As a busy landlord, you’ve got a lot to think about: maintaining or renovating your property, carrying out safety checks, getting your rent on time…the list is endless. So, it’s easy to see why more and more landlords are looking for a managing agent and why some have been tempted by the promise of guaranteed rent.
Over the last few years, guaranteed rent or rent-to-rent schemes have grown in popularity. After all, who doesn’t want a fixed amount of cash every month without the hassle of managing a property or dealing with disgruntled tenants?
But when something sounds too good to be true, it probably is. So, should you really risk it?
In this quick read, we explore the truth behind rent-to-rent schemes and why landlords need to be weary.
What is Guaranteed Rent?
In short, as a landlord, you hand over your property to an agent who effectively becomes your tenant. The agent guarantees an agreed amount of rent per month for a fixed term (even if the property is vacant). They then sub-let your premises to individual tenants, or institutions such as the local council.
The agent or rent guarantee specialist deals with all day-to-day running of your investment property, collects the rent and pays you as agreed.
Problems with Guaranteed Rent Schemes
Whilst the promise of fixed rent with no stress sounds good, there are a lot of compromises involved, as detailed below:
- Below market rate rent
Often these schemes work by landlords getting less than they would on the open rental market. The scheme only works if the agent charges the tenant a higher rate, pays the landlord a fixed rate and pockets the difference.
- Loss of Control
Once you agree to a rent-to-rent scheme, you’re basically handing over control of your property to an unknown agent. Legally, the property is in your name and is your responsibility, so how will you know how many people are living there, the condition of the property, if it’s safe and so on? Whilst the contract you sign may include these details, how can you be sure the correct procedures are being carried out?
- Potential Mortgage Issues
If you enter into a guaranteed rent agreement, you could potentially be in breach of your buy-to-let mortgage. Lenders typically frown upon any form of subletting and if they find out this is what you’ve been doing they might demand full resettlement of the loan, and remortgaging may prove tricky.
- Lack of Protection
In the event of a business closure or liquidation, a landlord not only loses the ‘guarantee’ of rental income but may also face difficulty accessing their property if tenants are in situ and/or managing any maintenance issues. They could also be left with a hefty bill of repairs if the property has not been managed correctly.
Work with Us
At Brookings, we understand the stress and time constraints faced by landlords. We work with hundreds of Romford, Dagenham and Hornchurch property owners to find them reliable tenants and manage their properties professionally and safely removing stress and freeing up their time.
With more than 20 years’ experience, we don’t offer guaranteed rents or fast-cash schemes. We do things the right way: finding and referencing reliable tenants, managing properties with care and carrying out regular inspections ensuring we’re here to answer any queries. To provide protection for you as a landlord, we offer industry-leading rent and legal protection with every tenancy.
If you are thinking about changing your managing agent or looking to find tenants for your property, please call 020 8591 9088. We’re happy to provide guidance and support to all landlords, and there’s no obligation or pressure to use our services.
