Having bought your first rental property and put in the work to make it tenant-friendly, several questions may start crossing your mind as the bills and mortgage payments begin to knock on your door. What if I can’t find a tenant? What if the tenant stops paying their rent? What if I end up with a nightmare tenant? Well what if we revealed that you can have guaranteed rent by leasing your property to the local authority?

Guaranteed Rent from Local Councils

Local councils all over the UK are leasing properties from private landlords and will guarantee monthly rental payments regardless if the property is tenanted or not. Yes, that means no void periods and therefore no concerns about rental income. The councils, broadly speaking, will lease the property for a period of anywhere between 12 months and 5 years and will pay you directly each month.

The council will take responsibility for the property as the landlord and utilise it for social housing. It will be the council’s job to find suitable tenants, manage those tenants and find replacement tenants when the property is vacated. Your role will be hands-off as you let the council do all the hard work. 

Leasing directly to the council will remove the time, cost and hassle of finding your own tenants. You will avoid any letting agent fees, which could save you 10% – 15% of your rental income. But ask yourself honestly, what is your perception of social housing tenants?

The stigma of Social Housing

The stigma of social housing is deeply imbedded and unfortunately social housing tenants are too often regarded as ‘those who have fallen to the bottom of society’. The reality is that people who struggle to pay rent may include anyone, from those who have been made redundant, vulnerable people, ex-armed forces personnel or victims of abuse, and many, many more.

In addition, many people require specific support and housing needs to simply allow them to live on a daily basis. With the continual growth of the elderly population within the UK, now more than ever, there is a need for housing that will suit their requirements to be safe, comfortable and supported. 

In addition to councils, there are many housing associations and charities who specialise in supporting various groups and work with private landlords to provide homes. A combination of increasing housing demand and an under-supply of properties has led to a serious problem that, if we are realistic, will only worsen in the foreseeable future.

Social Responsibility

One of our core values at the Asset Academy is to promote integrity, honesty and responsibility by teaching how to provide safe, comfortable and secure homes as a professional landlord. Regardless of who your tenants are, supplying a healthy and considerate home is fulfilling your responsibility as a landlord.

Employing a social housing strategy is a win on every level. By buying the property from the seller you will be removing a problem from their life in exchange for cash. By working with the council you will be helping, albeit in a small way, to alleviate the strain on their housing department. By providing a safe home you will be helping people who may be in a desperate situation. By structuring the deals in the way we teach, you will be generating a guaranteed rent as the result of doing something good in the world.

Boom! The world of property investing and being a landlord enters a new dimension that goes far beyond profits and yields. If you want to earn an income from helping others, perhaps a social housing strategy will be well worth your consideration. Now, I expect you are thinking ‘there must be a compromise somewhere?’

What’s the catch

The legitimate concern that often arises is, how can I be sure my property will be safe in the hands of someone else? Each local council, housing authority and charity will have their own criteria around leasing a property from you. Generally speaking, it is likely they will be contractually obliged to return the property to you in the same condition it was in at the start of the agreement. You will normally be responsible for structural maintenance such as the roof, drainpipes, plumbing etc., however the general upkeep will normally be taken care of as part of the agreement.

Researching your options with regards to social housing will require a proactive approach and a bit more patience as you gather information on the various local authorities, associations and charities. Finding the person you need to speak to can often require jumping through a number of hoops but once you begin to build relationships, life will become much easier. You will need to find out the social housing requirements for your area (types of property, locations etc.) and also how much they will pay you.

Some local councils will give you a guaranteed rent that is in line with the Local Housing Allowance and some will charge certain fees. The fees may be charged as a percentage or as set amounts to cover the various costs at their end. If you recall however, you will be saving on the many fees associated with either finding and managing your own tenants or using a letting agent. The bottom line is your rental income may be slightly lower than with a buy-to-let for example.

Is it for you?

This strategy is for you if… you want guaranteed rent over a long period, you want to be hands-off, you want to help people in need and prioritise these points over pure income. Regardless of your plans, this strategy is a valuable string-to-the-bow for any property investor as it gives more options and opportunities when viewing properties.