Why rent guarantee insurance is great for letting agents and not just landlords
Rent guarantee insurance has proved to be a popular product with landlords. Most policies will cover all rent arrears and will even cover the legal fees to evict the tenants. Costs for 12 month policies can vary between £90-£180 approx, so it’s an absolute no brainer for landlords. Surprisingly, many letting agents aren’t really pushing the idea of guaranteed rent, so we’ve listed a few reasons below on why the insurance is also great for letting agents.
- Less Administration
Rent guarantee policies will usually start as soon as the tenant reaches 30 days or rent arrears or 1 month. As soon as the tenant reaches this timeframe, letting agents are simply able to pass the case on to the rent guarantee insurers, who will then do all the work.
This process can save letting agents a lot of time and aggravation. Rather than being sent on a wild goose chase for rent, agents are in full control. If the rent arrears reach 30 days, simply inform the insurers who will handle it from then on. Some policies will still insist that agents send rent reminder letters, however a lot of this can be automated with agent CRM software.
- Time to focus on other aspects
Chasing rent isn’t something a lot of agents want to spend time doing. Agents are best when they’re closing deals, winning new business and keeping clients happy. Chasing rent isn’t time effective, as agents can spend weeks, if not months chasing rent.
The additional time gained from having rent guarantee insurance, can allow agents the additional time to focus on what’s important. More time to close deals and more time to win new instructions. Happier employees and happier employers.
- Leave it to the experts
Although agents are able to serve notices such as section 21 and section 8 notices, many aren’t able to evict tenants. Submitting a possession order and a bailiff warrant involves a lot of time and administration. Furthermore, if anything is incorrect within the paperwork, the entire eviction can get thrown out of court. This means, the entire eviction process has to start from scratch.
With rent guarantee policies, the insurers use experienced and qualified solicitors to handle the eviction process. Remember, it’s in the interest of the insurer to evict the tenant as soon as possible. This is because the insurer has to keep on paying the rent as long as the tenant is in occupation of the property.
- No loss of rent, no loss of management fees
Tenants that rack up a few months’ worth of arrears obviously cost the landlord, however it also costs the letting agent. Not only does the letting agent lose time by chasing arrears, however the managing agent also doesn’t receive their management fee. Most agents work on the basis that the management fee is deducting from the rent on a monthly basis. If there isn’t any rent, then the chances are the managing fee is also non-existent.
It can be frustrating for a letting agent to putting in heaps of time and effort into chasing rent arrears and they’re actually not getting paid each month to do so.
Rent guarantee insurance also ensures that the managing agents are also paid and aren’t out of pocket. Furthermore,
- Higher landlord retention rates
Rent arrears sometimes aren’t intentional. Not every tenant is a rogue tenant who doesn’t pay by choice. The majority of tenants who fall into arrears have obvious financial problems, which can be the result of a number of things. For instance, a loss of job, separation/divorce and ill health are a few of the things that can cause people to spiral out of control and lose track of their finances. That being said, landlords aren’t able to afford renting properties if there isn’t any rental income. Landlords also have their mortgages and property maintenance bills to pay so of course less forgiving when the rent isn’t paid.
Although rent arrears can be a rare occurrence, landlords tend to blame the agent for rent arrears. The agent has placed the tenant and now they’re not paying the rent. In cases such as these, landlords that have a bad experience are likely to change agents. Agents that can ensure their landlord’s rent is guaranteed are much more likely to stay with that agent (if they’re satisfied with the rest of the service).
This article was written by Martin Alexander from Expert Mortgage Advisor. With a wealth of experience in buy to let mortgages and working closely with landlords and agents throughout the UK.
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