Why Every Landlord Should Have a Rent Guarantee
When you decide to become a landlord, you have to consider all of the scenarios that could take place. By planning for the worst, it allows you to protect yourself as needed. While you may work to get the best possible renters inside of a home or apartment, you can’t be sure that they’ll pay rent.
What happens if your renter doesn’t pay rent? While you may be able to cover one or two payments or deal with late payments, what happens when rent isn’t paid at all? You’re likely to suffer financially. You may even default on some of your own loans.
Financial security is critical, and you achieve that with a rent guarantee.
What is a Rent Guarantee?
A rent guarantee is sometimes known as a deposit guarantee. It is something that can be obtained by the person who is renting your property. This is a more affordable option in comparison to a deposit on rent. For those who don’t have the financial ability to make the required deposit, you can ask that they obtain this kind of guarantee.
Why is a Rent Guarantee Recommended?
Imagine that you’re renting a property. You ask that the people renting your property provide a deposit – and this may be three to six months’ rent. It can be quite a substantial sum – and one that many cannot afford.
In order to rent the property, you need to collect the deposit.
As more people struggle with paying the deposit, you have to make it easier for people. You can ask for a rent guarantee as an alternative. It means that people won’t have to tie up a large sum of money. People won’t have to save for months in order to obtain the deposit money.
And, for you as the landlord, it still provides you with financial protection. You know that a guarantor group will provide you with the rent money in the event that the renters do not pay the rent when it comes due.
How Much Should the Rent Guarantee Be Worth?
This is a question that only you can answer. In general, you will want to be competitive with the other rental properties around you. Just as you conduct research to see if an investment property makes financial sense, you will also want to research the market value.
If most properties around you are requesting a deposit of four months’ rent, you can ask for a guarantee that adds up to that amount. This way, you have sufficient financial protection in place in the event that the renters default on what is owed to you. It’s important to find a balance between making it easy for renters to acquire the property and protecting yourself financially. If you ask for too much of a deposit or guarantee, renters may not choose to rent your property. This could lead to bigger problems, such as extended vacancies that can end up costing you a significant amount of money.
Other Ways to Protect Yourself
As a landlord, you have to make sure that you protect yourself in every way possible. This means that you’ll want everyone to sign a lease agreement. This can be a legally binding document that protects both you and the people who are renting your property.
There are several things to include:
- Names of all tenants
- Limits on occupancy
- Amount of rent and when it is due
- Deposits and fees
- Repairs and maintenance (who is responsible for what)
- Restrictions on activities (noise, pets, etc.)
- Any other restrictions
With a lease agreement in place, it ensures that the renters know what they have to do to be in compliance. It also allows you to have a legal way to file a dispute in the event that they do not pay rent on time or if they break any of the other rules.
Ultimately, you’re in control of how you handle your rental property. As the landlord, you can decide what works best for you to keep the property rented regularly. Particularly if you’ve had issues with deposits in the past, a rent guarantee may be the easiest way to move forward.