Whether you are a new landlord or an experienced veteran, one thing that never changes is the importance of reducing the risk associated with renting. Most times, this means non-payments, but can also include items such as damages to your property or the risk to your mental health if you end up in the type of scenario every landlord worries about.
While these scenarios don’t make up the majority of rental situations, they make up a large enough portion of them that many investors have been through it themselves or know somebody who has. In fact, Tenantcube founder Andrews Moses went through one of these situations in his very shot at renting out an investment property.
With all this in mind, if you’re a new landlord or been incredibly lucky this far, you may be asking yourself, do I really need a rent guarantee? Here’s a brief update on some conditions to consider when considering protecting your income stream.
Post covid Environment
The first reason why rent guarantee makes sense to help protect your investment directly relates to the ramifications of covid lockdowns. During covid many locations and regions halted evictions, adjusted payment requirements and shut down hearing tribunals in which landlords could plead their case when they needed to process evictions. The result of these rule changes and the backlogs caused by halted hearings in many regions has led to eviction processes that can take as long as 12 months and wider protections for tenants that result in tougher positions for housing providers.
The Economic Horizon
On the economic front, Steve Hanke of John Hopkins University was recently quoted as saying “The US is in for a whopper of a recession.” While many other analysts have predicted a deep and wide global recession through 2023 and perhaps into 2024. Should this situation play out, the chance of job losses at scale greatly increase. If a job loss takes place for your tenant, are you confident that they will be able to continue to pay on time? If the answer is no, it’s likely that they will continue to reside in the property as that protection is afforded to them in many regions and situations. This means a lengthy process of removal for which many months of rent may go unpaid. Even if your tenant wishes to pay, they may not be able to for a number of months and your bottom line will still be great impacted.
Rising interest rates
Finally, rising interest rates. Interest rates have now been on the rise through most of 2022, and are expected to continue and stay elevated for the foreseeable future. If this is the case, this means investors will not see relief on their mortgages any time soon. Just like your renters may be feeling the pinch of a tightening economy, you may feel the pinch via elevated rates. Should rates continue to rise, a nightmare scenario could be triggered for one of your rentals if you get caught in a situation of elevated rates and a tenant who is not paying because they’ve lost their job or stopped paying for economic reasons.
To sum it all up, we’re entering a time unlike that in which we’ve seen in the last decade, rates will be elevated, the economy will be more difficult for many to navigate, and post covid ramifications will still be affecting government bodies who help manage tenant and landlord issues. In this environment, the best way to sleep easy and rent with confidence is by protecting your property with a rent guarantee program.