We do not take on new guaranteed rent arrangements. We ran them for years and we know exactly how they work, so this page explains the model honestly rather than selling it to you.
If you are weighing up guaranteed rent against a managing agent, this should help you decide. If you conclude guaranteed rent is what you want, that is a perfectly reasonable answer and there are firms who still do it.
What guaranteed rent actually is
A company takes a lease on your property, usually for three to five years, and becomes your tenant. It then sublets the property, normally room by room.
You are paid a fixed sum every month for the length of the agreement, whether the property is full, half empty or empty. The company keeps whatever it collects above that figure, and absorbs the loss whenever it collects less.
That is the whole model. Everything else follows from it.
What you are actually buying
You are buying certainty, and you are paying for it out of rent.
The fixed monthly sum is set below what the property would achieve if it were let well and stayed full. It has to be, because the company is carrying the void risk, the arrears risk and usually the management cost. The gap between the fixed sum and the market rent is the price of the certainty.
That is not a criticism of the model. It is simply what it is, and any firm that tells you otherwise is not being straight with you. The question is whether the certainty is worth more to you than the gap.
When guaranteed rent is the right answer
It genuinely suits some landlords. In our experience it works best where:
- You live abroad, or far enough away that involvement is impractical
- You want a single predictable figure to set against a mortgage, and volatility matters more to you than total return
- You have one property rather than a portfolio, so the arrangement is simple to oversee
- The property is in reasonable condition and you do not intend to refurbish during the term
- You would rather not deal with tenants, at all, ever
If most of those describe you, guaranteed rent is a sensible choice and you should not be talked out of it.
When it is not
The model works less well where:
- The property is licensable as an HMO and the licence sits in your name, because the legal duties do not transfer with the rent
- You want to sell, refurbish or take the property back inside the next few years
- You have several properties and the aggregate gap starts to become a real number
- You want visibility of who is living there and how it is being run
That first point is the one landlords most often miss, so it is worth being blunt about it.
A guaranteed rent agreement does not move your legal duties.
Whoever holds the HMO licence carries the licence conditions. Under the Management of Houses in Multiple Occupation (England) Regulations 2006 the duties fall on the person managing the property. If the arrangement is structured so that you remain the licence holder, you remain exposed, however comfortable the monthly payment feels.
Being paid on time is not the same as being compliant. Landlords have found that out at the point a council starts asking questions, which is a bad time to discover it.
Before signing any guaranteed rent agreement, get a straight answer to three questions: who will hold the licence, who is named as the manager, and what happens to both if the company walks away.
What we do instead
We manage HMOs. We collect and pursue rent, but we do not guarantee it, and we would rather say so at the outset than have you find out later.
The trade is the reverse of guaranteed rent. You carry the void risk, so you keep the upside when the property is full, which it should be if it is being run properly. You pay a percentage of what is actually collected rather than accepting a discount on what could be collected. And the compliance work is done by someone whose job it is.
How our HMO management works · Book a free compliance audit
We were on the other side of this for years
We ran guaranteed rent arrangements in South West London for a long time before moving to management, and we were the tenant on a good number of properties. These are from landlords who let to us under those arrangements.
Reay Smith Property have been a fantastic tenant for me over the past 4 years, the rent is always paid on time and the property is kept in fantastic condition. I will be renting another property to them later this year and can recommend them very highly.
Fiona C, Putney
I have worked with Reay Smith Property for several years and have 2 properties with them in South West London. They have been responsible and timely with their payments and have kept the property in good condition. We will gladly rent out any of our new properties to them again.
Rishi, Marylebone
I have rented 3 houses to Reay Smith Property and have had a great relationship with them. They have been wonderful tenants for us, they are reliable and always report maintenance issues in a timely manner, and the regular cleaner and gardener means the houses are kept in good condition.
Mr Shah, Colliers Wood
I never had a rental payment missed and they resolved quite a few little issues around the house without me having to lift a finger.
Katie, Clapham
Reay Smith Property are very reliable and conscientious tenants for me. They have looked after the house well, reported any issues quickly and have helped get things fixed without much involvement from me. Highly recommended.
Miss A Delajoux, Shepherds Bush
Reay Smith Property are absolutely fantastic, they pay the rent on time every month, keep the property in good condition and are always quick to report if there are any maintenance issues. They even remind us when the Gas Safety is due!
Victoria, Wimbledon
That experience is the reason the management side works. We know what a poorly run house share costs, because we carried that cost ourselves rather than passing it to a landlord.
Talk to us
No obligation, and we will tell you honestly if you do not need us.
Telephone: 020 3026 7320
Email: info@reaysmithproperty.co.uk