Guaranteed rent: A landlord's path to peace of mind

‘Guaranteed rent’ or ‘rent to rent’ as it is often known, has become an increasingly popular business model in the private rented sector. In this guest blog, guaranteed rent and property management experts, Elliot Leigh, explain the benefits of guaranteed rent and how you can weigh up the pros and cons to decide whether it is the right option for you.

Being a landlord can be a great way to generate income and build wealth. However, it also comes with its own set of challenges, such as finding good tenants, dealing with maintenance issues, and collecting rent on time.

Guaranteed rent can help landlords address some of these challenges and provide peace of mind. But what exactly is guaranteed rent, and how can it benefit landlords?

What is guaranteed rent?

Guaranteed rent is a service offered by a third party, such as a property management company. Under this arrangement, the property management company guarantees the landlord a fixed monthly rent payment, regardless of whether the property is occupied or if there are any issues with the tenant paying rent.  

Under this system, the landlord essentially leases their property to the third party for a specified period (often one to five years), and in return, they are guaranteed consistent rent payments.

Benefits of guaranteed rent for landlords

There are several benefits to using a guaranteed rent service, including:

• Peace of mind: Guaranteed rent provides landlords with peace of mind knowing that they will receive a steady stream of income from their rental property, even during vacant periods. This can be a huge relief for landlords who rely on rental income to cover their mortgage payments or other expenses.
• Reduced risk of rent arrears: One of the biggest challenges for landlords is dealing with tenants who are late or fail to pay rent altogether. Guaranteed rent eliminates this risk, as the property management company is responsible for making sure that the rent is paid on time.
• Fewer administrative duties: Landlords can embrace offloading key administrative duties to their guaranteed rent company. This could include saving significant time with advertising, tenant screening, various legal safety checks and keeping up with general landlord legislation.

Is guaranteed rent right for you?

It is important to weigh up the pros and cons before deciding whether this is the right option for you as a landlord.

Here are some things to consider:

• How much time can you give to the management of your property? Guaranteed rent schemes allow landlords to take a much more hands-off approach to property management. This can be especially appealing for landlords with multiple properties, a busy schedule, or those who live far from their rental property and want to minimise their involvement in its day-to-day operation.
• Do you have a plan in place for 24/7 maintenance? Without a property management service, day-to-day maintenance and tenant complaints fall under the responsibility of the landlord. If a property requires frequent repairs, having a guaranteed rent company may reduce the burden on the landlord. Saving the hassle of having to coordinate repairs, schedule tradespeople, or respond to emergency calls.
• Your own risk tolerance: If you are comfortable with some risk of vacancy and rent arrears, then guaranteed rent may not be necessary for you. However, if you value peace of mind and a steady stream of income, then guaranteed rent can be a good option to reduce financial stress.
• Long term commitment: Guaranteed rent works by landlords entering into a long-term agreement from one to five years, limiting flexibility to adjust to market changes or reclaim the property for personal use. Something to consider if you have plans to sell your property in the near future.

Do your due diligence

When choosing a guaranteed rent provider, it’s crucial to conduct thorough due diligence to make sure of a secure and beneficial partnership. Start by researching the company’s reputation, checking reviews, and asking for references from other landlords. Carefully review the contract terms, focusing on maintenance responsibilities, termination conditions, and any hidden fees. Clarify what happens in cases of property damage or eviction, as some providers may pass these costs onto landlords. Consulting a legal professional before signing can help identify any potential issues and make sure you’re working with a reputable, reliable provider.

“Guaranteed rent schemes, when carried out correctly by a reputable provider such as Elliot Leigh, can offer many benefits to landlords. However, if a guaranteed rent service is not carried out diligently, the landlord loses control of the property, and this is where the problems begin. I speak from being at the sharp end of dealing with evictions, so would advise any landlords entering into such an agreement to tread carefully and make sure they are using a reputable provider. This will be particularly important when the Renters’ Rights Bill comes in, as landlords will no longer be guaranteed vacant possession at the end of the agreement. If the tenant refuses to leave or the guaranteed rent provider disappears, landlords may struggle to get their property back once Section 21 is no longer an option.”

- Paul Shamplina, founder of eviction specialists, Landlord Action

Guaranteed rent can be a valuable scheme for landlords who want to reduce the risks associated with letting out rental properties. If you are a landlord looking for an alternative to traditional letting, a guaranteed rent scheme may be exactly what you’re looking for. Visit Elliot Leigh’s website where you’ll find a short quiz to find out if your property is eligible for guaranteed rent.

For more information on guaranteed rent, read, ‘The ultimate landlord guide to rent to rent’ from mydeposits and the Property Redress Scheme’s article, ‘How does guaranteed rent work?’.

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