Being a landlord can be difficult because you can’t always rely on your tenants to pay on time, and you go through times when you don’t have tenants at all. There are options for you to be guaranteed your rent payments, but are guaranteed rent schemes worth it?
Guarantee rent is worth it because landlords are guaranteed to be paid even if the property is empty or the tenants pay late. Even though the guaranteed rent is slightly less than ordinary rent, the payments are always consistent and the rentals are hassle-free for the landlord.
It is important that you know exactly how guaranteed rent works and know all the benefits that there are if you go with guaranteed rent so that you can make an informed decision about guaranteed rent.
What is Guaranteed Rent?
Being a landlord is often an unstable business. You may have properties that are often empty, whether they are in an undesirable area or it is just a bad time in the housing market. Some of your tenants may also be unreliable. They may pay rent late or simply not pay at all.
This is especially problematic if your main source of income comes from the rent from your properties. Just because you aren’t making enough money from a property doesn’t mean you don’t still have to pay bills for your business and properties or pay your own expenses.
Guarantee rent is exactly what it sounds like. It is a way that you as a landlord can receive rent on time and in full consistently. This is the case whether the property has tenants or not, whether these tenants are reliable or not. You’ll receive checks every month no matter what; the tenants or lack thereof don’t factor into it at all.
The way it works is that you rent out your property to a company. This company will essentially be your tenant, paying rent for the property. This company will then lease out the property to individual tenants who will pay them for rent. It is not your responsibility to find these tenants, but the company that is renting the property from you.
If the property does not have any tenants living there or if the tenants turn in their rent checks late, the company will still pay you the rent in full. If the tenants leave, stop paying rent or utilities, or damage the property, it won’t affect you, but it will affect the company that is renting from you.
Guarantee rent takes away all the risks and uncertainty of being a landlord. It also takes away many of the responsibilities as well. You won’t have to worry about going out and finding tenants to fill your property or paying for damages and cleaning. The company that rents from you will usually handle all of that for you. There is less risk and less pressure for you as the landlord because you won’t have as many responsibilities and you will get paid no matter what. All you need to do is sit back and collect the checks.
Benefits of Guaranteed Rent
It is important to consider the benefits and drawbacks before deciding to take part in a guaranteed rent scheme. There are a lot of benefits of guaranteed rent that make it a good business decision.
The main benefit of guaranteed rent is that you are paid consistently and regularly no matter what. If it is a time when not many people are renting, you will still be paid the same amount. If the tenants are unreliable, you will still be paid on time. If rental prices decrease, the rent you are given won’t decrease.
You are guaranteed a certain amount of money every month, and it will be paid in full every month. Many guarantee rent schemes involve you choosing when and how often you get paid. This means that you’ll be getting your stable payment when you need it most so you can pay your own expenses regardless of how your properties are doing.
It is true that this amount of money is usually below the market value of your property. After all, the company that rents from you needs to be able to make a property. You’ll be getting a little less money in return for the stability of the payments.
Though these payments will be less than if you directly rent to tenants, you will receive them consistently, and you won’t have to worry about what happens if your property remains empty of tenants. Depending on the area and your tenants, you may very well end up making more money over time with the lower but stable payments of a guaranteed rent scheme.
Another benefit is that you won’t need to be responsible for managing properties, finding tenants, and completing repairs. The company that rents from you will take care of all that. Companies that offer guaranteed rent to landlords have their own agents that are experts in the housing market.
These agents do research and handle the search for tenants, marketing, and maintenance themselves. This is usually part of the agreement, and it means that you don’t have to worry about those things anymore.
On the other hand, you will lose some of the control that you have of the property because the company renting from you will have control. You won’t have as much say in the tenants that are staying on your property. The maintenance and design will also be under the control of the company.
For some landlords, this will give them peace of mind, but others may not want to give up their control. It all depends on your needs and desires as a landlord.
You’ll want to consider the benefits and drawbacks and look at the pricing of guaranteed rent companies. Remember that landlords will sign onto guarantee rent schemes for the stability that they offer that ordinary landlord work can’t give you. If you require a stable and consistent income from your properties, guaranteed rent is definitely a good option for you to look into.