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Jul 12

What Is Guaranteed Rent & Should Landlords Try It?

Reading Time: 2 mins

Landlords have a lot to worry about when they’re renting out any property. That naturally leads to quite a bit of stress. Anything that could reduce that would be well-liked. Is there something that can help you?

Guaranteed rent might be the right scheme for you. You might think that this isn’t an actual practice; after all, rent is as guaranteed as it can be, right? But actually, it’s an increasingly common practice that any landlord might want to take advantage of.

 

What Is Guaranteed Rent?

You might assume that you know what guaranteed rent for landlords is by the name. While you’d be close, there are some differences between this and many other rental schemes. Instead of entering an agreement with a renter, you’ll be doing so with a rental agency.

The agency will subsequently rent out the property on your behalf. However, they will be the ones paying a fixed rent every month. As such, if the property is ever empty, they’ll still have to pay, resulting in the rent being guaranteed to have been paid every month.

In some cases, this might be an agreed-upon sum. In others, it’ll be a percentage of the rental income. The agency will essentially become your tenant and are then responsible for the property for a specific period.

 

What Are Its Pros & Cons?

As you would expect, there are quite a few benefits associated with guaranteed rent. Perhaps the most notable is that your rental income is guaranteed every month, regardless of whether the property is empty. That should mean that you have a lot less to worry about when leasing out your property.

Coupled with this is that many organizations that enter such agreements are government agencies, who subsequently use the property as affordable housing. As such, you could also be making a positive social difference, although this will typically mean that the rent will be lower.

Regardless of what organization you enter the agreement with, there’ll be a lot less hassle involved in renting your property. The other party will usually be responsible for its management and maintenance.

That makes them responsible for arranging viewings, repairs, and much more. You can relax much more knowing that almost everything is taken care of.

That doesn’t mean that it’s all positive, however. There can often be some negatives associated with the rental scheme. The most notable are:

  • You have little control over who rents your property.
  • Rents will typically be lower than in other schemes.
  • Could take more time to enter your property into the rental market.

These could be enough to put some people off, especially compared to some other rental schemes. As such, you’ll have to spend time making sure it’s the right one for you.

 

Wrapping Up

There’s a lot involved in the guaranteed rent scheme. While there are a host of benefits, you’ll also need to worry about its intricacies. There might be more hurdles to overcome when entering into such an agreement, which you’ll need to be prepared for.

The prospect of a guaranteed rental income, however, could be too much for a landlord to resist. It’s all about what best suits your circumstances.

 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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