Rent Guarantee Insurance vs Guaranteed Rent Schemes
If you are a landlord your main concern is probably getting tenants into your property, and collecting rent from them. Most landlords have buy-to-let mortgage payments to make, and various other outgoings involved with the property.
So, a reliable source of income is needed from the tenant. If a tenant falls behind on rent payments, or the property is left empty, it can take time to chase debt or arrange an eviction notice. There are two ways to deal with these issues, rent guarantee insurance and guaranteed rent schemes. Both of these options address the same issue but they are entirely different products. Below is a comparison to give you an idea of which is best suited to you.
Guaranteed Rent Scheme: How it Works
A guaranteed rent scheme involves entering a contract with an external party, usually an estate agent, who will manage the property. The estate agent will search for the tenants and deal with the rent payments and maintenance of the property. If the property is left empty it is the estate agents responsibility to pay rent to the landlord.
Guaranteed Rent Scheme: Costs
Under a guaranteed rent scheme you will receive a set monthly income from the third party, ie. the estate agent. This may be slightly less than the market price but the amount will remain the same throughout the entirety of the guaranteed rent scheme, which can be upto 5 years.
Most often the third party will take the responsibility of additional fees such as referencing checks and maintenance costs so you save money in this area.
Guaranteed Rent Scheme: Control
If the idea of handing over control of the property to an estate agent sounds appealing to you, then a guaranteed rent scheme is your best option. You won’t have to deal with finding tenants, managing the move in process or negotiating maintenance work.
Rent Guarantee Insurance: How it Works
Rent guarantee insurance is a policy that pays the landlord if the tenant misses their payments. This is also known as tenant default insurance. It is a type of cover that you add onto your landlord insurance to protect you from the financial implications of missed rent.
Rent Guarantee Insurance: Costs
Rent guarantee insurance varies in price and depends on several things such as the type of property you are renting out, the size and location of it and how many tenants are living there. You may pay the insurance monthly or in a lump sum. This type of insurance may not cover additional costs like maintenance fees or tenant referencing fees.
Rent Guarantee Insurance: Control
Rent guarantee insurance means that you, as the landlord, still have total control over the property. You are in charge of selecting tenants and managing their tenancy.
Guaranteed rent schemes may be a bit more complex to organise but they ensure you receive rent every month, and once set up there is no hassle involved for you. If you want to be very involved in the management of the property then rental insurance may be a better option for you.