Guaranteed Rental Schemes

crackers78

A question to landlords....

What's your opinion of companies offering guaranteed rental schemes? There are schemes out there that will pay 70% of the market rent for 12 months. The company then become the tenant and pay you that amount regardless of whether there is a tenant in your property or not. They make their money from the difference they manage to rent it out and the amount they pay you.

The value is certainty of rent. There argument is that for a 2 year period, on average there will be 3 months of the 24 that the property will be vacant, whereas this scheme provides certainty.

The downside is that say you had a property that you could let for 500 a month, they would pay you 350 a month for a year - guaranteed.

In your opinion, are these schemes attractive and worthwhile?

Thanks

sooz

Depends on the market where your BTL is. Personally, I would think you could 'guarantee' yourself the same certainty of very little void periods if you marketed your property yourself for £350 rather than £500!

Keep your property in really good condition, and price it at a little below market value. You should have people lining up to rent it.

plane_boy2000

Depends how much care they take in selecting their tennants! My guess is that they will stick anyone in so that they can start getting money in. Do they offer any guarantees in terms of condition of property upon return to you?

Is it Northwood?

Doozergirl

Do you think they do it out of the goodness of their hearts or do you think they might profit from it? It's money for old rope!

If the average is 3 months out of 24, you lose 12.5%. So you want to pay someone 30% to insure against a 12.5% loss? You would have to be bonkers! I can almost guarantee that their tack would be to not be too picky over who they let it to.

You can do exactly what sooz says; keep it nice and advertise at slightly less than the going rate and you will minimise your voids. Read up on letting it privately and properly; protect your asset and save on agent's fees also.

crackers78

Planeboy - yes it is northwood. Have you had any dealings with them, either from a tenant or landlord experience?

Sooz - good point about putting the property on a slightly below market value to improve the chances.

My friend has approached northwood regarding a franchise opportunity and he has asked whether I would be interested in putting in some capital for an equity stake in his business. I wouldn't see that money back for the first year or two but in the medium/longer term I would be taking a monthly income as a % of the monthly billage.

With the company paying away 70% and taking the rest, they are effectively making 25-30% margins comparing to the 10-15% margins of traditional renting. In my mind, the best way to find out whether this is a business idea that would work and be profitable, I should be gaining the reaction of actual landlords and people who've dealt with the company, so all feedback and thoughts are appreciated.