Managing guaranteed rent schemes

Some agents run guaranteed rent schemes, where they will guarantee a monthly rent to the landlord, irrespective of whether the property is let out and the tenants paying on time.

The best way to model this scenario in the system is by splitting the normal link between the tenants and the landlord, and putting your agency in the middle.  This means two versions of the property:

  1. Property A, with the landlord of this property being the real landlord, and Property B, with your agency as the landlord.  There is a "Copy Property" button to do this, so you don’t have to re-enter all of the details again.
  2. Set-up a tenancy against Property A with yourselves as the tenant.  Set the term to be whatever the length is of your guaranteed rent contract with the landlord.  Tick the "Is Rent Guaranteed" tickbox. 
  3. Set-up one or more lettings on Property B, with the real tenants and yourselves as landlord.  Record rent payments and manage arrears against this tenancy.  The tenancy agreement you generate for the real tenant will be between the tenant and yourselves – there will be no mention of the real landlord on it.

With this approach, the system will automatically generate a rent payment due to the real landlord every month, based on the agreed guaranteed rent amount set-up in Step 2 above, regardless of whether the property is actually currently let out or not, or whether the tenant has paid. 

If there are repairs due against the property, there is then the option of logging them against Property A (so the landlord will pay for them, deduced from the guaranteed rent) or against Property B, meaning your agency will cover the costs.

Tracking your profit

To keep track of your agency's profit from this kind of scheme, generate a monthly landlord statement for your landlord entry, the landlord of Property B above.  Set-up a recurring expense on Property B for the guaranteed rent each month. 

At the end of each month, you would create a landlord statement for each property - those for Property A would be sent out to the real landlord showing them the guaranteed rent they had earned (less any expenses); those for Property B would show the profit/loss for the month as they would show real rent received less the guaranteed rent out (and any repairs that your agency has incurred on the property).  At year end, you could also run an income analysis report for your “landlord” entry showing the profit/loss for the year on such properties.

 

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