Landlords using a guaranteed rent scheme can earn £3,600 a year more than by conventional letting, according to one guaranteed rent provider.
Property management firm Elliot Leigh has crunched the numbers to discover that although a typical London rental will bring in a monthly income of £1,650 compared with a guaranteed scheme’s £1,575, those letting privately have to fork out for commission, VAT, reference and inventory fees and an average £1,650 in void periods or rent arrears. This means they are pocketing £15,274 instead of £18,900.
The firm points out that its agreement will also typically include refurbishment, free minor repairs and property inspections, utility and council tax payments during void periods, and no eviction costs.
These benefits mean it has seen a 25% increase in the number of both private and corporate landlords turning to guaranteed rent during the last year.
Director Leigh Young (main image) says due to the slowdown in the sales market off the back of rising interest rates, a growing number of developers have found themselves unable to sell off their new-build properties.
“Some are choosing to refinance and use a guaranteed rent scheme to give themselves a five to seven-year plan while the market stabilises.
“We have also seen an increase in inquiries from smaller landlords with one or two properties, who have had problems with rent arrears.”
Young explains that there are ways to avoid the handful of unethical companies taking properties without the financial resources to back up their promises, by exercising due diligence and checking that the company has the resources to meet their obligations.
“Companies House is a good place to start. Check out their accounts and credit score, and even go as far as looking into the directors of the company and what other organisations they may have been involved with,” he adds. “I would also recommend that if the provider is working with local authorities, ask for references from the local authority too.”