When considering property investment in Croydon, landlords must choose between two options: private rent or guaranteed rent. Both options have their unique advantages and disadvantages, making it essential to analyse the ROI of each before making a decision.
Private rent involves landlords advertising their property on websites such as Zoopla or Rightmove and managing tenant relationships themselves. Private landlords must also handle repairs and maintenance, and cover void periods when tenants are not occupying the property.
In contrast, guaranteed rent gives landlords peace of mind by providing them with a fixed rental income despite voids or unpaid rent. Additionally, guaranteed rent providers take care of the repairs and maintenance, saving landlords from unexpected costs.
To illustrate the difference in ROI between these two options.
Let's look at an example of a 2-bedroom flat in Croydon with a monthly rental value of £1,500.
If this property were privately rented out, the landlord would encounter the following costs and fees:
Estate agent fees: 10% of the first year's rent = £1,800
Legal fees: £1,000
Repairs and maintenance: estimated £1,000 annually
Void period: assuming 2 weeks per year = £562.50
This would amount to an annual cost of £4,362.50, resulting in an annual ROI of £12,637.50.
On the other hand, if this same property were rented out through guaranteed rent, the landlord would not have to pay for repairs, maintenance, or void periods, resulting in a pure profit of £18,000 annually.
Therefore, the annual ROI of private rent is 74.3%, whereas the annual ROI of guaranteed rent is 100%.
This shows that while guaranteed rent's yearly cost is higher when accounting for the associated fees, it can lead to a higher ROI in the long run.
In conclusion, guaranteed rent is the best option for landlords who want a stable income and a lower level of responsibility, making it a popular choice for investors. It's best to consider both options' variables, costs, and ROI before making an informed decision.