x
By using this website, you agree to our use of cookies to enhance your experience.
STAY CONNECTED!
    
newsletter-button
award
award award
award award

TODAY'S OTHER NEWS

‘Game changer’ up-front rental payment system to roll out nationwide

The Advanced Rent Option, which offers landlords a year’s rent up-front, is being rolled out across the UK.

The ARO is the brainchild of Choices Estate Agents - a nine-branch lettings, sales and investment agency in the south east of England and with associate brands including Sinclair Hammelton and Daniels in Kent - and works through a business model named Primary Tenancy.

This involves the agency collecting rent on a monthly basis but providing investors with a lump sum to manage their buy to let mortgage payments or to use as capital towards expanding their portfolio.

Subject to referencing, ARO can provide landlords with up to 12 months' rent in advance minus agency fees.

Landlords can take their up-front rent at the beginning of a tenancy provided their property is compliant and the tenants pass referencing, or at any time during an existing tenancy, subject to a new one-year agreement. 

ARO doesn’t affect a landlord’s credit score as it is paid as rent, not a loan. 

Founder Simon Shinerock says: “This project has been two years in the pilot stage and it has proven to bring huge benefits to the lettings market offering peace of mind, flexibility and freedom to landlords, as well as an invaluable marketing and prospecting edge for selected agents.

“Landlords with small to medium property portfolios are paying between 12-17% plus VAT for a fully managed service. It is possible to pay less, but over 30 years of experience in the industry, I have come to believe that paying a discounted agency fee, or letting privately is often a false economy.”

Shinerock says the advance payment assists landlords fund personal expenditure like school fees, or the replacement of big-ticket items on their properties such as boilers. 

“ARO is ideal for reliable, professional and go-ahead landlords, who understand its value and how to use it to accelerate their portfolio growth and achieve financial freedom, through property. The new service is available to landlords direct from ARO, or from selected agents who have been awarded an ARO licence” he continues.

Publicity for the ARO cites a Croydon buy to let landlord, Mohammed, who says: “A few months ago my properties were coming available and had been empty for a few months due to some issues we had.  When the Advanced Rent Option was explained, it suited me because I wanted to get everything back on track, in one fell swoop. 

“So to get eight properties rented out, with the eight lots of rent in advance really helped to get me back on my feet. A lot of the up-front rent went into paying for works that had been carried out. I also put some to one side to help restart and get things back on track.”

  • icon

    18% + vat ? NO THANKS.

    Simon Shinerock

    Up to Andrew

     
    Simon Shinerock

    FYI ARO is actually the equivalent of 15% plus vat, still not cheap but you do get a full Management service plus your rent upfront for the year

     
    icon

    Another useless plan to milk the landlord. I would put this scheme in the same category as any no deposit scheme - NO THANKS, NOT WANTED, NOT NEEDED!

     
    icon

    My letting agent charges 10% + vat and for that I get an excellent service and the rent paid into my bank account the same day that they receive it, there even some letting agents around here charging just 8%, but I'm very happy with the one I have and have used them for the past 20 yrs

     
    icon

    😂😂😂 Ditto 17% + vat !Then with the tax man and everything else that dips the pot I’ll pass.

     
    Simon Shinerock

    I guess if you don’t need the money in advance and you don’t use an agent, or you have a discounted service it’s not for you. However, some people see ARO as a good way to improve their cash flow without borrowing. A feature of the service is to enable ARO so that it could be taken in the future while negotiating a discounted fee. What I don’t understand is the vitriol.

     
  • Joanna Gibbings

    Do you cover Scotland? You require a one year lease, but these don’t exist in Scotland.

    Simon Shinerock

    Hi Joanna, not right now but it’s something we will look into

     
  • icon

    Quick Q Simon, how does this work if the Landlord were to default on the mortgage and get repossessed or, in the situation where the property is owned through a Ltd company, go bust? Would there be any liability on the agents behalf and who would pay back the overpaid rent in the event the tenants were evicted? I appreciate that this is not the tenant paying up front but someone is "fronting" the money and when the tenant stops paying the rent, as they're no longer living in the property, this would affect the "payback".

    Simon Shinerock

    Fair question, if a property were repossessed the mortgagee in possession would still have to respect the tenants rights. We offer an optional guarantee to protect landlords from having to repay the ARO if the tenants default

     
  • icon

    12 to 17% management fees? As a former letting agent we were lucky to get 8% and then landlords would complain that they were paying too much.

    Simon Shinerock

    True but equally true is that many landlords pay in that range, especially in London and heap isn’t always best. Landlords on this page tend to be more proactive and more likely to be hands on than most and as we have seen from the comments generally anti agent in whatever form

     
  • icon

    As a landlord, getting a years rent upfront makes no difference to me. I can also see some landlords spending the years money on other things and not paying their mortgage.

