nights to a week, that is a lot of people coming and going through your property, so expect wear-and-tear to become a thing, as well as to receive calls from neighbours if there are any noise disturbances (which there usually are a lot of throughout a year!).
Issues with wear-and-tear will mean property maintenance. Unfortunately, whilst you have an agreement with a company to run the property, it’s very rare for a holiday letting companies to take care of maintenance by themselves. Even in cases where they do, they still charge the landlord for all repairs and works carried out at the property (and in some cases, they can overcharge using expensive contractors!).
This affects the profits a landlord can expect to receive despite receiving guaranteed rent each month. Still, equal to this issue is that landlords often join schemes like this expecting their property to be well looked after and managed, only to be increasingly involved in looking after their property themselves. Many holidays let companies put a significant markup on nightly stays at a property but keep the profits for themselves, sometimes even charging landlords fees for their “services”, which can reduce the rental income a landlord receives!
The holiday letting model is also not without risk of instability. During Covid-19, many companies went bust when they could not continue to pay their landlord’s guaranteed rent as bookings dried up. Whilst the pandemic might seem like a one-off, the model is still vulnerable to a crisis if bookings begin to dip or operational costs at the company start to exceed profits, so landlords should be wary of which company you use to holiday let your property!
Local Council/Housing Schemes
In most areas across the UK, your local government authority is likely to be looking for additional options for housing people. Councils across England have been upping their game in recent years to offer landlords guaranteed or slightly better rent for their property (depending on size and classification) whilst also taking on maintenance and management at the properties they acquire.
Now on the surface, this sounds like an incredibly attractive proposition for landlords. Your local council paying your rent each month is one of the strongest guarantees for rent anyone could ask for. On top of that, they’re offering to manage your property for you and deal with any maintenance that needs doing – surely this is what every landlord wants to hear?!
However, issues with a council or local housing schemes do exist. Incidents of anti-social behaviour and noise disturbances can be pretty common. Landlords may find their phone ringing at all hours from neighbouring properties, depending on the tenants living there. Additionally, just because maintenance is supposedly being taken care of, does not mean that high property wear-and-tear isn’t a thing landlords won’t ever have to deal with.
By the time a landlord has reached the end of their letting agreement with a local housing authority or council, they may well have had enough already from the stress of letting their property, as well as find a host of maintenance issues they will now have to deal with before they can let their property to a regular tenant again.
The promise of guaranteed rent is worth a lot to many landlords, but everyone has their limits for stress and dealing with issues!
As you might have guessed from the title, corporate letting involves letting your property to a company, which takes it over to house their employees at the property. This can be due to short-term contracts for workers or permanent relocations. Corporate let’s are fantastic opportunities for landlords looking for ideal tenants. Well behaved, invested in looking after the property (as they don’t want to fall out with their employer who is paying for them to live there!) and receiving rent each month guaranteed by the company who take over your property.
Corporate tenancies are one of the most secure and reliable guaranteed rentals a landlord can find. Larger cities like London, Manchester and Birmingham are incredibly popular for corporate lets. There are plenty of opportunities to sign flexible agreements that can last for years!
However, one noticeable drawback you may have just noticed is that corporate let agreements tend to be most prevalent in larger cities, potentially limiting the accessibility for landlords in less populated towns or rural areas. Additionally, corporate housing has very high standards, which means not every landlord will have a property that meets the requirements for corporate letting.
Let Your Property Better For Guaranteed Rent
While the options we have just gone through have their strengths and weaknesses, they are just a few examples of guaranteed rent schemes landlords can opt for. Many hybrid models for guaranteed rent combine different features from traditional letting and the options we just went through.
However, as we pointed out earlier when discussing holiday lets, the quality of these models will vary between providers, and landlords should be careful when considering who to partner with when opting for guaranteed rent schemes.
If you’re a landlord with a property in London, see if you can benefit from their alternative to property management for London landlords and discover what other options you might have for letting your property!