Being paid in full and on time is a prerequisite for
Landlords. Cashflow, ROI and covering expenses are a crucial element to the
day-to-day running of their portfolio. There are some safeguards available to
mitigate against lack of rent. It starts with the initial application by the
tenant. Taking good references is very important. We find tenants, vet them and they move in, that’s
essentially the plan. We need to check they can afford the rent, have been good
tenants before and have a decent credit profile. But life changes, people
change too, and the perfect model tenant can morph sometimes in to a completely
different person. These occasions are extremely rare, but very important to
bear in mind. People stop paying rent for a variety of reasons, but mainly
because of life (normally employment) changes.
If you want to consider protecting your income, and/or being
able to forecast confidently, you may want to seek some guarantees. There are 2
main routes for this: Rent guarantee and Guaranteed rent.
We recommend rent guarantee insurance to our Landlords. This
is an insurance product, which pays out to the landlord as soon as the tenant
stops paying rent, and covers the landlord for the legal process of eviction. This
gives good peace of mind, and is generally cost effective (about £120 per year
for a comprehensive package) So a cost at the set-up stage, but full rent (less
any management fee if applicable!) from then on.
Some agents and investors can guarantee you rent, weather
the property is full or empty. There are many decent schemes around, which can
be relied upon. Rent to Rent – the most common form, has received mixed press.
This is where an individual or a company offers to pay your rent, in full, for
3 – 5 years. This is most common with three bedroom houses, where the investor
creates 4 or 5 bedrooms in a house-share situation. As long as you do your due diligence,
these can work out well.
There are a few firms, such as Northwood, who guarantee your
rent. Where an agent offers to guarantee the rent – they often offer you 60-80%
of the rental value, in return for regular, reliable monthly payments. So the choice
is yours, insurance or guarantee.
If you need any advice on this topic please get in touch.