Guaranteed rent or a letting agent: which suits you?
Landlords often ask which earns more. The honest answer is that a well-run managed let usually pays slightly more over time, and guaranteed rent pays more reliably. Which matters most depends on you.
How each one works
With a letting agent on full management, your tenant pays the market rent, the agent deducts a fee and you receive the rest. If the property is empty or the tenant falls behind, your income stops until it is resolved.
With guaranteed rent, a company rents the property from you and pays a fixed amount every month for a set number of years. It lets the property on and keeps the difference. You are paid whether it is occupied or not.
How the income compares
Take a two-bedroom house with a market rent of £1,000 a month.
- Managed: you receive the rent collected, less the management fee, a set-up fee for each new tenancy and the cost of any repairs. Three weeks empty between tenants would cost about £690 in lost rent.
- Guaranteed rent: you receive a fixed monthly sum set below the market rent, with no empty weeks and minor repairs covered.
In a year with a change of tenant, guaranteed rent often comes out ahead. In a year with no change of tenant and no repairs, the two can be close. Over five years with a good tenant, management is likely to edge it, because rents rise and guaranteed rent is fixed or rises by an agreed amount.
Guaranteed rent suits you if
- You rely on the income to pay a mortgage or supplement a pension
- You live abroad or a long way from the property
- You have had a bad experience with arrears or empty periods
- You do not want to be consulted on repairs and renewals
A letting agent suits you if
- You want the full market rent and can absorb an occasional gap
- You want to choose your tenant
- You may wish to sell or move back in within two years
- Your lender will not consent to a company let
Questions to ask any guaranteed rent provider
The guarantee is only as good as the company giving it. Ask to see filed accounts, speak to existing landlords, and read the clauses on repairs, break rights and the condition of the property at hand-back.
We offer both and will show you figures for each at your rental appraisal.
