Rent To Rent

As a landlord, whether you’re new to the property game or an experienced property manager, you have likely come across terms like ‘rent to rent’ and ‘guaranteed rent schemes’. These arrangements offer landlords a unique way to let out their properties, adding a third party to the rental process that can handle much of the footwork involved in tenant management. 

These schemes can provide a number of benefits, but it’s crucial to understand just how they work and how your Landlord Insurance will be affected or needs to be updated to suit. We’ve put together this handy infographic to help you get started.

Rent To Rent And Guaranteed Rent

What is Rent to Rent?

Rent to rent is an arrangement where a property owner or Landlord rents their property to an intermediary (often a business or individual) who then sublets the property to tenants. In these cases, the intermediary takes on much of the responsibility involved, including finding and vetting tenants, managing the property, and ensuring rent is paid. Essentially, the intermediary becomes the tenant – though may not live in the property – and the actual occupants are subtenants.

What is a Guaranteed Rent Scheme?

A guaranteed rent scheme is a specific type of rent-to-rent arrangement where the intermediary guarantees a fixed rental income to the landlord, regardless of whether the property is occupied or not. The intermediary might be a property management company or a letting agency (e.g. Serco, Mears) and in exchange for this guaranteed income, will take on the risks and responsibilities of tenant management and property upkeep. For Landlords, this takes away much of the stress and intricacies involved in property letting.

Benefits of Rent to Rent and Guaranteed Rent Schemes

As a Landlord, finding the best way to let out property to tenants is undeniably important, and for those who may not be well-versed in property management, rent-to-rent or guaranteed rent schemes can be a useful option. The benefits can include:

  1. Steady Income: These schemes provide landlords with a predictable rental income, reducing the financial uncertainties associated with vacancies or late rent payments.
  2. Reduced Management Responsibilities: The intermediary handles tenant sourcing, rent collection, and property maintenance, ultimately freeing up the landlord from day-to-day management tasks.
  3. No Void Periods of Income: With a guaranteed rent scheme, landlords receive rental payments even when the property is vacant, ensuring continuous cash flow each month.
  4. Lower Risk: The intermediary takes on the risk of tenant defaults and property management issues, providing peace of mind to the landlord.

How Does Landlord Insurance Work Within These Schemes?

Landlord insurance is designed to protect property owners from various risks associated with renting out their properties. When engaging in rent-to-rent or guaranteed rent schemes, it’s essential to ensure that your insurance policy covers this specific arrangement to give you confidence that you are properly protected. We are on hand to help you find the right policy and will consider:

  1. Policy Coverage: What does your policy cover? Will it cover sublet properties or subtenants? Not every standard landlord insurance policy will cover this, so care should be taken to ensure the right cover is chosen.
  2. Property Damage: Your insurance should cover damages to the property, whether caused by the intermediary or the subtenants. 
  3. Liability Insurance: Liability coverage is crucial in case someone is injured on the property and holds you responsible. Ensure your policy includes liability insurance that covers both the intermediary and the subtenants.
  4. Loss of Rent: If the property becomes uninhabitable due to an insured event (like a fire or flood), your policy should compensate for the loss of rent for both tenants and subtenants.
  5. Legal Expenses: In the event of a dispute with the intermediary or subtenants, legal expense coverage can be invaluable. Ensure your policy includes this provision to cover potential legal costs.

Ensuring Proper Insurance Coverage

If you are planning to adopt a rent-to-rent or guaranteed rent scheme on your property, making sure that you have the right insurance coverage is an important step. Our team are on hand to help you find the right policies with the right coverage and terms, specifically those that include subtenants and subletting within their cover.

Rent-to-rent and guaranteed rent schemes offer landlords a convenient way to secure steady rental income and reduce management burdens. However, it’s crucial to ensure your landlord insurance adequately covers these arrangements. For more information or support in finding the right policy for you, get in touch with Ashburnham Insurance on FREEPHONE 0800 1696137.

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