Rental Guarantees.

[Tezza]

Hi,

Not sure if this has been asked before but I have a rental property that has a one year rental gaurantee. The initial tenants only stayed for 5 months.
I have already been charged cleaning fees by my agent to prepare the property to be re-tenanted. I am not sure whether the agent will charge me for the first week to re-rent the property?

The question I have is should these fees be paid by the vendor as part of the rental guarantee or by me as the landlord??

Thanks
Tezza.

 

[buzzlightyear]

With whom is the guarantee with? Is it with the property management company? If so, what does your contract say?

 

[Propertunity]

Tezza, it is impossible to say - you will have to have a read of your rental guarantee contract.

Then be prepared for the real market rental on expiry.

 

[marg4000]

As said, read the contract.

I would expect a rental guarantee to cover the rent for 52 weeks, so I would not expect a fee for re-renting.

Cleaning is a different matter, and probably isn't covered.

But it should all be set out in the contract.
Marg

 

[NotAllPMsRBAD!]

is it a lease break or was the initial lease only for 5 months?

If it is a lease break, then the tenants would be liable for the fees anyway.

If not, then generally speaking the RG only covers the rent, if there is a vacancy period then the RG should cover that but it wouldn't cover the agents fees.... you really need to check the wording of your RG tho

 

[RightValue]

is it a lease break or was the initial lease only for 5 months?

If it is a lease break, then the tenants would be liable for the fees anyway.

If not, then generally speaking the RG only covers the rent, if there is a vacancy period then the RG should cover that but it wouldn't cover the agents fees.... you really need to check the wording of your RG tho

In many cases with properties with rental guarantees - where the guaranteed rental is above market, the tenant is paying a market rent and the guarantor is topping up the rent to the guaranteed amount out of the over the odds price the investor paid for the property.

My question is this .. is the property manager related to the providor of the rental guarantee??

If I had a rental guarantee for the first year I would expect to receive the years guaranteed rental and the guarantor to pick up any cleaning or reletting costs .. coz they promised me $x in income over the year and I paid for that guarantee in the price after all.

good luck,

cheers

RightValue

PS: In my experience rearely is buying a property off the plan with a rental guarantee actually worth it

 

[Tezza]

is it a lease break or was the initial lease only for 5 months?

If it is a lease break, then the tenants would be liable for the fees anyway.

If not, then generally speaking the RG only covers the rent, if there is a vacancy period then the RG should cover that but it wouldn't cover the agents fees.... you really need to check the wording of your RG tho

Hi Guy,

Thanks for the replies. It was a lease break so I should be able to claim the cleaning as part of the bond. Did not think to look at the contract of sale, but when I refered to it, it does state that the purchaser pays the agents fees and any collection or management fees.
I think my questions have been answered. Thanks again.

 

[stinadaze]

I have come across a company that offers a rental guarantee for 10 years. They do ask you to pay approx $15/week but rent is guaranteed (even if tenant is late to pay) and if rent increases, the increase is also passed onto you. You can also break out of the contract at any time but they cannot.

The $15/week ($780/year) amount to approx 2 weeks of rent (for the houses they are suggesting)

As such I am not considering this option at this point, I am enquiring more to learn about this, but my question is what is the real catch about these rental guarantees and why does everyone not like them?

 

[marg4000]

1. The cost of the guarantee is usually inflated into the purchase price, so you are simply getting your own money back.

2. The guarantee is usually from a $2 shelf company, and liable to go bankrupt at any time.

The question to ask yourself is:
Would I buy this property at that price without the guarantee?

Only investigate further if the answer is yes.
Marg