    Simon Shinerock

    No one is forced to take it Gordon, we don’t want the whole market

     
  • icon

    Comedians

    Simon Shinerock

    Really Layla, I think in a rational debate it’s your facile comment that would attract ridicule

     
  • icon

    Hmm .... lots of issues potentially - I would want to see the fine print and then have a solicitor go through it -

  • Franklin I

    Lets of 12 months payment in advance works well with company let's.
    I'm unsure how this business model will work with the average tenant.

    For example. A 2 bed flat in London (not zone 1-2) rents for £1,500/month @ £18,000 per annum.

    Who is actually funding the advance payment?

    Will the tenants AST Agreement have a break clause?

    If so, then who would be responsible for the shortfall halfway through a 12 month contract?
    A lot of questions needs to be asked.

    Whist it may sound good, is it too good to be true!

    Simon Shinerock

    We fund ARO ourselves so we are putting our money where our mouth is. We have worked out a response to all contingencies. Landlords can take the payment with or without a guarantee

     
  • icon

    I don't think it's either good or true! However any landlords wanting a sub for 18% interest, just let me know!

    Simon Shinerock

    And of course you would throw in full management for free

     
    icon

    I value full management at £0.00 and wouldn't offer it - but I am willing to come and go a bit on the 18% interest rate for suitable landlords,

     
  • icon

    Just more & more on the band wagon carving out a lucrative business for themselves at the LL's expense, (we are so lucky everyone wants to do us a favor) and no need to query this & that / what if ? they'll have a thing known as Terms & Conditions keep clear let them row their own boat.

    Simon Shinerock

    Michael, it’s my idea and my money and I’m not forcing it on anyone, all the terms are transparent and reasonable, sure I believe it’s a potentially good business but that makes it good not bad

     
  • icon

    I have to pay 9% for rent collection to the letting agent, which I think is quite high.

    icon

    I think that's very reasonable, but you could take over the management yourself then you would not have to pay any fees

     
  • Ruan Gildchirst

    Who takes the hit when the tenants stop paying rent but they LL has already received one year up front?

    icon

    For you Ruan that is a very sensible comment, but I won't be finding that out because I like most others on here will not be signing up to this scheme.

     
    icon

    It says above 'We offer an optional guarantee to protect landlords from having to repay the ARO if the tenants default' - but they fail to mention how much that is on top of their 15% plus VAT so mu guess is you'd be paying closer to 25% if you didn't want to run the risk of paying back the rent when tenants default! A quarter of the rent! You must be joking!

     
  • icon

    Its one thing paying an Agent @ 9% when you are getting a market rent but don't forget there will be other bit of costs they add in + 20% VAT on your fees which is hundreds on its own and I know 9% of nothing is nothing the money is gone you'll never see it. I don't get market rents at best of times, all hijacked by Digital Academics so called Corporate Lets, Rent to Rent or Airbnb etc, taken over LL's property & sub -letting it in rooms usually and now I have many arrears, other parts of the UK are more fortunate for now at least as they seem to be getting good rents for much cheaper properties and not hammered with so many unfair regulations yet. I can never understand why Licensing only applies to one half of the Community so called single family units by any definition and virtually nothing applies plus a huge number of those living off the system as a reward for not having to comply with anything, level playing field please. They Mayor would like the tenant to inform on the LL if he doesn't have the appropriate License for the Property but its the Tenant that should be licensed as the License don't always apply to the Property unless a different set of Humans Beings are installed ? total Discrimination its a mockery, so if you need a license don't bother just change the occupants much more economical and you wont get yourself a criminal record.

  • Mick Roberts

    A lot of Landlords would go bust at 17%+ VAT

  • Matthew Payne

    Even with the fees as they are, I could see this could being of possible interest to landlords with cash flow challenges, albeit the devil is always in the detail. Many of these type of rent in advance or gauranteed rent services offer the rent far below market values to mitigate their own risk and to enhance their own ROI.

    It's a competitive market place out there as well for agents, so I can't see many landlords having to pay 15 or 17% to any agent for any service whether traditional or niche like this.

    Simon Shinerock

    In our pilot about 10-15% of landlords want the ARO and many more like the option of it being available. We aren’t pitching at landlords who self manage so the extra cost if there is one is the difference between what they pay and what we charge, on average about 5%

     
    Matthew Payne

    Whilst 5%, that does represent a 40-60% increase in fees, but still may well be worth it for some. The key is transparency, where many schemes have struggled in the past, but if represented as an expensive Get out of Jail Free card, then I can see that 10% or so of landlords who have had a torrid time in the last year or so may well be prepared to pay extra. Certainty comes with cost.

     
icon

Please login to comment

MovePal MovePal MovePal
sign up