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Rent Guarantee Insurance vs Agent's Rent On Time scheme

(4 Posts)
aniceearlynight Sun 04-Jan-15 11:43:50

I am going round in circles with this so would be grateful for advice/comments from experienced landlords.

I have just bought a BTL about an hour away from home and have decided to opt for a fully managed service from a Letting Agent as my circumstances mean I can't take on management myself (full-time working single mum with demanding job and teenagers!). Mortgage payments are £400 pcm and it will take a few months to build up a savings 'buffer'.

Have decided on the agency to go with and in addition to their fully managed service for another 2% + VAT they offer a 'rent guarantee scheme' (sometimes called a 'rent on time' scheme) i.e. if the rent is 5 days late they will pay it to you themselves.

This is not a guaranteed rent scheme as offered by Northwood etc i.e. I am not letting the flat to the agents so they can sublet. It is just a service whereby they guarantee to pay me the monthly rent for the term of the AST but won't pay any associated legal costs with removing a tenant who has fallen into arrears. This will cost me approx. £300 a year.

Alternatively, I could purchase Rent Guarantee Insurance from e.g. Endsleigh, which offers recovery of rent arrears for a maximum for 5 months out of 6 (on both a 6-month and a 12-month policy) and up to £15,000 legal expenses cover. These terms seem fairly standard. Obviously with insurance I will have to claim and find the money to pay the mortgage while the claim goes through. This option costs £120 a year.

Any advice gratefully received.

specialsubject Sun 04-Jan-15 11:50:56

FWIW I pay 2.5% of rent for rent guarantee and legal expenses. The latter is an absolute essential; removing a non-paying tenant takes four months and a LOT of legal expense.

Also check your insurance covers malicious damage; some of the 'popular' ones don't.

it all adds up but the consequences of not having these insurances can be financially crippling.

aniceearlynight Sun 04-Jan-15 23:16:47

Thanks Special for good advice re. legal expenses insurance - shame the agent's scheme (2.4% of rent) doesn't include this as then it would be the best option. I am now thinking of just going for their full management plus the insurance - would save me approx. £180 a year.

specialsubject Mon 05-Jan-15 10:32:09

if full management is cheaper then do it!

you still need to keep an eye (voice of experience re an agent that kept 'forgetting' the inspections) but it all helps.

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