Owning a rental property can be a lucrative investment, but it also comes with its fair share of risks. One of those risks is the possibility of your property being left vacant for extended periods.
That’s where the advent of guaranteed rent schemes came, posing themselves as an appealing prospect for real investment business owners and landlords. In this blog post, we will delve into what guaranteed rent entails, the pros and cons, and ultimately answer the question on every property owner’s mind: is guaranteed rent worth it?
What is Guaranteed Rent?
Guaranteed rent is precisely what it sounds like – a rental property scheme that offers a landlord guaranteed income regardless of whether the tenant defaults on their rent payments.
In such an agreement, an organization, which would be a guaranteed rent company, that sublets the property becomes the tenant, essentially becoming the tenant’s landlord. They then rent out the property to tenants and take responsibility for rental payments, maintenance, and dealing with tenants’ grievances.
How Is Guaranteed Rent Beneficial
As the name suggests, the biggest benefit of guaranteed rent schemes is that you get a set amount of rent, even if the tenants pay their rent late, or it’s empty. Cash flow certainty is the best-selling thing about these schemes, as even if a tenant defaults on rent, payments continue to come in consistently.
Furthermore, guaranteed rent also assures landlords that their property will be correctly maintained, reducing the stress and care that comes with managing a rental property.
It’s Not All Sunshine and Rainbows
The primary drawback of guaranteed rent is that the income a landlord receives is usually less than what they would earn if they managed their property themselves.
Additionally, with guaranteed rent providers taking care of all tenant management responsibilities, landlords may have little say in how their property is managed.
So, Is Guaranteed Rent Worth It?
We’ve broken down guaranteed rent schemes from top to button, but let’s get down towards the answer you’re here for.
In truth, schemes like these have their benefits and demerits, and the exact answer to that question would vary from person to person. On one side, if you’re a hands-off landlord who wants peace of mind, guaranteed rent may be an excellent option for you.
On the other hand, if you’re looking to maximize your profits and are willing to put in the work managing your property, guaranteed rent may not be the best option for you, and you should probably look into other options out there.
Summing It Up
A rental property is a solid investment, but it comes with its fair share of risks. Therefore, property owners have to weigh the pros and cons of guaranteed rent and determine if it’s a good fit for them.
The decision would involve considering your income goals, level of involvement in your rental property, and time constraints. Ensuring that you make an informed decision will result in maximizing your investment’s potential and guaranteeing your rental income for years to come.
