Is 10% a good return for a rental guarantee concept?
It may sound like an obvious question, but what is a ‘good’ return in today’s modern market? To answer this question, you only need to look at the interest rates and therefore the returns that are being offered by the banks.
The returns offered by banks are generally in the region of 1-2% which is below the rate of inflation in most developed countries – to put this into perspective, if your return doesn’t exceed inflation you are LOSING money in real terms.
The problem is that to get a better return you need to take more risk – a word that is frowned upon and avoided wherever possible by most investors. Stocks and shares are likely to gain you a good return but the risk is perceived to be high and there is always a danger that you could lose some or all your capital – even if you invest in traditional blue-chip companies. Property and gold are probably the safest options but the returns can vary.
When it comes to property there is a good chance that your return will exceed inflation. However, the old adage of ‘location, location, location’ is very true and this can force up prices therefore reducing returns. Another problem more commonly associated with investment properties is tenants. Firstly, finding them in the first place and secondly, finding tenants who will stay long-term, pay their rent on time and look after your property. Achieving this can be a major headache and is the reason that many either avoid this type of investment altogether or pay a management company.
Management companies have some very obvious advantages, certainly when it comes to stress reduction. However, the downside is that they will charge a monthly fee that will eat into your return. Couple this with the fact that there is no actual guarantee that they will be successful in finding tenants and not only that, good tenants so you may be no better off than you were if you tried to do it yourself but pay for the pleasure of someone else failing.
It is maybe for this reason that rental guarantee concepts are becoming increasingly attractive. A rental guarantee is exactly that – a guarantee and in most cases, they manage your property on your behalf. You will know what return to expect and over how long you will receive it even before you purchase the property, making any investment decisions far easier. Returns vary a great deal but it is seen as a safe investment. Returns of high single digits should satisfy most investors.
A great investment then is the New Nordic rental guarantee concept. The New Nordic Group are based in Pattaya, Thailand. Their scheme offers returns of 10% p.a. rental guarantee for periods of anything from five to twenty years. This deal has been in place for around a decade and has proved to be very successful for all parties with many existing investors looking to purchase more units. The experienced management team and sound business model means that such as scheme can be trusted as the company has such a well-established track record.
A 10% p.a. return is therefore a great for a rental guarantee concept and indeed the offer from the New Nordic is something that any investor should consider.