The lettings agency owners behind the Advanced Rent Option, which provides landlords with up to 12 months’ rent in advance, says the innovation could help landlords spend significantly less time having to manage their portfolios.
The ARO is the brainchild of Simon Shinerock, chairman of Choices Estate Agents, and offers the rent in advance minus standard letting agency fees.
"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 Shinerock, who is offering the product through his agency and its associated brands Sinclair Hammelton and Daniels.
Now in a video interview with well-known industry consultant Christopher Watkin, 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.
"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.
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 per cent 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 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.
The video interview, below, was conducted ahead of the ARO launch event, organised by Angels Media, publisher of Letting Agent Today and the other Today industry titles.