Why does experience count when it comes to rental guarantee concepts?
After the global financial crisis of 2008, investors are looking for increasing assurances before they commit any of their money and who can blame them? Investments that seemed sound and robust in the years, maybe even months leading up to the crash showed us that nothing is 100% safe anymore – even our deposits with banks. Therefore, regardless of what investment you are interested in you should always do your due diligence.
Rental guarantee concepts have become increasingly popular in the last few years as they give investors some of the assurances that they seek. Investors know the return that they will receive and the duration that they will receive it over even before they have purchased the property. This gives them a cornerstone around which they can start to construct their investment portfolio. The fact that they are a tangible asset also gives investors extra reassurance.
The thing is, there are so many rental guarantee concepts that are available so how do you know which one is best for you? This is a tricky question, but schemes that have a certain degree of longevity, experienced management teams and have been setup with the sole purpose of creating investment properties is certainly a good start. Sadly, some of these schemes are run by disreputable developers who have maybe fallen into the rental guarantee concept industry rather by chances or to cover their previous failings.
Like many things in life, experience often gives you a great insight and a better grounding and this is certainly the case when it comes to rental guarantee concepts. The principle is relatively straightforward but they do need to be managed correctly in order to guarantee sufficient cash-flow and to ensure that liabilities are met. After all, there will always be peaks and troughs, especially when you are considering holiday properties and these need to be carefully taken into account.
An example of a well-established rental guarantee concept is available from the New Nordic Group who are based in Pattaya, Thailand. Their scheme has been in place for around a decade as has successfully paid all obligations on time and in full every month since its first inception. They have completed literally dozens of properties and have all the necessary infrastructure in place to make their properties attractive to visitors.
The New Nordic rental guarantee concept pays investors a return of 10% p.a. for periods of anything from five to twenty years – something that is better than the market ‘norms’. Investors are paid their monthly return directly by the New Nordic Group rather than any third party and this amount is guaranteed regardless of if your individual unit is rented or not. As there are so many properties all generating returns, the occupancy rates are relatively low and can easily be met – even in the traditional low season.
The majority of bookings come from domestic or international tour operators who can guarantee certain visitor levels months or, in some cases, years in advance. This has several advantages obviously making cash management easier but it also gives the developer the opportunity to build properties that are in demand. This is only possible because of the experience and reputation that the New Nordic Group has built up over the last decade.
The New Nordic is a vastly experienced developer and has proven track record and business model. If you are looking for a sound investment, then look no further than the New Nordic rental guarantee concept.