Video interview: how can landlords benefit from receiving annual rent upfront?
A new video interview explains how landlords can receive their annual rent upfront in one lump sum and the business model behind the innovation.
Last month, the Advanced Rent Option (ARO) was successfully launched at an exclusive event at London’s Royal Institution of Great Britain.
Now industry commentator Chris Watkin discusses with its creator Simon Shinerock, chairman of Choices Estate Agents, how the innovative concept was formed.
Subject to referencing, the ARO can provide landlords with up to 12 months’ rent in advance, minus standard letting agency fees.
The product is being offered through Choices Estate Agents and its associated brands using the pioneering Primary Tenancy service.
“The ARO is helping landlords to receive rent money upfront and use it to build an extension, expand their portfolio or do whatever they want with it,” says Simon Shinerock.
Pioneering model can provide financial freedom
In the interview, Shinerock explains how his agency’s Primary Tenancy business model – launched in 2008 – allows Choices to pay landlords annual rent upfront via the ARO.
Primary Tenancy sees the agent act as the landlord’s tenant, essentially sub-letting to the incumbent renter. It’s different to a Rent to Rent scheme as there are still only three parties in the transaction.
The video explains how the ARO was born as the Primary Tenancy agreement means there is nothing to stop the agent paying the landlord upfront, despite the renter still paying their rent on a monthly basis.
When Choices offers the ARO to landlords, it mirrors its normal management service fees (15%+VAT) and provides the opportunity to receive the full market rent.
“We couldn’t pay landlords rent upfront if we weren’t their tenant,” says Shinerock, while explaining that Primary Tenancy is a profit-rent model which allows an agent to have a more ‘flexible’ and ‘adaptable’ business structure.
“It completely changes the relationship and takes all responsibility away from the landlord. It means the landlord doesn’t have to get involved with things like evictions,” he says.
He also explains the benefit of this model for tenants, who will be dealing with a fully compliant landlord which already manages thousands of properties.
Upfront rent an option for DIY landlords?
Shinerock and Watkin also discuss the role of DIY landlords in the market and whether an innovation like the ARO could benefit them.
They note that approximately 50% of landlords don’t use letting agents and Shinerock suggests that while some of these landlords will be excellent, there will be a high number that are not operating effectively.
He says that he believes DIY letting rarely beats the professional agent approach and that these landlords who go it alone tend to get ‘less rent, more voids and more problems’.
He also discusses how working with a letting agent – or opting to receive rent upfront – could allow DIY landlords to spend less time managing their portfolios or eventually retire.
