Can Property Management Cos offer guaranteed rent?

Question

Are there any companies which can offer a service where they pay me a guaranteed monthly rent (may be less than what usual monthly rent but guaranteed) and then take the property and sub lease it on a per room basis or per bed basis?

Jay Hinrichs · Answer

One of the very fast ways to go broke is to guarantee rents especially on C and D class.. It is a strong marketing tool though and frankly can be a false sense of security for the buyer/investor..   ALL forms of Guarantees are only as good as those providing them.. Now the government they can just print their way out of a guarantee.. private sector not so much.

Although about 10 years or so ago there was a firm I think in Ohio that was turnkey and called them selfs triple net turn key and that's exactly what they did.. but when  I looked at the properties buyers were over paying by a fairly significant amount and of course the sponsor needed that to make up for vacancy etc.

There was another turn key in Salt Lake named Marquis properties.. the owner Chad Duecher ended up in prison  .. they came to my office looking for funding and I flat told them you guarantee rents in C and D class you will go broke.. they did that and some.

Julian Sage · Answer

Master lease investing can sometimes replace the need for hiring a property manager. For example, the properties we acquire through master lease we handle things like minor maintenance and repair, yard work, and general up keep of properties. It's a way to find a quality tenant who cares about your property just as much as you as our business depends on it's attractiveness.

Mike B. · Answer

I know of a company that was offering one year rental guarantees with their "turnkey" properties. They essentially added a year of rent to the purchase price and fed the buyer's money back to them over the course of that first year. Majority of the units were never rented and it became a huge issue for the buyer in year two. That company is now bankrupt.

Steve Morris · Answer

I think you're looking for a master lease?  They happen, but you'd need to make sure you have some default provisions in case:

1) They lay waste to the property

2) Fail to pay the NNNs or whatever bills

3) Have effective insurance with you as a named insured

In turn, you should give them some warranty that you'll pay your bills like mortgage and insurance.

Most often I see it with a buyer option at end of the lease to help with tax issues.

Ethan Jacobsen · Answer

All I know is that there are many companies that have a guarantee in place that says if a tenant fails to pay rent, the company will still pay you (the owner). However, interestingly enough we have found ourselves in a position where many tenants cannot pay rent. I've seen some companies send out notifications stating that they can't make good on their guarantee because of COVID-19. To me, this means that it was never a guarantee, but just a marketing tool to get a client hooked. I feel like most guarantees are very similar to this situation. If it sounds too good to be true, it probably is. I would personally be wary of anything like this.

Gabriel Harper · Answer

Hey Madhur, I'm considering starting a company that does exactly this. Would definitely appreciate hearing your thoughts & what made you interested in a property management company that offers guaranteed rent. I've dropped you a PM. There are a few companies that I'm aware of offering this: BelongHome, Doorestead (full guarantee, Bay Area), Mynd (partial guarantee), Bungalow.

Drew Sygit · Answer

@Madhur Dhawan if it could be done, Wall Street would be doing it to scale, slicing and dicing traunches and more.

Since the PhD experts working on Wall Street can't

make it work, anyone else offering it is extremely high risk- think junk bonds.

See if Julian will give you his personal guarantee. If not, then he's gambling with your money on his startup concept.

Jonathan Klemm · Answer

@Madhur Dhawan - There are definitely some newer tech companies doing creative things with rent.  I know of one called Belong that I believe will pay you upfront.  Check them out below.https://belonghome.com/

Adam Martin · Answer

We have a company locally that charges either 8.5% management or 85/month whichever is cheaper and has a guarantee they will pay any missed rent and also an eviction guarantee if they have to go through the process.  The guarantees are extra though where they are 19.99 each or 30 for both but this is still cheaper than most companies.  I don't know how good to their word they are and have never talked to them however this seems very appealing.  I currently self manage and really don't want a property manager but as I scale and need one these guys are going to be my first but not only call.

Lien Vuong · Answer

Apart from the Master Lease model it's not really plausible, it's a level of risk of any asset class and when you're in the rental business, some loss of rent is part of your Cost of Doing Business. You mitigate that loss by choosing a stronger tenant class, thriving and logistically easy metro, and a community that has a lot of local offerings so tenant remain.

Can Property Management Cos offer guaranteed rent?

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