Rental Guarantees: Be careful!

TL;DR

Rental guarantees offered by property developers may seem attractive, but investors should be skeptical as they often inflate rental yields and ultimately, the investor ends up overpaying for the property.

Transcript

g'day and welcome to this week's video this week we're gonna have a look at rental guarantees and that's where a developer or marketer will provide a guarantee rent for a certain amount of years after the sold the property to a willing investor so given the property market I think particularly after the Royal Commission it's going to be a lot harde... Read More

Key Insights

• ❓ Rental guarantees provided by property developers can be enticing but should be approached with skepticism, as they often inflate rental yields.
• ❓ Investors should be aware that they are overpaying for the property to accommodate the guarantee.
• ❤️‍🩹 After the rental guarantee period ends, finding tenants can be difficult, as there is often a glut in the market, and property developers may not offer further assistance.
• 🌥️ These guarantees are typically found in units within large-scale developments.
• ❤️‍🩹 Investors need to carefully consider the long-term viability of finding tenants at a similar rent level once the guarantee period ends.
• 🍉 Property developers selling investment properties may not have a vested interest in their long-term success.
• 👨‍🔬 It is important for investors to do their own research and not solely rely on rental guarantees when making investment decisions.

Questions & Answers

Q: What are rental guarantees offered by property developers?

Rental guarantees are assurances provided by property developers to investors that they will receive a certain amount of rent for a specific period after purchasing the property.

Q: Why should investors be skeptical of rental guarantees?

Investors should be skeptical as these guarantees often inflate rental yields and ultimately result in investors overpaying for the property.

Q: Who pays for the rental guarantee?

The investor pays for the rental guarantee, as they are generally overpaying for the property to accommodate the guarantee.

Q: What happens after the rental guarantee period ends?

Once the rental guarantee period ends, investors need to find tenants who can afford the rent or cover the cost of property ownership. However, finding tenants can be challenging due to the oversaturation of properties with rental guarantees.

Summary & Key Takeaways

• Rental guarantees are provided by property developers to assure investors of a certain amount of rent for a specific period after purchasing the property.

• These guarantees are typically offered for two to three years and are often inflated to make the rental yield look good.

• Investors should be cautious as they end up overpaying for the property and may struggle to find tenants once the guarantee period ends.