GUARANTEED RENTAL RETURN

Guaranteed rental return is known as the future rental income that is guaranteed by the management or the developer to the person who purchases the property over a time period that is contracted after signing the purchase agreement.

Guarantee rental return scheme provides buyers with a peace of mind, in the knowledge that the buyers will receive fixed income on an agreed time period. Many buyers interested with the scheme to assist them in paying associated mortgage and maintenance cost. Moreover, the management of such property is hassle free because the developer will handle it on an agreed time period.

In most instances, the developer has engaged professional hotel management team to manage these units. The fixed rental income is based on the hotel management team leased the completed units and arranged to lease out as hotel units to derive income to support the fixed rental income contracted with the new investors.

How investor looks at GRR

Many investors however view this rental guarantee as one of the safe bet for them to achieve their financial benchmark and for them it is an offer that often sounds too good to be true. Plus, they do not want to get involve with the management of the property. So this scheme is highly popular among the overseas investors as they know their property management is handled throughout the year while they received returns from it.

Through this method it takes the burden of managing the purchased property away from the home owners and all they have to do is waiting for their passive income to come in. This will also serve as the assurance that they will continue to receive rental income from the property they bought.

How developers look at GRR

While for developers, it is one of those creative ways how they want to increase appeal into their property in a very challenging market. This scheme however has been offered widely since two years back and this is how these developers trying to woo the investors especially on the yet to be built properties such as condominiums, apartments and hotels.

By doing this, it means that the developers have plans to rent it out or of there is a commercial use such as turning them into office units as well if the developers are confident of the prospects of the mixed development.

From Financial perspective

But from financial perspective, the rental guaranteed is already included in the purchase price already while the developers priced the property a bit higher to the guaranteed rental return. Providing rental return implies a weak financial situation for the developers and such developers will be considered as risky builders that might not be able to deliver their project at first place.

Since you are generating income from passive cash flows, you still be charge of tax. Getting tax from this extra income will make it hard for you to create serious wealth and while these properties are regional or outer areas, they could be quite sensitive to economic cycle. There might also be high maintenance cost and tenancy problems due to socioeconomic factors.

Conclusion

Therefore, for first time property buyers, there is no harm in buying guaranteed rental return project. As this kind of projects already laid down in advance your potential return as well as also guaranteed a certain rental return, ensuring that there is occupant renting from you. You do not need to worry too much about property management and being unfamiliar with the property matters, this can sometimes be mind boggling.

This is also akin to buying unit trust for investments. Is this the best investments that gives you the highest return rate in the market. No. But you are assured of professional fund managers helping you to manage your fund and make informed decisions and enjoy other side benefits of joining the bigger pool of investments. It is very beneficial for first time buyer.