In this post, we will try to simplify the guaranteed rent scheme as much as possible, so our landlords to understand the scheme better. Is it a good option to take? How does it work for both the landlords and the property management company? What are the benefits of the scheme? And is there any risk in proceeding with this scheme?
Let’s find out the answers to these questions, and find out if you prefer this scheme. Or you want to manage your property yourself.
Table of Contents
What Is Guaranteed Rent Scheme?
Guaranteed rent is a contract in which a landlord gives the control and management of his property to a third party. This third party can usually be a property management company or the landlord’s tenant. Guaranteed rent for landlords means good monthly income and peace of mind. It pays a fixed monthly rent to the landlord for a definite period, usually 2 to 10 years.
With this scheme, the landlord is looking to minimise stress and risk by giving the property to a property management company at a fixed rent rate for a specified period. The property management company is confident enough to use its experience and expertise to find the best leasing deals for the property.
In this scenario, the landlord will guarantee himself a fixed monthly rent from his property and doesn’t have to worry about the tenants or guests of his property. Meanwhile, the company will take all the hassle of finding property tenants.
Guaranteed Rent, Is it an Option or a Need?
For some landlords, it is a need. Some landlords are suffering from their property finding the right tenants who can pay on time. Moreover, landlords with more than one property suffer from handling the property in maintenance and repairs. In this case, the landlord can rent out his property to a property management company. As a result, the landlord will have a permanent tenant and forget all hassles. Not only that, but there are many other benefits of hiring a property management company.
On the other hand, some landlords believe they can manage the property themselves and don’t need a property manager. But surely, this will take much more of their daily time to look after their properties. Some landlords make more income from their properties, but this depends on many factors regarding the property itself.
The scheme in Luke Capital Group
Here at Luke Capital Group, our rent guaranteed service for the properties is very flexible and straight. We don’t only rent the property from the landlord, but we pay in advance and take good care of the property. All of our management systems will be explained to our landlords, and we will answer any questions from our landlords. Our goal is to make our landlords happy with our service.
We take the property and do the needful to make sure that the property is well-maintained for all guests. Furthermore, we upgrade the property if needed to make the maximum profits from the property and ensure our guests have a 5-star hospitality experience.
Our Property Management Systems
Our expertise lies within Short Term Rentals and Serviced Accommodation, not in long-term contracts with tenants. Moreover, we provide short term rental property management services to our landlords and maximise their property income potential, with our systems thoroughly explaining how we operate.
Guaranteed Rent – How It Works
In a guaranteed rent property management, also called ‘rent-to-rent arrangement‘, the property manager signs a contract guaranteeing to pay a set monthly income to the landlords to take complete control of the property. The property manager will market the property to find guests and do all the tenancy administration. They are furthermore handling any property maintenance and taking care of legal proceedings.
The property manager agrees to a guaranteed rent with the landlord, close to the market value for the property. The success of their enterprise then rests on their ability to achieve a high enough rental income from the property to cover expenses and generate a profit.
The Benefits To the Landlords
Landlords can benefit more from this scheme instead from handling the properties themselves. Here are the benefits of this scheme illustrated.
- it’s the most ‘hands-off’ option available for landlords
- it allows landlords to free their minds from the lettings process
- it ensures that there is a regular, predictable cash flow
- less risk of having to enter legal eviction proceedings
- no need of having to deal with damage and repairs
- landlords receive payment from the middle tenant even when the property is unoccupied, meaning there are no void periods for the landlords
Guaranteed rent schemes can be especially appealing to landlords with prior experience with arrears and evictions. As they know all the hassle and stress that can come from the letting process.
At Luke Capital Group, landlords will forget all of the hassles. Because our managed properties operate as short term rentals and holiday homes, which provide less to no hassle for our hosts and guests. Furthermore, we plugged in the technology in property management, using advanced systems to make all the operations run smoothly.
Is There Any Risk With Guaranteed Rent Scheme?
Anything you want to proceed with can have risks. It is always recommended to consider what risks you might face when moving with any contract. But most importantly, you need to calculate the risk-reward ratio of it. If you can foresee there will be more rewards with this scheme, then proceed with it. If you feel you can have more risks, think twice before proceeding.
The risks can come from which property management company you are dealing with them. Some companies can have fewer features than what they promise. For example, their ability to handle maintenance works and repairs is somehow incomplete. In some cases, landlords have to take responsibility for the maintenance as the property manager couldn’t do their best.
Another example is when a property management company collapses and loses the ability to cover the monthly rent. Of course, that can depend on the company’s reputation and its clients’ reviews. So make sure to do your research when deciding on proceeding with this scheme.
Risk With Luke Capital Group
Ryan Luke, the Founder and CEO of Luke Capital group, mentioned in his article about the future of rental arbitrage, that he made sure to pay all landlords their rent during the Covid pandemic. He personally paid every single rent during the pandemic. He believed it would serve his business in good stead moving forward, which has precisely done that.
Another reason for the minimum to no risk with Luke Capital Group is that we are I-PRAC certified. I-PRAC, International Property Rental Certification, is a global trust accreditation & certification operating in 28 countries verifying short term rental operators as legitimate, trustworthy & professional, ensuring trust and confidence.
There are many other reasons for the guaranteed rent scheme with Luke Capital Group, for the landlords to proceed with this scheme and forget the hassle of their property.
As we mentioned earlier, our goal is to make our landlords happy and satisfied with our service, ensuring to take all the hassles from their property management. Ideally, landlords always look for operators that will carefully handle their properties.
Conclusion
The guaranteed rent scheme is a straightforward, almost risk-free property management scheme that all occupied and busy landlords should consider. It provides them with many benefits and frees their mind from the stress that could come from their property. So landlords that have many other obligations in their life should consider proceeding with this scheme. Other landlords might want a stress-free income from their property, which can be a good fit for this scheme.
However, landlords should do their homework to make decisions for their property management. They should be wise when choosing their property manager to ensure that their property is being taken care of.
