Being a landlord comes with other responsibilities than providing tenants with a safe space. For instance, you must perform administration tasks, meet regulatory thresholds, deal with every tenant issue, and conduct maintenance. All these tasks can be time-consuming and tiresome.
Fortunately, each landlord doesn’t have to experience the hassle of managing and taking care of their rental properties with guaranteed rent. Most landlords are currently using the rent-to-rent or the guaranteed rent scheme due to its convenience and benefits. This allows the landlord or the property owner to create a contract with a person, council, or company to assume each property responsibility for the agreed time. With guaranteed rent for landlords, the landlord still enjoys the renting benefits without dealing with any rental property management responsibility.
Nevertheless, while the scheme is beneficial to the landlords, like everything else, it has its downsides, too. However, before taking a look at its dark side, you first have to understand the rudiments of guaranteed rent. Read on for the details.
- How Does Guaranteed Rent Work?
As earlier mentioned, this scheme allows the landlord to rent their property to a third party, who’ll then rent the property to actual tenants who’ll occupy it. The tenant who signs the guaranteed rent contract takes every responsibility concerning the property, such as finding tenants and paying property bills, among other responsibilities. Also, these tenants should ensure the property is adequately maintained and is habitable.
Since most landlords have switched to guaranteed rent schemes, it’s easy and quick to find a house to rent South Wales or other similar parts of the world, so long as you work with reputable realtors. The third-party tenants pay monthly rent, although it’s relatively lower than the regular rent cost, so that they can profit from the scheme.
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- What Are The Benefits Of The Guaranteed Rent Scheme?
Here’s why most landlords prefer a guaranteed rent scheme:
- Guaranteed Monthly Income
As the term suggests, landlords are guaranteed monthly rent for the agreed period. This ensures that landlords don’t have to worry about finding or losing tenants within the agreed period since they must receive the agreed rent, whether or not tenants are occupying the property. What a great deal!
- Property Management
While this depends on agreements, the third-party tenant manages the property on behalf of the property owner. This move ensures that the landlord is free from hassles accompanying renovations and dealing with tenants as the broker is responsible for everything concerning the property.
- Fixed Payment Date
Dealing with financially unstable tenants is the most challenging thing landlords deal with. Such individuals don’t have an actual date for rent payment since they’re always asking for a few more days to raise the required amount. Fortunately, a guaranteed rent scheme saves landlords the waiting since the brokerage company makes rent payments on the actual date they agreed on throughout the entire duration. Come to think of it: who wouldn’t want to know precisely when they’ll receive their money?
- Disadvantages Of Guaranteed Rent
Everything that has advantages has disadvantages. Here are some disadvantages linked with guaranteed rent:
- Overcharged Property
As mentioned, the owner rents their property to a third-party tenant, who later rents the property to tenants who occupy it. Therefore, third-party tenants must get something out of the deal. That said, most properties under a guaranteed rent scheme are overcharged to ensure each person gets their share. Also, the third-party tenant must raise renovation funds; of course, such funds don’t come from their pocket. They must overcharge the property to develop the rent, profit, and renovation costs, among others.
- Low Monthly Return
Generally, the monthly rent signed upon is relatively lower than the actual rental prices in the market since the brokerage company needs to make a profit from the initial rent. Within the agreed period, the landlord receives the same amount regardless of rising rental prices. With such an agreement, you, as the landlord, will likely be underpaid for the entire signed-on period.
- Inability To Manage Your Property
The guaranteed rent contract frees the landlord from the responsibility of managing the property since the brokerage company does all the work. Therefore, the landlord has no say regarding who’ll occupy your property, and what they should and shouldn’t do. Additionally, the landlord can’t solve the tenants’ issues for the reputation of their property. Generally, your role as the property owner is to wait for the monthly rent without a right to say a word over your property.
Signing up for a guaranteed rent scheme means trusting someone else with your property. This individual will be making every decision regarding the property without you getting involved. It’s, therefore, essential to work with a reputable brokerage company that’ll ensure you get your rent on time and make better decisions to improve your property. Failure to do so can make a mess of your property for the agreed period without you being able to do anything regardless of the damage.