Rental Guarentees

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From: Anonymous


are rental guarantees genuine or are they a sales gimmick?
 
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Reply: 1
From: Sergey Golovin


Gimmick.

Serge.
 
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Reply: 1.1
From: Rixter ®


It all depends on if you are buying at FMV or below..if you're buying higher then its a gimmick!

Happy Investing,
Rixter :)
 
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Reply: 2
From: Nigel W


a few points spring to mind:

1) why is one required? If they don't think the place is going to rent sufficiently then what's your evidence to the contrary so as to make this a good buy? I think you should look seriously at whether their rental estimate is seriously inflated above the true market rent for the area. Supply and demand determines the rent a landlord can charge...if you're competing with the 50-100, 200+ etc units in the same development for a pool of tenants, with nothing differentiating your new unit from everyone else's, no wonder there is concern about vacancy!

2) the price of the developer providing the guarantee has to come from someone..guess who? The cost is passed straight through to the buyer.

3) If you do need to call on the guarantee, will there be anyone there to pay up down the track? You are taking a risk on the credit of the developer/guarantee provider.

At the end of the day, IMHO, rental guarantees are a pure marketing play by the developer which preys on one of the major FEARS of inexperienced RE investors "oh my gosh but what if its vacant!". If its a good property, it will rent period. There's no need for any illusory enhancements like a rental guarantee. And as Jan Somers illustrates in her books, even an extended period of vacancy doesn't dent the bottom line too greatly over time.

Cheers
N.
 
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