Rent Guarantee Insurance vs Agent's Rent On Time scheme

[aniceearlynight]

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.

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.

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.

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.