How guaranteed rent works
Under a guaranteed rent (sometimes called “rent to rent” or a “rent guarantee”) arrangement, you let your property to a company rather than to a tenant. That company pays you an agreed fixed rent every month for the length of the agreement, then sublets the property — often as a room-by-room HMO or as serviced accommodation — and keeps the difference between what it pays you and what it earns. The voids, the tenant-finding and most of the management become their problem, not yours. In return you accept a rent that sits a little below the open-market figure, because that gap is where the operator makes its money.
The pros and cons for a landlord
- Pros: a fixed, predictable income with no void periods; no tenant management or chasing arrears; maintenance often handled (within limits set in the contract); useful if you live far from the property or want a hands-off hold.
- Cons: the rent is below market — you are paying for certainty; you hand over day-to-day control of who lives there; and you are relying on the operator still being solvent and reputable in year four. A bad operator who sublets to the wrong people, or folds, is a real headache.
Council and local-authority guaranteed rent schemes
Many local authorities — including several London boroughs such as Greenwich — run their own guaranteed rent or leasing schemes. The council leases your property directly, pays a guaranteed rent (usually slightly below market), houses tenants from its own waiting list, and hands the property back at the end of the term. These can run for longer fixed periods than a private operator and carry less counterparty risk, though the rent offered is typically lower and the condition you get the property back in varies, so read the dilapidations terms.
What to check before you sign
This is where landlords get caught out, so do not skip it:
- The operator. Check how long they have traded, ask for landlord references, and look at how they actually run their other properties.
- The contract. It should be a proper company let agreement, not an assured shorthold tenancy, and it must spell out who is responsible for what repairs and the condition the property is returned in.
- Your lender and insurer. Subletting almost always needs your buy-to-let mortgage lender’s written consent, and your insurer needs to know the property is run this way. Skipping this can breach both.
Guaranteed rent is the hands-off cousin of running the strategy yourself. If you want to understand the operator’s side of the deal — the side that earns the margin — read our guides below.
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