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Tuesday, August 25, 2009

Guaranteed rental schemes have some merit....but


It sounds great. Buy-to-let without the hassle of finding tenants or doing any of the day to day maintenance.

All you have to do as a landlord is sit back and hopefully watch the value of your investment go up, once the property market has recovered it's nerve that is.

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However, it's not all as simple as that. Any guaranteed rental scheme comes at a cost. That can be as much as 20-25% in the rent that you as the landlord receive. This may be fine if you are lowly geared and have purchased your buy-to-let as a long-term investment concentrating on capital appreciation.

If income is important though this reduction in net rent could be critical to the economics of your investment. Also if you do consider using such a guaranteed rent scheme make sure you find out as much as you can about the schemes provider and ensure that they have a good track record. You don't want to find that the scheme is run by dodgy Russian gangsters who fill your property with a load of crack heads.

That would somewhat defeat the object of the whole scheme!

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