Can you hear that noise? It’s the chatter of doubt that plays in your head. It often stops you from taking action; ‘it’s not affordable,’ it murmurs or ‘It’s too risky,’ it says.
One article on off-the-plan rental guarantees in a well-known property investment publication added to the noise this week. A rental guarantee on an off-plan purchase provides surety around post completion rental income (in most cases funded by the developer), in cases where a property is untenanted. The article makes some broad assertions that can be summed up in two key points:
- Guarantees are inflated above market figures and thereby provide inaccurate expectations around income post guarantee
- Prices are inflated by the developer to fund the guarantee
I’ll concede that there are some developers guilty of the offences above. Making broad statements, however, neglects the more potent upside of rental guarantees.
Our mission, beyond providing you the tools to make informed decisions, is to mitigate your risks. One of the ways we do that is by negotiating purchase incentives that act as insurance by transferring risk to another party. One of those incentives is a rental guarantee. Think of it as insurance against post completion vacancy.
Here’s how we avoid the potential pitfalls outlined above:
- We negotiate rental guarantees in line with market, not inflated figures. This ensures there aren’t any surprises at the end of the guarantee period
- In most cases, research approved properties are tenanted within a month
- Rental guarantees, if negotiated effectively, ensure that developers stand behind their projects
- We conduct a thorough value proposition to mitigate the risk of a price/value differential
Whatever your noise, education is the remedy.
