Understanding the Guaranteed Rent Scheme: Is it Worth it for Landlords?

Ross McColl
3 min read
Oct 18, 2023
Updated: Oct 23, 2023

In the vast realm of property rentals, one term that has gained traction among landlords is the Guaranteed Rent scheme. But what exactly does it entail? And is it a suitable choice for every property owner? Let’s explore.

What is a guaranteed rent scheme?

A guaranteed rent scheme is a service typically offered by property management companies or letting agencies. When landlords enter this agreement, they are essentially leasing their property to the agency, which then sublets to tenants. The unique feature? Regardless of occupancy status or if tenants default on their rent, the landlord still receives a predetermined monthly rental income.

Is it worth getting a rent guarantee?

The appeal of the guaranteed rent scheme lies in its predictability. For landlords seeking consistency and minimal involvement in the day-to-day challenges of property rental, this can be an enticing option. Here are a few benefits:

  • Predictable Income: With the guaranteed rent scheme, landlords can expect a stable monthly revenue, irrespective of tenant circumstances.

  • Minimized Hassles: Landlords won’t have to chase after non-paying tenants or worry about property vacancies.

  • Professional Management: Most agencies that offer the scheme also manage property maintenance, tenant issues, and other administrative tasks.

However, it's also essential to note that the agency typically takes a cut from the monthly rent, which might be higher than traditional property management fees. This means, in booming rental markets, landlords might earn less than if they were managing the property themselves.

Can I trust a company offering guaranteed rent to landlords?

Like any business transaction, due diligence is key. While many legitimate companies offer genuine guaranteed rent schemes that benefit landlords, it’s crucial to:

  • Research the Company: Check reviews, testimonials, and their track record.

  • Understand the Agreement: Read the terms and conditions. Know your rights and responsibilities.

  • Consider the Financials: Ensure the guaranteed rent offered aligns with market rates and compensates for the agency's cut.

How much does rent guarantee cost?

The cost varies depending on the agency and the property's location and condition. Typically, there's no upfront charge for the landlord. Instead, the company makes its profit by charging the tenant a higher rent than what they guarantee to the landlord. So, if a landlord is guaranteed £1,000 per month, the agency might charge the tenant £1,100, keeping the difference.

However, some agencies might also have service charges or setup fees. Always ensure clarity on all costs before entering an agreement.

Guaranteed Rent scheme offers a blend of convenience and financial predictability for landlords. Like any decision, weigh the pros and cons, and make the choice that aligns best with your property management goals