The new definition of rental guarantee is a product that an insurance company offers to the landlord to insure him against non-payment of rent by the tenant in exchange for a fee. The rent guarantee product is simply an insurance policy. The costs of having a rent guarantee insurance product or a rent guarantee scheme could be between £49 and £69 per month. Compared to the potential loss of income, this is a small price to pay to ensure your future peace of mind.
However, it is still an additional monthly expense. On the positive side, you can claim this cost as an allowable expense. This may make a marginal difference to your net rental income, but it is a positive difference nonetheless. This type of transaction is similar to the leaseback arrangements most commonly used by property developers.
Through a wholesale contract, the owner can receive a guaranteed sum for the term of the contract. This eliminates the risk of trying to rent out the property themselves, often at a financial discount. Depending on how the contract is structured, the landlord may also be able to pass on more or less of the landlord's costs, maintenance, repairs and other responsibilities to the acquirer during the term of the contract. A potential drawback is that by selling the leasehold right to a third party, the landlord loses some control over the management of the property during the term, although this can also be negotiated and agreed in the contract.
Through a wholesale contract, a property manager can acquire new stock to manage at retail, which increases revenue. When purchased at the right price, these contracts can also increase profit margins. By purchasing weeks during the term, the manager has greater control over the management of the property. A potential disadvantage is the increased risk of providing a guarantee: if the property does not rent as well as anticipated in the retail market, the manager is still obliged to pay the landlord the agreed sum.
Wholesale rents can be negotiated directly between landlords and property managers. This type of contract can be good when the parties trust each other and the figures are easy to agree upon. Landlords and property managers can also reach an agreement through wholesale rental markets. Through these markets, property managers compete with each other, raising the price offered and ultimately paid to landlords.
By creating a market-derived price for weeks of rental property, these marketplaces often make it quick and easy for landlords and property managers to reach an agreement and sign wholesale rental contracts. This insurance pays the monthly rent for a set period of time if the covered tenant fails to make payments. There are several ways to legally sublet a property, usually in the form of commercial or business leases, management agreements and leases or rent guarantee schemes. The agreement between the landlord and the tenant is commercial in nature, so they should actually enter into a lease of the property for the period of time that the tenant will pay the guaranteed rent.
The "Tenant" would generally also be responsible for any damage to the property as it is their responsibility to return the property to the landlord in the same condition as when they took it. In these cases, the landlord would be paid, even if the property is vacant or the tenant does not pay rent. Although the Guaranteed Rent model does not fit the traditional definition of rental or property management work, the landlord has a relationship with both the landlord and the tenants, acting as an "intermediary". The main idea behind these schemes is that a landlord seeking to reduce risk and liability rents to an agent at a fixed market value for a predetermined amount of time.
Rent guarantee insurance is, in essence, an insurance product that can be purchased through an insurance broker specialising in rentals. Landlords acting on their own often have to bear the cost of unpaid rent, sometimes until the eviction process is completed, which can be a lengthy and costly process in itself. Most policies cover landlords for the duration of the tenancy, at a cost of approximately 10 per cent of the monthly rent. Rent guarantee, rent guarantee schemes or rent guarantee insurance could have a big impact on the best way to rent your property.
The benefits of the arrangement for the landlord is that their rental income is guaranteed regardless of whether the tenants living in the property pay the rent or if the property becomes vacant. We have a huge database of potential tenants in the area who are always looking for properties to rent. You have bought the perfect rental property, found a tenant and have a rental contract in place. You earn money from the difference between the rent you pay to the landlord and the rent you receive from the subtenant.