Tips to help landlords & investors protect their investments during Covid-19

The truth is the risk of landlords and investors not receiving rent during the Covid-19 pandemic is far higher now than previously predicted. Given the widespread economic impact of the pandemic, many landlords and investors who let their properties to working professionals and working families may suddenly find themselves receiving less or even no income at all.

Although Housing Benefits or Universal Credit may come to the rescue for some tenants, it takes time to apply and receive these benefits, time that a lot of landlords and investors may not have. And with the unemployment rate rising, there’s a significant risk that the number of landlords and investors being impacted will rise greatly too.

So, unfortunately, the risk of rent default (whether due to tenants’ loss of income or to changing circumstances) has increased. Not only that, but it will continue to do so as long as the pandemic lasts, especially if we continue to drift from one lockdown to another.

While a vaccine or cure will (hopefully) reduce the health impact of Covid much sooner than that, it will take much longer for the UK economies stability to return. This means that landlords and investors need to do all they can to protect their property investments during the ‘new normal'.

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There are a few ways in which landlords and investors can better protect their investments.

They could insist on much more stringent references for tenants. Meaning, going forward when doing checks there would be a more in-depth process to ensure that any new tenant has a secured source of income to continue paying rents whilst the pandemic continues.

They could also make a personal guarantor a requirement. Then, like with the above option, any landlord or investor would need to take a more in-depth approach when checking references for a guarantor.
The use of a Guarantor Company

Although not ideal, the top two solutions could work as a temporary solution until we receive more announcements/guidance from the government.

They may also come with a price tag, so landlords and investors need to be comfortable with spending, in order to receive more cover. That said, wouldn’t it be a small price to pay if it meant you were cover and you have effectively reduced the risk of loss of earnings for your investment?

How About a Guarantor Company?

A third option could be to use the services of a guarantor company. The use of a guarantor company is often the best solution, but it’s not one with which all landlords and investors are familiar.

With these companies, the company stands as the guarantor for the tenant. This arrangement negates the need for the landlord or investor to worry about a personal guarantor (who could be in just the same position as the tenant in terms of reduced or entirely lost income) paying out should the tenant be unable to.

Guarantor companies are paid for by the tenant, so the landlord or investor's investment income is protected at no additional cost. Should the tenant be unable to pay their rent, the guarantor company will make the payment within 28 days upon receipt of the invoice.

Whichever solution a landlord or investor opts for, I would recommend carrying out some kind of due diligence to ensure that their chosen option will ensure their financial risk and protect their investment until all this uncertainty of a distant memory.

Well, I hope this article is able to help a few of my readers. If you have any questions or would like to add anything to this post, please feel free to contact my using my details below.

More than just an estate agent…

I’m Gary Lintorn - Let Me Get You Moving...

gary@garylintorn.com

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