We do everything we can to provide our members with full peace of mind on their investments. So in addition to the provision fund, we’re now also looking to bring you more properties with underwritten rent, such as our Nottingham property.
But what exactly does underwritten rent mean?
Underwritten rent means that a contract has been put in place with a private partner (these can be local councils, letting agents and property management firms) to take responsibility of the property and underwrite rent for a set period, which can be anywhere between 1 and 5 years(1).
As well as guaranteeing rent, the private partner may also include other benefits within the agreement such as maintenance costs, utility costs, council tax and management. This differs with each property and each private partner contract.
The question a lot of people have is, why would someone underwrite the rent? This comes down to risk and confidence in the property management (as well as insurance which some providers put in place). There is a well defined formula used in the market which includes deducting a typical void period as well as an allocation for maintenance which means that the rental return achieved will typically be lower than if the property was let privately with no voids and no major maintenance. This is where the balance of risks comes in as underwritten rent will generally provide a more consistent and visible income stream.
So what are the benefits for you as an investor?
- You may get consistent returns on your investment each month for the period of the underwritten period (three years in the case of the Nottingham property).
- No rental voids with the rent being paid by the management agent/guarantee provider if the property is empty.
- Generally higher rents – as the private partner doesn’t charge any fees to the landlords (in Property Moose’s case, the SPV you become a shareholder in), it is in their best interest to get the best rent for the property(2).
- Regular inspections – the private partners acting as managers of the property guarantee regular inspections of the property for the period. In the case of the Nottingham property, inspections will be carried out every 30 days.
Disclaimer and Legals
Property Moose does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Please remember that property prices can go down as well as up and that all figures, rates and yields are projections only and should not be relied on. If in doubt, please seek the advice of a financial adviser. Your Capital is at risk if you invest. This post has been approved as a financial promotion by Resolution Compliance Limited.
Property Moose is a trading name of Crowd Fin Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (no: 574048).
Sources:
2 - https://storify.com/ArnoldVicente/top-7-benefits-of-guaranteed-rent-scheme-for-landl
