Guaranteed Rent vs Traditional Lettings: The Real Numbers

The Traditional Lettings Agent Model: Full Cost Breakdown

To understand why guaranteed rent is often more profitable, we first need to quantify the true cost of traditional AST lettings. Most landlords underestimate how many costs erode their gross rental income.

Cost 1: Lettings Agent Fees

If you use a letting agent, you'll pay fees in two formats:

• Letting fee (upfront): Typically £200–£500 or 5–10% of first month's rent (varies by agent and location)
• Management fee (monthly): Typically 7–12% of monthly rent (London agents charge higher rates)

Key insight: If you manage the property yourself (no agent), you save these fees, but you incur time costs (detailed below). Most landlords with 2+ properties hire agents to avoid management burden.

Cost 2: Void Periods

Voids (periods when the property is empty between tenants) are one of the largest but least predictable costs.

• Every tenancy cycle carries void weeks: notice periods, viewings, referencing, inventory, and turnaround work all sit between one tenant leaving and the next paying
• Your own void history is the number that matters: pull it from your records before comparing models

Cost 3: Repair and Maintenance

This is highly variable, but average landlords incur these repairs annually:

• Routine maintenance: Annual gas safety cert (£150), EPC (£50–100), guttering/garden (£200–500) = ~£500/year
• Tenant-caused repairs: Holes in walls, broken locks/blinds, damaged carpet, etc. = £800–1,200/year
• System repairs: Boiler service (£200), plumbing (£300–800), electrics (£400–1,500) = ~£1,000/year on average
• Major repairs (unpredictable): Roof, guttering, windows, damp treatment = £2,000–5,000 per occurrence (typically 1 every 5–10 years)

Cost 4: Compliance (Gas, Electrical, Damp & Mould)

The Renters' Rights Act 2025 tightened the compliance picture for AST landlords. The recurring items:

• Gas Safety Certificate: annual
• Electrical Installation Condition Report (EICR): every 5 years
• Damp & mould and property condition standards: inspection, prevention, and remediation when issues arise

Each item carries a cost and, as importantly, a deadline you own. Under a corporate lease, occupant-facing compliance passes to the corporate tenant.

Cost 5: Landlord Time (Opportunity Cost)

Even with a letting agent, landlords spend time on property management:

• Inspections: 2–4 per year × 1.5 hours = 3–6 hours/year
• Repair coordination: Getting quotes, scheduling, following up = 5–10 hours/year
• Tenant disputes/communication: Complaints, maintenance issues, notice issues = 4–8 hours/year
• Agent communication: Discussing arrears, void strategies, property issues = 2–4 hours/year

Count your own hours honestly. Most landlords who come to THS have been self-managing for more than a decade and have had at least one bad tenant in the last two years; when they finally price their time, the number surprises them.

Cost 6: Arrears and Debt Recovery

Not every property experiences arrears, but when one does, the costs stack: the unpaid rent itself, solicitor's letters, court filing, and enforcement, with mortgage payments continuing throughout. One bad tenancy can erase years of headline-rent advantage. If it happens under a corporate lease, it is the corporate tenant's problem, not yours.

The Guaranteed Rent Model: Cost Breakdown

Guaranteed rent schemes have a fundamentally different cost structure:

The Core Payment

You receive a fixed monthly payment, agreed below market rent at property assessment, from the corporate tenant, regardless of voids or occupant payment issues. THS's calculator uses a conservative 85% baseline for illustration; the tables below assume 80% to be deliberately cautious.

Costs Eliminated by Guaranteed Rent

• Letting agent fees: £0 (scheme provider sources tenants)
• Void losses: £0 (guaranteed payment regardless of voids)
• Major repairs: £0–500 (scheme provider responsible; you may cover routine only)
• Compliance burden: £0 (scheme provider handles RRA compliance)
• Landlord time: ~2 hours/year (minimal: annual check-in with provider) = ~£100 over 5 years at £30/hr
• Arrears risk: £0 (scheme provider absorbs all tenant payment risk)

Costs Retained by Guaranteed Rent

• Insurance: Landlord's insurance (building & liability) = £200–400/year = £1,000–2,000 over 5 years (versus traditional AST where this is similar)
• Council tax (if applicable): Typically scheme provider pays (check contract)
• Structural responsibility: You remain liable for major structural issues (roof, foundation). But in most schemes, the provider covers these. Clarify in contract = ~£0 if contract clear, or £500 contingency

5-year net cost under guaranteed rent: ~£1,000–2,500 (insurance only)

Side-by-Side Financial Comparison: Traditional AST vs Near-Guaranteed Rent (5 Years)

A worked illustration built on the assumptions stated in the cost sections above; substitute your own figures.

