What is a Guaranteed Rent Scheme? How does it Work?

The term “guaranteed rent” has sky-rocketed largely in the past few years. But it ain’t that simple as it seems.

It is, without a doubt, too good to be true. However, without proper understanding of how guaranteed rent works and how it can be beneficial for you; you cannot fully gain from it.

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Landlords have been deliberating this catch for a long time now. But is it really worth the hype? Let’s find out.

What is Guaranteed Rent?

Although the term itself provides you with sufficient idea of what it is, to clarify it further, the guaranteed rent scheme is a contract. The landlord hands over the property to a third party, who manages and controls the property on their behalf.

The third party, which you can refer to as a tenant too, pays the landlord the fixed price for the determined period of time.

Also, guaranteed rent is an extremely vast term and is usually categorized into 3 sectors, i.e. council-backed, insurance and letting agency-backed.

Although this scheme does seem very attractive, it is not an appropriate pick for everyone. For a better understanding, we have summed up the pros and cons for you further.

Benefits of Guaranteed Rent Scheme:

Let’s begin with the pros of guaranteed rent scheme:

You will be receiving a monthly, guaranteed rent. It is similar to having a fixed monthly income.
An entirely hassle free process.
Stable income
Council perks

As a landlord, if you have almost always experienced troublesome tenants; this might be a very stress-free option for you. Without any hassle involved, you can easily get your property managed professionally and also receive a guaranteed income for it.

Drawbacks of Guaranteed Rent Scheme:

However, there are some drawbacks that one must consider before opting for this scheme.

Monthly income might be lower than the rent you would derive from a tenant directly
You will have extremely limited say in who the tenants are
The setup time period is long and you might experience communication differences with the council staff.

Considering your situation, you can decide whether you want to opt for the scheme or not. Although it is rewarding and you have no worries of finding the right tenant or reminding them of the rent again and again. But weighing the cons is equally important to certify a wise decision making process.

How do these Agents Work?

The third party, i.e the guaranteed rent agent, is responsible for managing your property entirely. From searching the tenants to your property maintenance and looking after all the repairs; everything has to be done by the agent.

This is all a part of the guaranteed rent agreement and it is counted as the agent’s responsibility. Simply put; you don’t have to worry about anything. Once the scheme agreement has been signed, the property is not your headache. All you have to worry about is getting the monthly payment on time.

Although some people might enjoy relaxing for some time. But at the same time, as a landlord, losing control over your property might be a bit complicated to deal with too. Thus, make a thoughtful decision before opting for guaranteed rent.

Conclusion

Guaranteed rent has all airs in the real estate and property industry. However, it all comes down to personal preference. If you ask us, whether guaranteed rent is worth it or not; we might not have a straightforward answer.

Some landlords might enjoy the peace of mind that comes along with it while some might be bothered by losing control. Thus, it all comes down to your needs and what you really want.

David Prior

David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.