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The Pros and Cons of Guaranteed Rent for London Landlords

Guaranteed Rent is a type of an agreement where a company or individual such as guaranteed rent agents London take an interest in a property for a period of time, paying a fixed rental amount to the owner. The owner or landlord provides their consent for the renter to let the property out to other tenants, who become legally liable for the rent. A guaranteed rent scheme in London is, simply put, a way of subletting a property. In this case landlords, rather than being responsible for finding tenants themselves, managing the property, and collecting rental payments, will pass over this responsibility to the renter. The renter can then set their own rental prices for tenants, find and house tenants in the property, and will be responsible for property management while the landlord receives a set rental amount paid by the renter.


In London, the landlord passes the renting responsibilities to the renter.

How Does Guaranteed Rent Benefit Landlords?

According to UpperKey, one of the main benefits of this type of agreement for landlords is that it provides a guaranteed rental income from the property regardless of whether or not somebody is living in it. Even if there are tenants in the property, as they are responsible for paying the renter and the renter is responsible for paying the landlord, the renter will still be liable to pay the fee to the landlord even if the tenants residing in the property do not pay, meaning that it is a method that carries a much lower risk for landlords compared to renting the property out directly to tenants. Unlike with property management schemes, where the landlord appoints a company or individual to be responsible for looking after the property, guaranteed rent does not incur management or letting fees.


How Does Guaranteed Rent Benefit Renters?

When the guaranteed rent company London takes a lease of the property from the landlord, they are effectively renting the property to become the landlord themselves and can legally sub-let it out to other tenants rather than live in it. In many cases, guaranteed rental agreements allow renters to determine how much rent they are going to charge the tenants that they find to live in the property, allowing them to make a profit from sub-letting. Renters are expected to comply with all the various issues and laws that would generally be covered by an agent or landlord, say UpperKey. For example, if they wish to make more money from a larger property by renting out each room as an HMO or house of multiple occupation, they will be required to get the appropriate license.


Pros and Cons of Guaranteed Rent for Landlords

If you own a property and want to make a rental income from it, then guaranteed rent in London may be something that you are considering. However, before you decide if this is the best option for you, it’s worth weighing up the pros and cons.


Pros:

· Council perks, such as free accreditation or exemption from council fees

· Make a social difference by allowing individuals to make a profit alongside you on the rental property, or provide social housing by entering into a guaranteed rent scheme with a local council or housing association

· Stable income on rental properties located in less desirable or low growth areas

· Guaranteed monthly income regardless of whether or not the tenants living in the property keep up with rent payments

· No responsibilities for maintaining or managing the property as these are passed over to the renter


Cons:

· The income you receive from the property may be lower compared to other rental schemes or renting the property out directly to tenants

· It can be quite time-consuming to set up, in which case the property may be sitting empty

· No or very limited say in who the tenants that are actually living in the house are going to be


Advantages of Guaranteed Rent

More and more buy to let landlords are considering guaranteed rent London schemes to help ease some of the burdens that they deal with as a landlord. If you own a rental property, then a scheme with London guaranteed rent companies can be a good way to make sure that you are at a lower risk of issues like rent arrears problems, which can often be very serious for private landlords and other buy to let investors. Along with this, with guaranteed rent, landlords are no longer responsible for the property as this is passed on to the renter. This means that for the duration of the agreement, you will not need to worry about things such as property maintenance, keeping the energy efficiency rating appropriate, etc.


Landlords are opting for guaranteed rent for stress-free management.

Disadvantages of Guaranteed Rent

While there are certainly many pros to consider before getting into a guaranteed rent for landlords London scheme, weighing up the cons will also help you determine if it is right for you. For some landlords, completely letting go of all control over their property is not an option. Bear in mind that once the guaranteed rental scheme has ended, you may be financially responsible for many any repairs to the property. This can be worrying for some landlords, especially as in the case of a guaranteed rental scheme, once you have passed over responsibility to the renter, you may have little to no say in who becomes the tenant actually living in your property.


Along with this, the rental income that you will earn from guaranteed rent might be paid to you even if the property is empty, but it is often much lower compared to what you could earn from renting out the property privately yourself or going through a property management company, which is worth considering, especially if your property is in high demand and unlikely to be standing empty for any lengthy period of time.


Guaranteed Rent Options to Consider

A council guaranteed rent letting agent London scheme is one of the most popular options for London landlords, involving the local council becoming the renter of your property and letting it out for a fixed period of time. This not only allows landlords to provide social housing, but also means that you have a trustworthy renter, the local council, who will directly pay you a rental fee each month for using your property as a council property, while collecting rent from their own tenant.


Another option that you may be interested in is a guaranteed rent scheme with a private company as the renter. For example, companies such as UpperKey can rent your property with the intent to use it as a short-term let property or a holiday home. They will pay you a fixed monthly rental fee while advertising and managing your property for short stays, which can be an ideal option to consider if your property is located in a popular tourist area or a big city where people are often looking for somewhere to stay for just a few nights.


How to Get into a Guaranteed Rent Scheme

If you own a rental property and are interested in a guaranteed rent estate agent London scheme, then this will normally involve entering into a contract with a third party. This could be a private company, property management company, a letting agent, the local council, or even a trusted individual who is interested in doing business with you. Once the contract is signed, control of your property is signed over to the renter, who will effectively be paying you rent to manage your property as the new landlord. A fixed monthly rental income that has been pre-agreed by you and the renter will then be paid to you over a set and agreed period of time, regardless of whether or not there are tenants in situ in the property at the time. Even if the house is empty, this means that you will still be receiving the rent as the renter is liable to make those payments.


The guaranteed rent scheme involves getting into a contract with a third party.

Guaranteed Rent Schemes vs Rent Guarantee Insurance

If you are a landlord, then you may have heard of – or even have – rent guarantee insurance. However, this isn’t to be confused with a guaranteed rent scheme, as it works differently. Unlike guaranteed rent where a renter takes over and becomes responsible for the property, guarantee insurance is a type of insurance policy for landlords that is taken out to cover the rental income if tenants fail to make the payment. This is also different to loss of rent cover, which is another type of insurance that landlords can take out to claim on if the property stands empty for a certain period of time as it is no longer able to be rented out due to damage that is covered by your buildings insurance policy. Unlike guaranteed rental schemes where the renter will pay the agreed amount regardless of whether or not the tenants make the rental payment, rent guarantee insurance is usually only possible to claim on when the tenants are in rent arrears of over one month.


If you own a rental property, guaranteed rent is a scheme that may be worth considering if you want a fixed monthly income and the responsibility for looking after the property passed to a third party.