Why are rental guarantee concepts relatively new?

Mar 6, 2017 | Emerging Trends

The number of rental guarantee concepts that are now available is increasing almost on a monthly basis, but where has this idea come from? The idea behind rental guarantee concepts is not particular new as it is basically people getting together collectively in order to buy property to generate a return – it is just that it is now done on a more commercial scale these days and more often than not these schemes are offered by developers themselves.

Rental guarantee concepts, if operated correctly, are excellent investments that give investors a certain degree of stability in an otherwise volatile economic environment. They are also good for developers – hence why their numbers have increased in recent times. They offer a very attractive incentive to the investor which means that the property is sold quicker and then generate an additional return in the form of the rent generated, a win, win situation.

So, if these schemes are so great, why is only now that developers have jumped on the bandwagon. Well, the answer to that is quite simple, circumstances have changed since the global economic crash of 2008 and demand for rental properties is now higher than in has been for generations. Naturally, wherever there is demand, there is a need for supply which almost always means an opportunity to generate very healthy returns.

Why are rental guarantee concepts relatively new?
Why are rental guarantee concepts relatively new?

 

The problem is that like with many excellent ideas in business it is copied by those who are perhaps unable to run such as scheme effectively. They may lack cashflow, experience or have entered the market trying to gain a quick return without having a suitable business plan to be able to run operate such a concept. If this happens, it can spell disaster for both the developer and the investor. It is therefore vital that you conduct your due diligence before entering into such a scheme.

Many of these rental guarantee concepts are established to in tourist destinations as their market is holiday lets. Investing abroad is something that has again increased in popularity in the last ten to twenty years so this again is another reason why these types of concepts have only recently taken off. Investors are still understandably cautious about investing abroad but assuming that the country is both economically and politically stable and there are no restrictions on foreigners purchasing property, the risks are no greater than buying at ‘home’.

An example of a well-established rental guarantee concept that has been operating for a long time is offer by the New Nordic Group in Pattaya, Thailand. This superbly managed scheme has produced dozens of completed properties and hundreds of very satisfied investors. In fact, many investors are so satisfied that they continue to purchase more units that are constructed by the developer. The developer has made excellent returns themselves and has ensured that the infrastructure is in place for future growth including contracts with local and international tour operators.

The scheme offered by the New Nordic Group offers involves purchasing a property from the developer who then guarantees you a 10% p.a. rental income in the form of rent. This is paid by the New Nordic Group themselves as you effectively rent your unit or units back to them who in turn sub-let it out to tourist groups. The rent is paid monthly regardless of if your unit is rented or not direct into the bank account of your choice. This deal is available for periods of between five and twenty years which just adds to its appeal.

If you are searching for an excellent rental guarantee concept, there will be few better around the world than the one offered by New Nordic.

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