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Guaranteed rent or rent-to-rent is a scheme where a landlord signs over their rental property to a third party such as a letting agent, institution, company or trusted individual for a specific period. In exchange, the landlord gets a guaranteed monthly income irrespective of the property being occupied by tenants.
It is then the responsibility of the individual or organisation who is renting the property from the landlord to sublet the property to tenants while managing the tenancy and condition of the property. The renters have no interaction with the landlord, everything is handled by the third-party or middle tenant.
How Does Guaranteed Rent Work?
With guaranteed rent, the middle tenant signs a contract and agrees to pay a monthly fee to the landlord for managing and subletting the property. The third party handles everything from tenancy administration, marketing and finding renters, property maintenance and meeting legal requirements. Not to mention, if renters living in the property need to be evicted, they facilitate all the legal proceedings.
In rent-to-rent, the middle tenant pays a guaranteed monthly rent to the landlord that is below the property’s market value. As a landlord, the amount of money you earn from this venture depends on gaining a high rental income and simultaneously covering expenses to generate a profit.
One strategy is to invest in multi-bedroom properties that can hold several single-room lets to unrelated tenants with individual contracts. This way, you can gain a greater yield by receiving three, four or five separate payments every month.
Who Offers Guaranteed Rent Schemes?
Letting Agents
Letting agents or rent-to-rent providers offer a variety of commercial guaranteed rent arrangements. Their focus is on trying to make you as much profit as possible by sourcing tenants from private rented sectors.
Local Authorities
With local authorities, a rent-to-rent scheme can involve the council where they use your property to provide accommodation for those in need, such as homeless people and refugees. Regardless of whether or not they find occupants, the local authority will still pay you a guaranteed monthly rental payment during the lease period.