Understanding Guaranteed Rent

December 3, 2012

Northwood MD Nick Cooper explains the intricacies of Guaranteed Rent.

One of the worst scenarios facing a landlord is an empty property.  Whilst the landlord must make mortgage repayments each month, if a property has a void (empty) period and there are no tenants to pay the rent, this can cause a real cash flow problem.  With recent statistics indicating that the average void period for a property is 69 days*, this could prove to be a severe blow to a landlord’s rental income with knock-on effects to their personal lives.

Sound bleak?  It doesn’t have to be.  Northwood developed its Guaranteed Rent service to safeguard against times like these when there is either no tenant or the tenant stops paying their rent.  The service itself is a 12 month contract which guarantees a rental income each month regardless of the state of the rental market, whether the property is occupied or whether the tenants pay.

How does Guaranteed Rent actually work?

When a landlord enters into the Guaranteed Rent contract, we effectively become the tenant.  It is a commercial agreement, whereby we negotiate an agreed fix rate (slightly below market rate) with the landlord in the return for the certainty that the rent will come in each and every month.  We believe this figure actually makes the landlord better off than if they had decided to go it alone. Why? Under the Guaranteed rent, there are no charges for setting the contract up, no tenant introduction fees, no commissions and absolutely no “hidden extras” to pay.  For the duration of the contract, we manage the property, find and deal with the tenants on your behalf and if there is ever a need for court action to evict a tenant or recover unpaid rent (which can occasionally happen), we will meet all the legal costs & manage the process whilst you continue to receive your rental payments.  At check out if any damages have been incurred, we cover the cost of internal damages up to the equivalent of 1.5 months’ rent, so if things do get damaged, we take the financial hit.

Rent Guarantee Insurance vs Guaranteed Rent Service

Rent Guarantee insurance is something quite different from Guaranteed Rent and can be an effective way of protecting against tenants who stopping paying their rent. However it is also important to be aware that Rent Guarantee insurance does not buffer against void periods or provide any additional management services. By its very nature it is a form of insurance with premiums attached and T&C’s which should be read very closely to ensure that the right level of cover is provided.

If you would like more information about Northwood’s Guaranteed Rent Service, contact your local branch.

*National Landlord Association (NLA)

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