A lettings agency is believed to be the first to offer landlords a year's rent in advance in one lump sum through a pioneering scheme called Primary Tenancy.
Choices Estate Agents - a nine-branch lettings, sales and investment agency operating in the south east of England and with associate brands including Sinclair Hammelton and Daniels in Kent - is offering the so-called Advanced Rent Option though a service 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.
"We want to provide landlords with more financial freedom while at the same time ensuring they have the protection and peace of mind they require by letting through a trusted high street agency” explains Choice Estate Agents owner Simon Shinerock.
In a statement announcing the scheme, Choices gives the example of a property with a monthly rental of £1,200 per month; its landlord could receive an upfront lump sum of £10,231 by signing up to ARO.
This final figure is calculated by discounting standard annual agent fees of £2,592, new tenancy set-up fees of £395, a rent guarantee of £432 and an emergency maintenance float of £750 from the total annual rent of £14,400.
The ARO scheme is also open to landlords with tenants in site; they can instruct Choices to carry out background checks and re-reference the tenant, before signing an agreement with the agency. Or Choices can manage properties with sitting tenants until the tenancy is over, before implementing the ARO for a new tenancy.
The Advanced Rent Option is not a loan, which means it does not depend on a landlord’s credit rating.
Shinerock says challenging market conditions and ongoing Brexit uncertainty mean that average property prices have been falling and transaction levels low in some areas.
"All shrewd investors know that during a market lull is the time to pick up a bargain before the next period of growth," explains Shinerock. "However, finding the capital to do so is not always easy. That's why we want to help landlords to take advantage of favourable investment conditions by using the annual rent from their existing properties to purchase their next one."
He adds: “It’s clear that in the face of rising costs and increased legislation, the rental market makeup is moving away from accidental and part-time landlords and shifting towards professional investors with large portfolios.”
Following a soft launch ARO will be officially launching on August 28 at the Royal Institution of Great Britain, at an event hosted by Choices and Angels Media, publisher of Letting Agent Today and other Today titles.
Details on how to attend the launch are here.