Project Description
Key Takeaway
Guaranteed Rent!! – AKA – Rental Income Protection Strategies
We define guaranteed rent strategies as measures that a property landlord should consider when renting out properties if they have concerns on the following:
- Regular Income
- Concerns about non-paying tenants
- Concerns about court fees and evictions
Note: As guaranteed rent/ rental income protection strategies do not in all circumstances protect your rental income 100%, read the small print and look at the credibility of the party offering it to you.
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Methods of guaranteed rent:
- Council backed guaranteed rent: the council rents your property from you (1)
- Letting agency guaranteed rent: a private agency rents your property from you (1)
- Insurance policy : you get insurance to protect you against loss of rent (2)
1. Letting agencies and council backed guaranteed rent
In the market there are management companies in the market that will lease properties off landlords and off them guaranteed rent for a number of years. Note normally the rent rates will be below market value so understand the discount.
Typical advantages and perks offered
No bills, no council tax & no worries
Flexible leasing to suit you 1- 5 years
Guaranteed option to extend the lease
No void/vacant periods
No difficult tenants to deal with
GUARANTEED rent paid every month
Disadvantages and restrictions to consider
Lock in period on lease
Often below market rents
Limited say on who tenants are
Can be timely to set up in some instances
2. Insurance
In the market there are insurance policies that can protect rental income. We have laid out below some of the types of policies but you should do you due diligence and read the small print.
Use to cover the landlord the amount of rent you would have received over the period where the property was unoccupied. This is often a suitable option if the property is unable to be insured for any reason against for example flood damage or fire.
Rent guarantee insurance is a policy to cover rental income should tenants find themselves unable to pay their rent.
There will be conditions required to get the coverage, such as:
- Tenancy agreement in place
- Tenants have successfully been referenced
This should be seriously considered, as it takes on average 10 months to evict a tenant. Ask yourself are you in a position to take the risk.
Make sure the policy provides sufficient cover. Understand the maximum number of months and the total value of unpaid rent that can be claimed.
Additional perks of the policy could include:
- Legal expenses
- Access to solicitors
- Assistance in recovery if rent
- Assistance in repossession or eviction processes
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