The best way to rent out your home is greatly influenced by guaranteed rent, rent guarantee schemes, or rent guarantee insurance. If you don’t have a thorough knowledge of the world of ‘to let’ it can be difficult to navigate between these terms to figure out what’s best for you when hiring a landlord.
All these rent guarantee products are created to ensure that the landlord receives rent in any situation like the tenant experiencing financial difficulties and is unable to pay the rent or refusing to pay the rent outright due to disputes.
It can be confusing because there are several guaranteed rent programs on the market, each with its own specific requirements, eligibility requirements, and limitations. Find out the difference between rent guarantee insurance and guaranteed rent schemes which is important for a landlord to pitch in for safety, guarantee, and ongoing revenue.
Rent Guarantee Insurance
Rent guarantee insurance is made to protect your income if your tenants fail to pay their rent. No tenant wants to get into the hassle of undue payments especially with rets.
Still, there are unknown circumstances that force them to become delinquent. On the contrary, the landlord puts his/her property on lease to get regular income through it. They too can never imagine even the most reliable tenants may become delinquent if they encounter unexpected financial difficulties.
If you have landlord insurance with a rent guarantee, you can still ask your provider, or third-party rent guarantor to reimburse you for missed payments. You will be covered by plans with the highest guaranteed rent for a duration of 6 to 12 months.
This will allow you enough time to find new tenants and carry out the official eviction process. It is worthwhile to investigate your options because numerous providers are providing a variety of coverage levels.
The Rent guarantee insurance comes with certain terms and conditions, which generally include –
- Before the agreement is signed, the tenant must pass a thorough tenant referencing process.
- While some insurers will take a working guarantor, others will not rent to tenants receiving housing benefits.
- If you don’t buy the rent guarantee insurance before the lease is finalised, you won’t be able to file a claim within a certain time frame. You might have to pay at least one month’s rent, to file a claim.
- The Energy Performance Certificate and a gas certificate must all be delivered to the tenant at the beginning of the tenancy.
- You will be protected by the rent guarantee insurance unless you have taken possession of the property, or the tenant has turned over the keys.
- The total sum of rent that can be claimed is capped at £25,000 to £50,000.
- It may take up to 8 weeks after filing a claim before your first month’s rent is reimbursed. You must be prepared to keep paying your debt despite the situation.
- Sometimes, rent guarantee insurance covers attorney fees as well when regaining possession of the property.
Advantages
- You won’t be at loss, even when a tenant is unable or reluctant to pay their rent.
- You can still pay your mortgage when there are times when you don’t have rental money.
- During the eviction and property recovery procedure, if you and your tenants are in dispute, you will continue to receive the equivalent of your monthly rental income.
Guaranteed Rent Scheme
A guaranteed rent scheme also referred to as a “rent-to-rent scheme,” provides landlords with a reliable, risk-free source of revenue. It entails signing a contract with an agent who then sublets the property or home to a renter. They function similarly to a property management company. They might occupy it permanently or use it as a holiday rental.
Guaranteed rent scheme agreements are for 3-5 years. You can make fixed, recurring payments during this time, regardless of the amount of significant income the property is producing. This is applicable even during the void periods. The guaranteed rent company will oversee all maintenance and operation tasks for the duration of the contract. The policy will vary depending on the business, so carefully read the contract before you sign it.
Advantages
- Longer-term security for the landlord, as rent-to-rent arrangements, leases for multiple years.
- Each month’s rental revenue is guaranteed regardless of whether a tenant is residing in the property.
- At the end of the rent-to-rent agreement, the company that leased the property from the landlord is required to return it in excellent condition.
- Saves you time and trouble by having the property’s daily management handled by a third party.
Things may not be in the favour of the landlord in these arrangements if the middleman lacks the financial resources or the motivation to support the guarantee. In the worst-case scenario, landlords might find themselves with tenants occupying their space with no money. If a rent-to-rent arrangement fails, it may be difficult for landlords to recover their property if the firm providing the guarantee goes out of business.
Putting a property for rent is a hassle, especially if you get the wrong tenants. Thus, hire a reputable third-party renter that can make regular payments irrespective of the kind of tenant residing at your home. Now that you understand the difference between rent guarantee insurance and guaranteed rent schemes, choose a good scheme and take backup insurance.
