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  • Buy-to-Let

    Guaranteed rent v insurance

    Hi,

    Does anyone have experience of these guaranteed rent schemes? My current tenants are moving out and I'm wondering if it's worth looking at these guaranteed rent schemes. I've not heard anything bad about them so assume they are OK, but I also assume they don't pay the same level of rent I would get if I let it myself. I've never had rent guarantee insurance, but from what I've read that covers rent in the event of a default and it looks like I can pick it up for £60.

    So to stop waffling I am basically after some advice on what is best/pitfalls.

    Regards

    Robbie

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    Hi Robbie,

    This thread may assist your understanding:

    Sub-letting/Rent 2 Rent vs. Guaranteed Rent vs. Guaranteed Rent Insurance

    Our lettings partner Northwood have over 13,000 landlords on their Guaranteed Rent and it has been operating for over 20 years.

    They will not offer you market rent, but a discounted rent.  You need to get in touch with your local office, as each quote for GR will be bespoke to the property and the area.

    GR is designed for landlords who want to "let and forget".  If you take into account the revenue lost through voids, and not having to worry about rental arrears or an empty property, then many landlords find it works for them.

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    Thanks Vanessa, is there a rough idea of what the discount percentage is, I've heard it's around 10%?

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    When I used it on a property in High Wycombe a number of years ago, the market rent was £1400.00 pcm and Northwood offered me £1200.00 pcm.

    I think it is typically around 10% less, but the best thing to do is contact your local office and get a quote imho, then you can work the numbers accurately.

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    I would be thinking about indemnities, public liability insurance in respect of tenant claims and matters where full legal liability cannot normally be avoided by the landlord - the buck always stops with the landlord - can they legally step into your shoes on all landlord liability matters?

    Also who pays/does what if additional/selective licencing is introduced into your area. If they can address such matters to your satisfaction then it seems to be a reasonable commercial proposition.

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    I explored the Northwood GR option mid last year, on a 2 bed flat SW London and the offering was about 30% less than the market rent. They offered £14,400 GR and the market rent I'm getting is £20,460. It was just too big a difference to make it worth my while.

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    RGI is the best option.

    Cost is dirt cheap.

    Of course it does not cover normal voids etc

    You still  have to manage your rental property or a LA does if you have one

    RGI just ensures that if you ever have a tenant that refuses to vacate and you need to use the court process because of rent arrears  that you won't suffer the costs.

    It is very rare that a tenant will pay rent until eviction day.

    So you will need  the insurance company resources unless you wish to waste your savings on paying for everything.

    RGI is a great idea in principle.

    The problem is that the qualifying criteria is necessarily  very strict.

    It is easy to see why when a RGI company could be on the hook for £50000.

    But even in Central London with the average 42 week period from PO to eviction that is about £35000

    RGI always puts you in control with rent arrears issues only as the tenant should know that the LL  could easily evict at little loss if the tenant defaults on rent.

    Most RGI companies give LL about a 90 day claim window  as they hope the LL  will resolve the matter before a claim is made.

    But if you ever manage to source a tenant who qualifies  for RGI hang onto them  for all they are worth

    Tenants like that don't grow on trees!!!

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    Paul, I concur wholeheartedly, thanks to your constant banging on about it, (and I mean this in the nicest possible way, I'm glad you did) Smile I took out an RGI policy with LRS on the 2 tenants, who were thoroughly vetted by LRS have a local LA fully managing it for 8% (I've lived in the UK but now I'm an O/S investor so cant be hands on). I've got piece of mind, and insurance if things go pear shaped and I'm achieving market rent.

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    Well done you

    I only bang on about it cos I don't want to see what happened to me happen to other LL

    They don't deserve what rent defaulting  tenants can do to them.

    I have lost more to rent defaulting  tenants probably more than any LL  in the UK!!

    I don't want LL  to be stitched up wrongun tenants and the dysfunctional  Court process

    LL are ripped off to the tune of £9 billion a year

    RGI could prevent a lot of those losses but so few LL  understand  the importance of RGI or some that it exists at all.

    I believe that many LL  don't quite understand  the dysfunction in the eviction process  and just go with what the LA suggests

    I wouldn't trust a High St LA to source me  a tenant ever!

    Unfortunately  very few of my tenants qualify for RGI.

    So despite my ideal requirement I have to take massive risks.

    However these risks are largely mitigated by the tenants themselves who come from the Portuguese community and know all about me and have not stitched me up.

    I have rarely achieved RGI.

    So I say to other LL  do as I say not as I do.

    I don't like the position I am in and would ideally have RGI on all my tenants.

    I hate the risk I am exposed to but have little choice in the matter.

    All the tenants I have seem to find me and they all seem to loosely know each other so I feel they don't want to compromise me in any way .

    If I was like you I should definitely  insist on RGI as being out of the country would compound issues in the event of rent defaulting  tenants.

    Personally  I believe that RGI criteria is far too strict.

    I believe many more LL  would take out RGI if their tenants could qualify

    It seems most RGI companies require an income of £30000.

    If this was reduced to £20000 many more LL  would use RGI

     I believe many more LL  will use the RGI approach as they terminate their LA contracts after the fee ban has taken effect

    But I believe that many  LL  are in blissful ignorance as to the efficacy of RGI  or even that it exists.

    When LL  start doing it more for themselves I believe they will use the RGI referencing  route.

    RGI remains the best way to prevent massive losses  that the useless dysfunctional  Court systems facilitate

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    Cheers Paul, yea I've got a couple of properties outside of London the tenants of which wouldn't ever qualify for RGI so I share your concern there, but thankfully they've been very well managed, and so far so good. Good management is key.

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    Good management  along with a fair bit of finger crossing.

    The LL  haters fail to appreciate the risk that LL  run because of rent defaulting  tenants.

    Of course many of the idiots just say that LL  know the risk so that is their problem

    Conveniently  forgetting that if LL  didn't take such risks tenants would not be housed

    But any LL  won't be given a scintilla of sympathy for the risks that they take.

    Such is the lot of the private LL.

    LL just need to accept they are in a very risky game predicated on strangers continually paying for a service  they use.

    Not all who use the service pay for it and even damage and steal at the service with impunity.

    Let no one say being a LL  is as safe as houses

    It is a far from safe investment! !

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