What is Guaranteed Rent?

Simply put this: a landlord lets a third party manage their property. The landlord relinquishes control of the management of the property to a property management. The property management will then handle the responsibility to sublet, maintain and search for tenants to occupy the property. In return, the property management a fixed monthly rental income to the landlord for an agreed-upon period.

It sounds too convenient to be true, doesn’t it? Well, let’s list some pros and cons to see whether entering a Guaranteed Rent is worth it.

Pros:

1. Stress-free property management

It can be overwhelming to manage a property on your own. However, with a guaranteed rent in place, all that stress goes to the third party. Things such as utility costs, property maintenance and financial delinquency of tenants will now fall under the property management’s care.

As such, you will get the benefits without all of the headaches. A guaranteed rent can especially be beneficial during these uncertain times.

2. Fixed rental income

One of the most important provisions of a guaranteed rent is the promise of a timely fixed monthly payment to the landlord. Even if the tenants cannot pay the property management, the landlord will still receive income according to the contract. If you think about it, it’s almost a passive income.

There are even instances where even if the property isn’t occupied, the property management still has to pay, as long as it’s within the established period of the contract.

3. Legislative compliance

Part of managing a rented property in compliance with relevant legislation, such as health and safety standards, building codes and rented property guidelines. This responsibility normally falls on the landlord. However, with property management in the middle, the owner is freed up of this task. It is now the middleman’s duty to maintain their knowledge of statutory guidelines and ensure that the property is compliant at all times.

4. Maintenance of the properties

You may think that with all these benefits, the guaranteed rent is too good to be true. Naturally, this arrangement also has its own disadvantages. This includes the following:|

Cons:

1. Relinquishing control

By giving a third-party property management full control of the property, the landlord effectively loses the capability to make decisions related to its management. This means that within the duration of the contract, the landlord can be powerless. This becomes an issue when dealing with problems that may affect the property.

2. Property mismanagement

Since the landlord does not have any control, they also lose the power to prevent property mismanagement. For example, if the property management does not properly maintain the house, or sublets to undesirable renters, the market value of the property may suffer in the long run. Instead of gaining a profit, the landlord might lose money for things such as future
renovations.

To sum it up

A Guaranteed Rent is an attractive and practical choice for owners who don’t have the time or energy to manage their properties. However, it may also lead to disagreeable results. For landlords, it is best to conduct due diligence and ensure that you trust the property management before completing any contractual agreement. This includes research on the property management, such as credit and financial history, previously rendered services and even testimonies.

It is also wise to thoroughly review the contract to prevent any issues that may arise in the future. Ask yourself this: is this beneficial to you in the long run?

If you have any more questions or are interested in receiving a guaranteed rent on your property in the United Kingdom, please feel free to get in contact with hello@firozpropertymanagement.co.uk. We can help remove the pain and uncertainty of renting your property.