On the whole, rental property is seen as a lucrative area for investment. However, rental companies are sometimes faced with situations that hamper profitability. These include the risk of unpaid rent, which should be considered and prevented as far as possible. If you’re an owner-lessor considering renting out your property, here are a few tips to help you avoid this problem.
Require a guarantor for your tenants
The best way to ensure that you receive the rent on time is to take precautions before the tenants sign the lease. We recommend that you don’t hand over the keys to your property to the first person who takes an interest in it. You should give preference to applicants who can demonstrate that they are in a financial position to pay rental charges on a regular basis. Be sure to require a guarantor for each potential future tenant. The law gives you the right to do so.
Renting your property to a tenant backed by a guarantor gives you the opportunity to turn to a third party in the event of non-payment. This requirement is a kind of financial insurance for homeowners. The guarantor undertakes to pay the rent in the event of non-payment in place of the tenant. You must receive a letter from him attesting to this status. This document serves as a deed of surety for a fixed or indefinite period in favor of the tenant.
The guarantor is liable if the tenant is in arrears with payments. Note that the guarantor can be a natural person (parent, child, etc.) or a legal entity (bank, company, etc.). In addition, as you can read on the Door-in blog, owners can delegate the rental management of their property to a real estate agency. The latter can then take charge of selecting tenants, which is generally reassuring.
Take out unpaid rent insurance for peace of mind
Another way to benefit from renting out your property is to take out unpaid rent insurance. This solution enables you to continue receiving regular income even if payments are suspended. One of the advantages of this insurance product is the variety of coverages. Most of the time, you can ask the insurer for assistance in the event of non-payment of rent, unexpected departure or death of the tenant. Insurance comes at a price. However, there are many circumstances in which it can be of interest.
Ask for a security deposit to rent your property
In addition to a guarantor, a financial guarantee can help you, as a homeowner, to avoid a situation of unpaid rent. This is a sum of money that the tenant deposits with the landlord when signing the rental contract. This is a guarantee that we are prepared for certain eventualities. The guarantee can be used to cover unpaid rent or other rental charges.
When a tenant leaves, you can estimate the renovation work required and use the guarantee to finance it. You are free to set the amount, within the limit imposed by regulations, depending on the nature of the property (furnished or unfurnished, seasonal rental, etc.). Remember that the security deposit is often confused with the bond. In reality, a surety is not a financial pledge, but rather the commitment of a guarantor to settle any unpaid rent.