Guaranteed Rent Schemes

Are Rent Guarantee Schemes all they are cracked up to be?

Rent Guarantee Schemes (RGS) have become very popular over the last 10 -15 years, the company or intermediary providing the Rent Guarantee (RG) do not let the property rather they sub-let it to other tenants. Another name for this type of agreement between the landlord and the company or intermediary such as a letting agent is rent to rent.

Please note there are many type of (RGS) for the benefit of those reading this article we are going to look at (SA) Serviced Apartments or Service Accommodation. At the high end of the rental market whereby companies take on Corporate / Leisure Tenants and sign 3 to 5 year agreements with landlords. These companies agree a fixed amount which is the  guaranteed rent for the landlord anything above the underlying rent agreed with the landlord is the profit for the company or agent. The property needs to be in a good location, ultra modern with high tenant demand. Central London is a good example where SA can work as it attracts Tourists all year round and it's also a hub for Corporate Tenants. It also works in other top locations where there are great transport links including areas we cover in SW London such as Wandsworth, Putney and in particular Nine Elms. 

Therefore, (SA) will always demand higher rents and prime locations are the pre-cursor for that. One bed flats perform better when it comes to occupancy rates than two bedroom flats. It can also work very well for HMO's again where the tenant demand for Corporate Tenants fits the bill. The company taking on the risk has quite a lot on its hands to make it work as they must account for lean spells like void periods, expenses like utility bills which they are responsible for and the day to day management including top notch cleaning services to accommodate for the high turnover of tenants. 

What Happens When The Market Takes A Down Turn ?

SA can take a big hit during a recession and many companies cannot survive the downturn or provide the (RG) to the landlord which effectively means they cannot afford to keep them. As was the case when many companies folded during the COVID 19 crisis which started in March 2020. 

Many landlords seem to think its quite an attractive proposition to offload their property to a company in this way. Yes you can mitigate risk with void periods, eliminate expenses which normally a landlord would be contractually obliged to pay under a normal AST agreement. And do away with the headache associated with every day management plus landlord pays no fees for setting up a rent guarantee scheme.

Long Lets are a better investment long term

It might be an attractive proposition to the landlord, but under a normal AST agreement there's no fancy stuff required; no sublet or assigning your property to x, y and z or a high turnover of tenants via the intermediaries. Long lets withstand downturns in the market or when there's a recession, and the government steps in to protect tenants as was the case during COVID. Many agents including ourselves put in place deferred rental plans over time, for our landlords tenants under our full management service so they could pay a monthly rental amount they could afford. These were comprehensive steps and plans put in place to protect the downturn for our landlords managing through us and it worked, during a very difficult period. 

When using our service and in particular our full management service this is your rent guarantee, there are no gimmicks, no fancy stuff required we just find you quality tenants, by the end of the day that's what counts a tenant that keeps paying your rent on time even in an economic downturn. We believe in providing a stress free service from start to finish by finding our landlords good quality tenants and providing a secure tenancy over a long term period which is based on building strong foundations and relationships!!