How does guaranteed rent work?
A Rent guaranteed deal involves two parties, the landlord which has a property to offer but does not want to deal with the headache of managing it.The second party is an agent or a company that is willing to offer the landlord a guaranteed rental income for his property regardless if it’s empty or not. The contract is usually signed for a period of 3 to 5 years.
For a property that has 3 to 4 rooms the agent could potentially rented on a room by room basis or they could rent it as a whole property on a short-term basis.
We can find more details about serviced accommodation in short lets in this article.
Why would the landlord want to get Rent Guaranteed?
Many landlords do not want to manage their property anymore because the tenants are difficult to manage or because they have reached retirement and they just want a quiet life.
A regular management company works on commission. This means that the landlord only gets paid when the property is rented. You can find here a good read about agent fees here.
This is the reason why a landlord might be more inclined to offer the property to someone that can give them rent guaranteed.
How can I make a profit from a property if I have to pay the landlord the rent?
Usually, properties offered on the rent guaranteed basis are either suitable HMO rented on a room by room. Some of the properties converted into serviced accommodation lets.
For an HMO usually, the landlord gets a standard amount slightly lower than the market value. The agent then lets the property on a room by room basis and makes a profit like that. A property let on the room by room basis can offer a higher amount of income. You have to be aware that you will put in more work managing and maintaining the specific property.
On the right is the floorplan of a potential HMO property.
Another type of property could be the one suitable for short accommodation late. A property like that needs to look very good and be placed in a strategic area. The agency then can charge a high fee per night. With the money made it can cover the rent guaranteed, the void period, and keep the rest as a profit.
Pros of Rent Guaranteed
There is no mortgage required and the amount of time you need to set up the property is fairly short. It can take about a month to have everything up and running. You can find here a great guide about setting up an HMO.
If the rental market fluctuates, you can go back to the landlord and renegotiate the contract. If you do not get to an agreement, you can give the property back to the landlord. Assuming that you have a very well written contract with clauses that give you this freedom. If you need a well-written Rent to Rent Agreement, you can download ours.
Starting a rent guaranteed business only requires you to have enough money to set up the first property which could be anything between £2000 to £5000, Depending on which area of the UK you choose as your “goldmine”.
Another good thing about doing rent rent is that you’re actually helping the landlord by giving them peace of mind, an assurance that they no longer have to worry about paying the mortgage or managing the tenants.
Cons of offering Rent Guaranteed
Rent guarantee schemes have a bad reputation because of a small group of people who start off with no experience and knowledge of the property laws, and no guidance. Due to this, they end up doing things that are not legal or they start losing money and have to return the property back to the landlord.
In order for a landlord to trust you, you have to look and present yourself professionally. You also need to train yourself in sales. You have to learn how to talk to someone and ask them about their needs and concerns with regard to their property.
If you miscalculating a deal and offering the landlord more money than you can afford to pay can lead to the property company becoming bankrupt and not being able to have to pay the rent to the landlord.
Rent to rent deals have become harder and harder to support. This is because given the current situation tenants are very hard to evict. In the current situation, everyone’s job is at risk.
If you want to know more about Tenant eviction you can read this article
In order to start a rent guarantee company, you need to know how to manage the property. The key is to set systems in place where everything is done automatically.
You can learn more about HMO Property Management in this online course.
Many fake gurus out there will make you believe that rent guaranteed deals are easy to come along and easy to manage. This is not entirely true. Managing an HMO property is very different from managing the regular property. Some tenants can be very needy and difficult. It’s also not easy to convince the landlord to accept this kind of agreement.
From my own personal experience, I can tell you that you will be getting calls in the middle of the night about the roof leaking or the tenant not being able to connect to the wifi to play games. There were times when I even had to make a rota with who takes the trash out each week.
Where can I find landlord for the rent guarantee scheme?
Marketing Method 1:
There are many ways to find landlords in each age and has their own way of doing this. Some property trainers would advise you to take the list of HMO properties and send letters to each one of those landlords. This can end up being a very costly method of finding properties If you add up the stamps and done printing costs.
Marketing Method 2:
Other property gurus advise you to go to agencies and try to agree on a deal with an agent. Some of the suggestions they make are that you should pretend to be interested in renting the property as a tenant. When the agent comes for a viewing, you can ask them about their willingness to do a rent guaranteed deal with you.
Marketing Method 3:
Another way you can find the landlords is by directly getting in touch with them from Openrent and other portals where they decide to advertise the property under their own. You just have to be aware that you need a unique angle. Remember that landlords are constantly being harassed by estate agents to let their property out.
Marketing Method 4:
You could also go to landlord meetings as a member of the landlord Associations like NRLA or NLA. This is where you can find an approach landlords who might have more than one property. Other agents advise you to go to.
Marketing Method 5:
There is of course advertising methods you can use like Google ad words and Facebook ads flyers and ads in window shops.
Marketing Method 6:
A good marketing strategy can also be Working on a referral basis. Every tradesman you get in touch with and work with can be a potential person that can refer you to their clients. This would only work if you talk to them on a regular basis to maintain this business relationship and possibly send some business their way as well.
What do I do after I got my first Rent Guaranteed property ?
The first thing you need to do is to get the furniture in place and change the bills on the name of the company. After that the property needs to be furnished or decorated, depending on the state of the property.
You can find here one of our articles about how to set up an HMO.
Every time we get a new property you need another few thousand pounds to invest in order to set it up. This means that if the first property deal goes well you can use the profits after 3 to 4 months to set up another property.
This strategy is very good because it offers to a learning curve without high risk of making expensive mistakes.
Here is a video we made about furnishing a property to charge more rent :
Rent guaranteed can be quite lucrative. This method allows you to make money without having to buy properties but can also be risky if you don’t know what you’re doing. The best way to start this business is by getting some training or mentorship. Knowing the property law will stop you from losing money or getting yourself in trouble.
If you liked our article about rent guaranteed and you have had any experience with this, please leave a comment and let us know how it went.