Why You Should Consider A Rent Guarantee

Although in our experience the majority of tenants are reliable, we all know that with the costs of living rising and expenses for many spiralling the “normal” risks of being landlord could be likely to rise and of course that means tenants defaulting on their rent payments. A rent guarantee or rental guarantee insurance is an important consideration for many new and would-be landlords. With the cost of living rising, the risk of having your tenants fall short on rent is not only more likely, but can have a greater impact on your personal finances. If you, many of our clients, are an accidental landlord or are preparing for your future by investing in buy-to-let property, you’ll know that any revenue generated from a small or large portfolio can be an important source of income. So here are our top reasons for why you should consider a rent guarantee, and how Centrick, with our extensive landlord portfolio and existing partners can help you secure your income.

Rental Defaults – More Likely Than You Think

During the pandemic, many jobs became unstable and work, even for some of the most stable professions was far from guaranteed. As a consequence tenant debt has soared, with 840,000 tenants in some form of rental arrears, leading to the government introducing additional tenant protection laws. Although many of us have regained career stability post-pandemic, we should look to this time of uncertainty as a lesson – rent arrears are always possible, especially in a volatile economy. With studies showing that the cost of rent is   the most common reason for concluding a tenancy, it’s important to protect your income not only for yourself, but for your tenants.

The Worst Case Scenario

On average, it takes 42 weeks to formally evict a tenant, which amounts to approximately 10 months lost rent during the time it takes to regain possession. Whilst all landlords will prepare for void periods and property maintenance, few if any plan for 10 months on non-rental income, after all few properties are able to wipe their face with just 2/12 months rent. Getting the right tenant in the first place can help. So if you’re looking at a rent guarantee for a new property then ensure that your agent is thoroughly qualifying and vetting and potential tenants with ID and credit checks as standard.  A professional referencing company will carry out tenant checks and references will be required from employers – and previous landlords where applicable – all of which can help avoid the issue to begin with.

In this ever-changeable world even the most thoroughly vetted tenant can fall on difficult times and if your buy-to-let investments are your primary source of income, this can be immensely detrimental to your finances, potentially putting your own mortgage at risk in some cases. Rent guarantees can help you avoid this worst-case scenario by providing you with financial assistance in the event of lengthy eviction procedures.

Although many tenants are reliable in their payments, it is important to note that rent rates are rising – and fast. The Guardian have claimed that rents increased by 2% during 2021 which, paired with inflation at 5.5%, has hit tenants hard. What’s more, with energy prices soaring, there is no doubt that tenants are feeling the burden of the cost-of-living crisis. With the likelihood of tenants missing rent as high as ever, it’s important to consider a rent guarantee for both existing tenancies and new lets.

Things to Note

Before you delve into researching the best rent guarantee option for you, here are a few things you should be aware of to help you make the best decision:

• Each insurance policy comes with different exclusions: you may need to wait 90 days before claiming, or only be able to claim full rent for a number of months. Ask any potential rent guarantee providers about their exclusions prior to choosing them and ensure that you have a plan of action to cover any exclusions that your provider enforces.
• Your tenants will need to be credit checked and referenced – or, if a credit check is not feasible, provide a guarantor – in order for the majority of rent guarantee schemes to be used. These safeguarding checks demonstrate that you have done your due diligence and, as far as you are aware, you believe that your tenants are in a position to pay their rent at the arranged times. Without these referencing checks, your rent guarantee provider will likely refuse to give you any cover.
• Rent guarantee insurance policies can also cover legal costs and solicitors’ advice, meaning you don’t have to purchase legal expenses cover separately – Centrick’s parter provide an industry leading £50,000 in legal expenses. In the event of a long-winded eviction procedure where you seek professional advice on which course of action to pursue, having inclusive legal cover can be very helpful. If you are an accidental or first-time landlord, or simply looking for some more guidance on the legal proceedings involved, this kind of cover is particularly useful.

Centrick are here to help you find the right rent guarantee plan for you, so you can spend less time stressing and more time doing what you love. With the cost of living rising rapidly, protecting your revenue – whether it’s your main source of income or not – has never been more important. Contact our Lettings Team using the form below for further information on how a rent guarantee scheme can benefit you: