Are there such things to watch out for when a seller is offering guranteed rental return on a studio appartment with an on site manger with a 20 year lease in place.
Hi jwhat,
Yep – guaranteed rentals are generally built into the purchase price and tend to be above market rates to make the ‘deal’ more attractive thereby moving more product.
You need to consider who is paying the rental guarantee (usually it is you) and who is the guarantor. Sometimes it can be a $2 shelf company and at other times Insurance Companies.
Studio apartments tend to be on the smallish side and as such banks will not typically lend to 80%. As such they may tie up more of your equity/savings than they warrant.
A 20 year management lease ties you into an arrangement for a lengthy period of time. Would appeal as an ongoing business concern selling the management rights but would leave you open to the vagaries of individual management companies and/or their skills.
Inner city apartments in Melbourne and Sydney have been dropping in value in recent months – with a similar occurence predicted for Brisbane.
You will need to get your solicitor to check the contract out very, very, very carefully.
Derek
[email protected]Property investment support – starts but never stops.
It will say in the contract that the current vendor will pay the rent if rent fails to be paid.
Kind Regards,
George.“If You never never ask, you’ll never never know”
Hi Geo,
If buying a property with a rental guarantee you need to check who is providing the guarantee. How secure are they and what is the extent of the guarantee?
A $2 shelf company or HIH (I have seen them) isn’t much of a guarantee.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
much agreed with Derek – it takes alot of looking into…
“If You never never ask, you’ll never never know”
Derek is spot on.
Frankly you can rent out virtually any property, so if they have to offer a rental guarantee – what’s wrong with it
Cheers,
Aceyducey
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