How important is rent guarantee?
How rent guarantee insurance saved this landlord from going bankrupt
Rent Guarantee Insurance is completely optional, but even if you were to source your own – we would strongly recommend you consider it to protect your interests. Like with most insurances, you hope you won’t need it, but in the event you do, you will be as grateful as this landlord was.
To disclaim, they weren’t one of ours, but someone we know, so they would often come to us for advice. They had their main residence and their rental home, both with mortgages that had to be paid. The rental home was going to be their pension, so whilst they were in a fortunate position to own two properties, they relied on the rental income.
The landlords were presented with a tenant, a working professional who was looking for more space, with plans to move his mum in from overseas. He has passed referencing, paid the first month's rent and five-week deposits upfront, and then moved in. Shortly after that, went missing. The tenant advised he was no longer able to pay the rent, which didn’t leave the landlords with many options – they had to start the legal process to evict. From start to finish, this process took about 8 months, with the loss in rental payments in excess of £10k, On top of that were the legal costs, bailiff fees, locksmiths, void periods, etc. Like most people, the landlords didn’t have this sort of money to hand and would have likely meant selling the investment that they had worked hard for.
Fortunately for them, they had invested in proper insurance that protected them against exactly this scenario. Ironically, they had considered canceling the policy, as they felt like they didn’t need it from their experience with the previous tenant. The full loss in rental payments, fees incurred, and even a large contribution towards the void period whilst the property was empty was covered – close to £15,000 in the end.
Since recuperating most of the money, they’ve found perfect tenants who are looking after the property. Even the best tenants can lose their jobs, especially in the recent climate. So, this blog isn’t to put you off, as being a landlord can be a great investment and there are plenty of superb tenants out there who will look after your home, but it is just to encourage you to protect yourself and your family's interests!
When speaking with agents, most will be able to offer you some sort of rental guarantee now, if you are curious to find out how ours works, we would be more than happy to walk you through it. If you’re sourcing your own, be sure to get a breakdown of what exactly you are covered for and when you can expect to be paid out.
