Are rent guarantee schemes worth it?
As part of a rental letting system, landlords rent their property to an individual, a company, or a landlord who becomes a “tenant” for a certain period of time in exchange for a guaranteed monthly income. In return, landlords receive a guaranteed monthly rent payment (often paid a month in advance) during the rental period, even if the property is vacant, professional property management and regular inspections, and guaranteed free ownership at the end of the lease. They then calculate the rent they want to receive and guarantee the landlord a fixed (lower) amount each month, regardless of whether the tenant pays or not. Rent guarantee insurance, also known as loss of rent insurance, is an insurance product for landlords who want peace of mind that their rental income has been won.
What is a guaranteed rent?
One potential disadvantage is the increased risk of a guarantee — if the property is not rented out as well as it was predicted in the retail market, the manager is still required to pay the property owner the agreed amount. Through a wholesale contract, a property owner can receive a guaranteed sum over the term of the contract. By creating a market-derived price for property rental weeks, such marketplaces often make it quick and easy for property owners and property managers to reach an agreement and sign wholesale leases. The middle tenant agrees with the landlord a guaranteed monthly rent that is below the market value of the property.
