Guaranteed rent is a compelling pitch also known as rent to rent. It is where a property management company takes responsibility to provide fixed guaranteed rent to the landlord by taking some percentage of interest from him.
Due to the pandemic, there is lower demand for rental properties in the UK, and financial insecurity rising. This is the reason why landlords are increasingly worried about rental arrears and lengthy voids. Now, real estate owners are taking interest in guaranteed rent schemes and their benefits. Here, the question arises, What is the guaranteed scheme, what are its benefits and how do they work?
What is a guaranteed rent scheme?
The Guaranteed Rent scheme is simply considered a rent-to-rent scheme. When a landlord signs over their rental property to a property management London company for a specified period of time in exchange for a guaranteed monthly income even if the property is not occupied by tenants.
Generally, a landlord or real estate owner hires a property management company to keep himself hassle-free from the responsibility of managing the property from the collection of rent to repairing and maintenance of the property. Not only this, the property management company offers guaranteed rent benefits to the owner of the property.
How does a guaranteed rent scheme work?
In the guaranteed rent arrangement, the rental property owner signs a contract with a middle tenant in which he guarantees to pay a fixed monthly income to the property owner. In addition, the property management company or middle tenant in return takes full control of the property and its management.
Also, the property management company will market the rental property to find tenants, do all of the tenancy administration, and handle everything related to property maintenance. The property manager will also be responsible to keep the rental property compliant with all relevant legal requirements.
Generally, the property management companies in London focus on agreeing to a guaranteed monthly rent scheme with the rental property owner whose property is below market value. The success of earning a return on investment is then on the property management. And their success depends on their ability to achieve a high enough rental income from the property to cover all expenses and generate a good profit. This is usually possible when real estate owners convert their multi-bedroom property into an HMO and earn a higher return on investment by doing several single-room lets for various unrelated tenants with individual contracts with them.
What are the benefits of the Guaranteed Rent Scheme to the Property Owner?
There are several reasons why landlords are growing increasingly interested in the guaranteed rent scheme and prefer it as an alternative:
- For landlords, it’s the most ‘hands-off’ option which keeps them hassle-free with no time or inclination to be involved in any part of the lettings process
- A guaranteed rent scheme ensures rental property owners that there is a regular, predictable cash flow and less risk of dealing with middle tenants or property managers.
- Also, there is less risk of legal eviction proceedings because property management companies such as HouseManage offers guaranteed rent in London and have years of experience in handling it.
- As a property owner, you no longer need to deal with damage and repairs
- A reliable property management company is the most reliable ‘tenant’ a landlord can find
- The rental property owner receives payment from the middle tenant even when the property is unoccupied.
Final Words:- The guaranteed rental scheme is beneficial for rental property owners. It ensures property owners that by hiring a middle tenant or property management company they will get assured fixed rent of their property even when there are no void periods for the landlord. In addition, the property management company will manage and maintain the property actively. For more information regarding the guaranteed rent scheme, and its benefits, you can contact us freely.