Guaranteed Rent vs a Regular Tenancy in Adelaide CBD

If you own an apartment or townhouse in the Adelaide CBD, the usual path is simple: list it with a property manager, find a tenant, collect rent, and repeat when the tenant moves on. It works for a lot of owners. But it isn't the only option. A growing number of landlords are leasing their property to an operator who pays a fixed rent every month and runs the home as a short stay.

This article compares the two side by side so you can decide which suits your property and your plans. It is general information, not financial or legal advice.

How a regular tenancy works

In a standard residential tenancy, you (usually through a property manager) lease the home to a household who lives there. Rent is set at the start of the lease and reviewed according to the lease terms and the rules that apply in South Australia.

The strengths are familiar:

• It's a well-understood arrangement with established rules and processes.
• Tenants often stay for a year or more, which gives you steady income while they're there.
• Your involvement can be low if you use a good property manager.

The weak points are familiar too:

• Vacancy gaps. Between tenants there can be weeks with no rent while the property is advertised, inspected and re-let.
• Letting and management costs. Property management fees, letting fees and advertising come out of your rent.
• Condition depends on the tenant. Some tenants look after a home brilliantly. Others don't, and you may only find out at the routine inspection or the end of the lease.

How a guaranteed-rent lease works

With a guaranteed-rent arrangement, you lease the property to a business rather than a household. The business pays you an agreed rent every month for the length of the lease, then operates the home as furnished short-stay accommodation for visitors to the city.

At CozyStayz, for example, the process is:

1. We inspect the property and talk about what you need from a lease.
2. If it's a good fit, we make a lease offer with a fixed rent.
3. We sign a lease of 12 months or more.
4. We look after the property: it's cleaned, checked and maintained between every stay.
5. We clean between every stay and keep up regular upkeep for the whole term.

The key difference is who carries the risk. In a regular tenancy, you carry the vacancy risk. In a guaranteed-rent lease, the operator does: if there's a quiet week, that's the operator's problem, not yours.

Comparing the two

Income

A regular tenancy gives you market rent while the property is let, minus fees, and nothing while it's empty. A guaranteed-rent lease gives you the agreed rent for every month of the lease.

Because a short-stay operator expects to earn more from the property than a household would pay in rent, the operator can often offer more than a typical long-term tenant. That means a higher rental yield for you, without taking on the ups and downs of short-stay bookings yourself. Whether this is true for your property depends on its location, size and condition, which is why an inspection comes first.

Vacancy

This is where the difference is clearest. Under a guaranteed-rent lease there are no vacancy gaps during the term. You don't need to re-advertise the property every time someone moves out.

Condition of the property

In a short stay, the home is professionally cleaned after every guest. Linen is changed, surfaces are wiped down, and small problems are spotted quickly because someone is in the property regularly. In many cases this keeps the home in better day-to-day shape than a typical tenancy, where the first detailed look might be a routine inspection months later.

There is still wear and tear, of course. More guests means more check-ins and check-outs. Ask any operator how they handle maintenance, damage and reporting.

Your workload

With a regular tenancy, a property manager handles day-to-day issues, but you still make decisions about re-letting, rent reviews and repairs. With a guaranteed-rent lease, you have one point of contact for the whole term.

Questions to ask before choosing

Whichever route you take, ask:

• What does the lease say? Read the term, rent, rent review arrangements, who pays which outgoings, and what happens at the end of the lease.
• Is short-stay use allowed? If your property is in a strata or community titled building, check the by-laws. Some buildings restrict short-term letting. See our guide to strata by-laws and short stays.
• What insurance applies? Talk to your insurer about how the property will be used. Landlord policies can differ in how they treat short-stay accommodation.
• Who is the operator? Look for a local, professionally run business that can explain exactly how it will look after your home. Our article on choosing a short-stay leaseholder covers this in more detail.
• What do your advisers say? An accountant or lawyer can tell you how either option fits your tax position and goals.

Which is right for you?

A regular tenancy may suit you if you're comfortable with occasional vacancy and want the most conventional arrangement. A guaranteed-rent lease may suit you if you value predictable monthly income, want to avoid vacancy gaps, and like the idea of the property being professionally cleaned and checked between every stay.

If you'd like to see what a guaranteed-rent lease could look like for your property, request a rent offer. We'll look at the details, arrange an inspection if it's a fit, and give you a lease offer with no obligation to accept.