Normal Lease and Rent Guarantee (Sublease)
Merits of Normal Lease
Normal rent is promised
Possible to control price
Demerits of Normal Lease
Have problems like occupancy rate or tenant troubles
Merits of Sublease
Stable rental income
No need of finding new tenants & managing
Good impression to bank loan approval
Easy on tax return
Demerits of Sublease
Guarantee is about up to 70-85% of rent
Risk of insurance company bankruptcy
Uncontrollable in price change
Guaranteed rent goes down every once in a while
The biggest benefit of Rent Guarantee is that you are able to receive a certain amount of rent in spite of occupancy rate. Also it comes with a property management service that frees you from worrying caring about your property.
This is equivalent to purchasing “security”.
In stead, you may have to use an selected company for reforming by the sublease company, may not be able to receive any guaranteed rent up to 3 months from the beginning as a grace period, or may not be able to cancel the contract. Subleasing contracts are typically favorable to sublease companies.
In a sense of buying security without using too much energy, using the rent guarantee service is a good way to think about. However subleasing can be pricy just for a handling fee. If you are thinking about adding more real estate assets to your portfolio, we recommend you run your own rental business as a learning lesson. Make sure to check the content if you use a sublease system.