Homeowner: How to guarantee the proper payment of his rent?
Even though the stone investment is the most dependable over time, it is not without danger when accompanied by a rental. One of them is vacancy, which is particularly punishing when the amount of rent is required to repay the credit for the purchase of real estate. Similarly, a nonpaying renter might cause the owner long-term financial hardship.
To avoid this danger, there are numerous options for ensuring adequate rent collection, regardless of the tenant’s goodwill (or power). Some are creative, which can comfort an owner who is hesitant to invest in a rental property. Let’s look at some options for making sure your rent is paid no matter what.
Require one (or more) guarantors
Let’s start with the most basic and long-standing habit of enlisting the help of a third party whenever required. In the event that the tenant he is covering does not fulfil his duties, the guarantor (or guarantee) is a natural or legal person who agrees to pay the rent and rental costs (as well as any interest if there is a delay).
The deposit may be straightforward: the owner contacts the guarantor only if the renter fails to pay his rent after first contacting him. In a second instance, if the owner may directly affect the guarantor from the first unpaid, without going via the renter, the deposit is termed to be “solidarity.”
In actuality, you’ll need to ensure the guarantor’s solvency: he may easily go bankrupt in the same manner as the renter did, and you’ll have a hard time retrieving your money. The legislation specifies which papers you may request from the guarantor in order to assess his degree of income and sincerity. It also doesn’t rule out enlisting the help of many guarantors to mitigate risks; most business owners, however, don’t go beyond two.
Finally, the assurance must be written, whether it is a deed under private signature, which is created and signed by persons, or an actual deed drawn out by a competent public authority (notary, bailiff or registrar). A copy of the security deed must be delivered to the guarantor if the security deed is not included into the lease.
Take out insurance against unpaid rent
This is another frequent technique that operates like any other insurance: a monthly contribution is paid, and the insurance covers the payment of the rent in the event that the insured renter defaults.
Several conditions are necessary here:
• The accommodation must be the principal residence of the tenant, and rented on a yearly basis.
• The tenant must be solvent and prove his income: most insurers require an income at least equal to 2.85 times the rent.
• The landlord is in charge of checking the conditions: he must collect the last three payslips of the intended tenant, as well as his identity card and employment contract.
In reality, it might take up to three months for insurance to pay a landlord who is behind on rent. Regardless, all overdue payments will be paid over time. This approach is more comforting than a guarantor’s guarantee, but it comes at a cost that reduces the investment’s profitability.
The Visale guarantee from Action Logement
A free device enables a renter who is having trouble finding a guarantor to do so. The Visale guarantee, created by Action Logement, ensures that a renter joining the private renting market is insured until their 31st birthday, independent of their employment status (student, work-study student, unemployed or employee). Older renters must provide confirmation of a monthly income of at least €1,500 and a solid employment condition.
The renter obtains a certified visa that he may transmit to the landlord once Action Logement validates the information. This method provides equivalent assurances to unpaid rent insurance, up to a maximum of 36 outstanding arrears, and additionally covers damage to the dwelling. The insurance is free, so please tell any future renters who may be qualified to contact Action Logement. The whole procedure is completed online in order to expedite the process.
Apply for a digital surety
Atypical profiles who are not qualified for the Visale guarantee and who are unable or unable to use a guarantor may use a new sort of bond produced by start-ups like Unkle, Cautionneo, or Garantme. The payment of rent is guaranteed for a proportion of the monthly rent due and payed by the tenant (usually between 3 and 4 percent).
This option is largely targeted at entrepreneurs, self-employed individuals, liberal employees, and other unconventional individuals who do not necessarily lack resources but do not fit into the traditional rental guarantee categories. This segment today makes up a significant portion of the working population, and a landlord with forethought cannot overlook them: a time of renting vacancy is just as costly as an unpaid one!
Companies that provide this form of guarantee take a different approach than traditional insurers, prioritising the visible regularity of the tenant’s resources above the illusory stability of a professional position that might alter at any time. The proportion of contribution is determined based on the expected risk, allowing anybody who has the financial means to rent housing to benefit from a good guarantee without having to turn to their family.
As a landlord, you will not be responsible for the expense of this service and will not be required to take any action; in fact, the renter may approach you first with his guarantor firm. If required, tell a renter you like to call on it that he may come back to you with a solid deposit in a few days.
Opt for a LMNP in a service residence
Finally, a rental investment might be risk-free in certain instances. The concept is simple: rather of purchasing a house and then hunting for a renter, you may purchase a service dwelling property. These are special dwellings that allow investors to assume all of a landlord’s responsibilities on their behalf, including locating a tenant, monitoring rental files, managing human relations, and even taking care of any damage to the property.
In this context, the firm that administers the house is also responsible for the payment of your rents: they will be paid to you even if the residence is unoccupied! To do so, you’ll need to set up a non-professional furnished rental firm and seek for real estate in a tourist, business, elder, or student-oriented community. After that, you must discuss the terms and sign a contract with the residence’s operator. When done correctly, this form of investment may provide returns of up to 7%.
However, be cautious when selecting a residence: a thriving area will guarantee that the occupancy rate avoids the operator’s possible insolvency, the only drawback in this sort of investment that might land you in problems.
Landlords now have a variety of options for ensuring that their rent is paid on time. Everyone may choose one or the other depending on their sensitivity and situation. One thing is certain: owing to these tools, real estate investment is now more than ever the greatest way to consolidate your income or plan for retirement by accumulating a strong and long-term legacy.