Buy-to-let landlord: how to guarantee rent is paid on time?

While property investment remains the most reliable over time, it is not without risks when accompanied by a tenancy. Vacancy is one of these, particularly penalising when the rent amount is needed to repay the acquisition mortgage on the property. Likewise, a tenant who defaults on payments can place the landlord in financial difficulty for a sustained period.

To mitigate this risk, several solutions are possible to ensure good rent recovery, regardless of the tenant’s willingness (or ability) to pay. Some are innovative and likely to reassure a landlord hesitant about buy-to-let investment. Here is an overview of the means of guaranteeing rent payment, whatever happens.

Requiring one (or more) guarantors

We begin with the most common and long-standing practice, which involves securing the assistance of a third party if needed. The guarantor (or surety) is a natural or legal person who undertakes to pay the rent and service charges (plus any interest in the event of late payment) should the tenant they are covering fail to meet their obligations.

The surety can be simple: the landlord calls on the guarantor only if the tenant is unable to pay what they owe, having first contacted the tenant. In a second scenario, the surety is known as “joint and several” if the landlord can directly pursue the guarantor from the first missed payment, without going through the tenant.

In practice, you will need to ensure the solvency of the guarantor: they could well prove insolvent in the same way as the tenant, and you would then have the greatest difficulty recovering your money. The law provides a precise list of documents that you can require from the guarantor to judge their income level and reliability. It does not forbid requesting the involvement of several guarantors to reduce the risk; however, most landlords do not go beyond two.

Finally, the surety must take the form of a written document, whether a private agreement drafted and signed by individuals or a deed executed by a competent public official (notary, bailiff or civil registry officer). The surety deed must then be incorporated into the lease; failing that, a copy must be provided to the guarantor.

Taking out rent guarantee insurance

This is also a very common approach, which works like any other insurance: for the payment of a monthly premium, the insurance will cover the rent in the event of default by the covered tenant.

Several conditions are necessary here:

• The property must be the tenant’s primary residence, and let on an annual basis.
• The tenant must be solvent and provide proof of their income: most insurers require income of at least 2.85 times the rent.
• The landlord is responsible for checking the conditions: they must obtain the prospective tenant’s last three pay slips, as well as their identity card and employment contract.

In practice, insurers can take up to three months to compensate a landlord lacking rent. All unpaid rent will nevertheless be covered in the long term. This solution is more secure than a guarantor surety, but it incurs a cost affecting the profitability of the investment.

Action Logement’s Visale guarantee

A free scheme enables a tenant experiencing difficulties to find a guarantor. The Visale guarantee, developed by Action Logement, enables a tenant entering the private rental sector to be covered until their 31st birthday, regardless of their employment situation (student, apprentice, unemployed or employee). For older tenants, they must demonstrate income of at least €1,500 € and a stable employment situation.

After validation of the file by Action Logement, the tenant receives a certified visa that they can pass on to the landlord. This scheme offers guarantees similar to rent guarantee insurance, up to 36 months of unpaid rent, and also covers damage affecting the property. The cover is free: do not hesitate to advise any prospective tenants who may be eligible to contact Action Logement. The entire process takes place online for rapid processing.

Using a digital surety

Atypical profiles, not eligible for the Visale guarantee and unable or unwilling to use a guarantor, can turn to a new type of surety developed by start-ups such as Unkle, Cautionneo or Garantme. For a percentage of the rent amount payable monthly and at the tenant’s expense (generally between 3 and 4%), the payment of rent is guaranteed.

This solution is primarily aimed at company directors, self-employed workers, freelancers and other atypical profiles who do not necessarily lack resources but do not fit the classic criteria for rent guarantees. This segment represents a significant proportion of the working population and cannot be overlooked by a forward-thinking buy-to-let landlord: a period of vacancy is just as penalising as unpaid rent!

The companies offering this type of guarantee take a different angle from traditional insurers, prioritising the observable regularity of the tenant’s income rather than the stability - now illusory - of an employment situation that can change quickly. The percentage of the premium is decided based on the estimated risk, which allows anyone with the empirical means to rent a property to benefit from a solid guarantor without having to call on their loved ones.

As a buy-to-let landlord, you will not bear the cost of this service and will have no steps to take: the tenant can even present themselves to you from the outset with their surety company. If applicable, do not hesitate to advise a tenant you like to use this service: they can come back to you within a few days with a solid surety in place.

Opting for an LMNP in a serviced residence

Finally, a buy-to-let investment can in some cases be free of risk. The principle is simple: rather than purchasing a property and then searching for a tenant, you can just as well buy a property within a serviced residence. These are specific residences, which offer investors the opportunity to have all the obligations of a buy-to-let landlord taken care of on their behalf: searching for a tenant, managing letting files, managing the human relationship and even covering any damage to the property.

In this context, the payment of your rent also falls to the company operating the residence: it will be paid to you even if the property is vacant! To do this, you will need to become a non-professional furnished landlord and aim to acquire a property in a residence dedicated to tourism, business, seniors or students. You will then need to negotiate the terms and sign a contract with the operator of the residence. The profitability of this type of investment, if well executed, can exceed 7%.

However, be careful with the choice of residence: a growing neighbourhood will ensure that the occupancy rate avoids potential bankruptcy of the operator, the only flaw in this type of investment, which could leave you in difficulty.

Buy-to-let landlords today have a wide range of solutions to guarantee the good payment of their rent. Each, according to their situation and context, can opt for one or another. One thing is certain: thanks to these schemes, investing in property remains more than ever the best solution for supplementing income or preparing for later life by building up solid and lasting wealth over time.