Guaranteed rent or a managed let: which suits a Luton landlord?
Both take the work off your hands. The difference is who carries the risk of an empty property or an unpaid month, and what that costs you.
The short version
With a managed let, you receive the full market rent less a management fee, but only while there is a tenant in the property who is paying. With guaranteed rent, you receive a fixed sum every month for an agreed term regardless, and that sum is normally lower than the market rent.
You are choosing between a higher income that can vary and a lower income that does not.
How a managed let works
The tenancy is between you and the tenant. The agent finds and references the tenant, collects the rent, arranges repairs and keeps the property compliant, and charges a percentage of the rent for doing so.
You remain the landlord. You decide who moves in and whether to approve a repair, and you benefit when rents rise. You also carry the risks: if the property is empty between tenancies you receive nothing for that period, and if the tenant stops paying, the arrears are yours until they are recovered.
How guaranteed rent works
Your agreement is with the company providing the guarantee, not with the person living in the property. You are paid the agreed figure each month for the length of the term. The provider finds the occupiers, collects from them and deals with them day to day.
The provider makes its money on the difference between what it pays you and what it collects, which is why the guaranteed figure is below the open-market rent. In return you have no voids, no arrears and no tenant calls.
Side by side
| Managed let | Guaranteed rent | |
|---|---|---|
| Monthly income | Market rent, less a fee | Fixed figure, usually below market rent |
| Empty months | You receive nothing | You are still paid |
| Unpaid rent | Your loss until recovered | The provider’s problem |
| Who chooses the occupier | You do | The provider does |
| Your contract is with | The tenant | The provider |
| Rent rises during the term | You benefit | Fixed until the term ends or is reviewed |
| Your involvement | Low | Almost none |
When guaranteed rent tends to suit
- You rely on the rent to cover a mortgage and cannot absorb an empty month.
- You live a long way from Luton or abroad.
- You own several properties and value predictable income over squeezing out every pound.
- You have been through a difficult tenancy and do not want to repeat it.
When a managed let tends to suit
- The property is in a part of Luton where it will let quickly, so the risk of a long void is small.
- You want a say in who lives there.
- You can cover the mortgage for a month or two if you had to.
- You want the benefit when rents go up.
Six questions to ask before signing a guaranteed rent agreement
- Who exactly is my contract with, and for how long? A guarantee is only as good as the company behind it.
- Who will live in the property? Ask how occupiers are chosen and whether the property will be let to a single household or shared.
- Who pays for repairs? Agreements differ on what the provider covers and what comes back to you.
- What condition will it be returned in? Look for a clear commitment, with an inventory at the start.
- How can it be ended early? Check the notice either side has to give.
- Do my lender and insurer allow it? Many buy-to-let mortgages and landlord insurance policies have conditions about this kind of arrangement. Get consent before you sign.
Which costs more?
On paper, guaranteed rent usually does: the gap between the guaranteed figure and the market rent is normally wider than a management fee. In practice it depends on how the tenancy goes. One empty month costs a twelfth of a year’s rent, and a period of arrears can cost far more.
The sensible way to decide is to get both figures for your actual property and compare them against how much risk you are comfortable carrying.
Get both figures for your property
We offer both services, so we have no reason to push you towards one. Ask for a rental appraisal and we will give you the market rent, our management fee and a guaranteed rent figure, so you can compare them properly.
This guide is general information, not legal or financial advice. Rules for landlords change, so check the current position for your property before acting.