Key Insight

On these illustrative assumptions, the corporate-lease landlord nets substantially more over 5 years, even at 80% of market rent. Your result depends on your real voids, repairs, and fees. The advantage grows if:

• Your property has longer void periods (rural/hard-to-let areas)
• You experience tenant arrears or eviction costs
• Your property requires expensive repairs (older properties)
• You value your time highly (if earning £50–100/hr professionally)

Scenario: High-Void Property (Illustration)

Some properties experience much longer voids between tenants. Assuming 10-week void cycles:

In high-void scenarios, the fixed-figure advantage widens further, because the corporate tenant pays through every empty week.

The Hidden Costs of Traditional Lettings (Nobody Talks About)

1. Tenant Turnover & Refurbishment

Between tenants, most properties need refreshing: redecorating, carpet cleaning or replacement, and appliance renewal. Priced per turnover, these run into thousands, and every turnover repeats them.

Under a corporate lease: the provider typically accepts the property as-is; refresh costs are built into the lower fixed figure you accept.

2. Relationship Management & Stress

Hidden cost: the emotional and mental energy of managing problem tenants. This isn't quantified in spreadsheets, but it's real:

• Problem tenant communication: Noise complaints, neighbour disputes, damage issues = 10–20 hours/year
• Stress & anxiety: Especially during eviction processes or arrears situations
• Emergency repairs at inconvenient times: Burst pipes, boiler failure, no hot water

Guaranteed rent: Zero tenant interaction. The scheme provider handles all problem-tenant communication.

3. Refinancing & Mortgage Complications

Some mortgage lenders require specific conditions for rental properties:

• Proof of income: Lenders want recent tenancy agreements and rent payment history. Gaps due to voids complicate applications
• Portfolio lending: Some lenders restrict the number of BTL mortgages. Unpredictable income doesn't help your case

Corporate lease advantage: A fixed, documented, contractual income is easy to evidence. How each lender treats it varies; ask your broker, and always confirm your product permits a corporate tenancy.

4. Tax & Accounting Complexity

Traditional lettings require detailed record-keeping for tax purposes:

• Accountant fees and record-keeping: Repair invoices, agent statements, and utility bills all need tracking and categorising every year
• Simplification: A single fixed payment simplifies the accounting picture; consult your accountant on your specific position

5. Regulatory Changes & Future Risk

The Renters' Rights Act 2025 is already in force, and residential regulation has moved in one direction for a decade:

• Further tenant protections: Damp & mould standards and future regulation will keep adding to AST compliance costs
• Corporate lease position: Your rent is contractually fixed for the term, and the Act does not apply to your lease because the tenant is a company, not an individual

Why Traditional Lettings is Riskier in 2026: Post-RRA Context

1. Section 21 Abolished = Longer Problem-Tenant Situations

Prior to the RRA, a landlord could issue a Section 21 notice and evict a tenant at the end of a fixed term without cause. This was a landlord's exit strategy for difficult situations.

Now: Section 21 is abolished. Possession requires demonstrated grounds (breach of tenancy, anti-social behaviour, serious damage, landlord sale or occupation, etc.), and contested cases can take months with court delays.

Cost of a problem tenant: every month of disputed rent, plus solicitor fees, plus your mortgage payments continuing throughout, plus stress.

Corporate lease: Zero tenant management risk on your side. The corporate tenant absorbs it.

2. Periodic Tenancies = No Fixed-Term Certainty

Under the Act, assured tenancies are periodic (rolling) rather than fixed-term. This means:

• You cannot rely on a fixed-term lease ending to regain access to your property
• The tenant's security is stronger; possession requires proven grounds
• The timetable for regaining possession is not fully in your control

3. Rent Increase Constraints

Rent increases on assured tenancies are limited to once per year and open to tribunal challenge, adding process and uncertainty to every uplift.

Impact on traditional landlords: Income growth requires a process you don't fully control.

Impact on corporate-lease landlords: Your income is fixed for the lease term, which cuts both ways: certainty, but no mid-term uplift either. At renewal, you renegotiate.

When Traditional AST Might Still Make Sense

Guaranteed rent isn't the right choice for every property. Traditional AST remains viable in these scenarios:

1. Premium High-Demand Properties

If your property is in an exceptionally high-demand area, you may achieve higher net income from market rent than a fixed corporate-lease figure. The wider the gap between your market ceiling and the fixed figure, the more the sums favour AST, provided your voids and management costs stay low.

Calculation: Compare the fixed offer against your expected market rent, accounting for all costs above. If market rent minus costs exceeds the fixed figure, AST may be better, and we'll tell you so on the first call.

2. Short-Term Holding (Planning to Sell Soon)

If you plan to sell within 2–3 years, the flexibility of AST (despite challenges) may be preferable. Guaranteed rent leases are typically 3–5 years with break penalties.

3. Properties with No Scheme Provider Coverage

Some areas (remote rural regions, depressed markets) have no active scheme providers. AST is your only option.

4. Landlords Confident in RRA Compliance & Tenant Management

If you genuinely enjoy property management, have a track record of successful lettings, and are confident in navigating RRA compliance, traditional AST remains viable.

Case Study: Real Landlord Comparison

FAQ: 10 Financial Questions