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Learn more about the services we offer and important legislation affecting landlordsRead More
See our Tenants guide to renting and the steps we take to help you find the right property.Read More
Demand for rental properties is outpacing supply causing home rental costs to rise and forcing millions of renters to move further and further away from London. For property owners, times have never been better, as shown by the dipping vacancy rates. But there are other factors to consider like anti-landlord legislation, future interest rises, and the downturn in our economy, which is currently held up with artificial stimulus. So, is now a good time to consider guaranteed rents? No doubt, there are a lot of letting agencies pushing for this. Every month, there are more and more letting agencies offering various types of guaranteed rental schemes. Greens Lettings in South East London, a trustworthy, highly capable agency, is also offering guaranteed rent solutions.
There are several benefits to guaranteed rents. As the landlord/property owner, you’ll receive predictable, steady income for the length of the contract. You'll also have peace of mind, knowing ahead of time that your property is rented out for the length of the contract, eliminating any fear of vacancy. For this added financial security, you’re willing to get slightly less than market rate, which is fine. You definitely have less to worry about as someone else is tasked to find you tenants. The property managers maintain your property, and they can even guarantee you a monthly income. What’s the catch?
Warning! Your Money is at Risk!
There are a lot of get-rich-quick schemes out there so you need to be careful. Some operators have little experience and may not know what they're doing.
Example 1: Perhaps the dangers of Guaranteed Rental Schemes was first prominently shown to light back in April 2013. The London Housing Solution, based in Catford, got embroiled in a controversy involving over 400,000 GBP owed to various Landlords. Several local authorities were owed rents, but were never paid. During this period, there was an ownership change, and to this day the missing 400,000 GBP still remains a mystery.
Example 2: On the Internet, you can easily search for get-rich-quick rental schemes that require no cash, and little or no experience. Success stories range from fresh college grads to even an ex-footballer getting into the business. Now, ask yourself. If you’re operator has little or no cash or experience, will you have peace of mind handing over your property to such a person?
You need to ask how long the operator has been managing properties. What’s their actual background? There are a lot of get-rich-quick systems out there professing that anyone can get into the business of managing property. However, if your operator lacks the experience or financial backing to manage your property, how happy and secure will you feel when a relatively minor problem comes up?
Beware of rent-to-rent operations that are popping up all over the UK. This is when you rent to renters/operators (the middlemen). This practice is also called “rent the rented” and “multi-let”. There are now instant “gurus” coming out of the woodwork professing this new technique and some are even holding seminars on how you too can replicate this practice just by paying £500 for a "course". You too, and with little or no money or experience can do the same. At age 26, and as a college dropout, one particular self-proclaimed guru ran seminars to show other property speculators how to rent and then sublet to as many tenants as possible. In fact, he once claimed renting out over 200 rooms in more than 40 different properties. In addition, he taught seminars on how anybody can, with no experience or cash, can follow his rent-to-rent strategy. Now, he has gone missing and so have many tenants' deposits. There are other rent to rent promoters claiming to earn anywhere from £5000 all the way up to £10,000 per calendar month. One well known advocate makes nearly triple his monthly income by teaching courses on how he does this. His £497 per day course fee multiplied by 30 students is equal to £14,910! But seriously, can you entrust your valuable property to someone with no money or experience? There needs to be more regulation, and though this practice may be morally or ethically questionable, you may end up with undesirable tenants like asylum seekers, renters with bad credit, or renters with a history of eviction.. Remember, being a tenant is in some ways a stronger position, because the laws protect tenants from eviction.
Local authority leasing schemes - guaranteed (lower) rent for a 3 to 5 year period. This can be a good option for many but beware again that such a lease will not breach your mortgage conditions (most of which stipulate 6 months ASTs). Look carefully at your rental income especially taking into account rental inflation over a 5 year period. In many cases you may be better off financially using a letting agent with full management.
Consider the possibility of rental insurance . Greens Lettings can provide this at a modest cost and this will be underwritten by a "proper" insurance company.
Guaranteed Rent Summary:
You need to know how the operator will run your property. What class of tenants, how many etc. Ensure that the running of your property does not put you in breach of most banks mortgage conditions, planning laws, HMO licencing, or any other regulations.
You can also ask if they are members of any accredited organization. See our page on “How to Choose a Letting Agency”
If you do indeed decide that Guaranteed Rents is a solution for your situation, consider writing the contract in such a way that the middleman/operator is the agent, but with a special fee agreement such that you, the landlord, always gets a set amount.
Ensure that the operator is financially sound. Just like insurance companies, they need enough financial resources to cover any possible losses during the times when your property may be vacant.
Do your due diligence. You should approach this in a way similar to what you'd look for in a good letting agent. Read our article on “Choosing a Letting Agency”; the same principles apply. Websites like www.duedil.com can be used to check out any company you deal with.
You need to be careful on what contract you sign with the operator. Granting a tenancy gives the operator a lot of power and is only appropriate in certain circumstances. Seek the advice of a certified solicitor, or you can speak to an expert at Greens Lettings by clicking here.
Do you have any other questions about Guaranteed Rent? Please feel free to contact us if you have any questions about this subject matter or anything to do with Property Management.
Greens Lettings is a property management company based in Shooters Hill, London. As your HMO expert in SE18, we continue to serve places in South East London such as SE2 (Abbey Wood), SE3 (Blackheath), SE7 (Charlton), SE9 (Eltham), SE10 (Greenwich South St), SE18 (Woolwich), SE23 (Lewisham) and SE28 (Thamesmead) — just to name a few. We are your local online letting agent specialising in HMO conversions and full management. We offer free consultation and free property valuation. Contact Greens Lettings here.