Why are rental properties so popular?
Demand for rental properties is high around the world at the present time and there are number of differing reasons for this. The world economic recession back in 2008 and the so called ‘credit crunch’ is certainly a huge factor in countries such as the US and the UK.
First time buyers and those on lower incomes simply can’t afford to get on the property ladder, especially with credit, or at least credit available at affordable rates, being so hard to come by, so these groups are left with no alternative but to look to rented accommodation.
Another reason why rental properties are increasingly popular is down to the fact that many people have to travel long distances to their places of work. They may choose to rent a property close to their office during the week and only return to their homes at weekends. On a similar theme, many jobs are less stable than they were a few years ago, so people are reluctant to move their families or lay too many long-term foundations in the fear that their circumstances may change. In our ‘home’ countries the driving force for demand is usually economic reasons and uncertainty.
Of course, it is not just rental accommodation in our ‘home’ countries that is in high demand. The older generations are looking ways of earning a passive income and getting greater returns than they would achieve from the banks and without the same risk as the stock markets. Holiday lets have increased in popularity with large percentages of tourists around the world opting for self-catering options as opposed to the traditional large hotels.
The demand for holiday properties and the demand for a passive income are two perfect partners.
Of course, when there are partnerships like this and mutual demand it opens up the opportunity for more people to make more money. Developers will want a slice of the action so build the properties that are demanded by the tourists which in turn are then demanded by investors who are looking to generate passive incomes. This naturally creates competition so the developers then have to get creative and come up with incentives in order to sell their particular properties.
The biggest headache associated with any investment property is finding suitable tenants so developers have explored methods of getting around this and the best solution appears to be rental guarantee.
Rental guarantees work by developers building properties and selling them to investors whose sole purpose is to generate an income in the form of rent. The developers sell the property without the need for hefty discounts and the investor gets a return of x% p.a. for a given duration.
The developer finds tenants and manages the property and also gains a return from the rental income. If managed correctly this is a win, win scenario for all parties.
An example of one such scheme is available in Pattaya, Thailand from the New Nordic Group. They are offering a 10% p.a. rental guarantee for periods of anything from five to twenty years. This very concept has been in operation 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.
This is the perfect investment for those looking to maximise their returns through rental properties and is the great example of developers, investors and tourists all striving to achieve the same goal, albeit for differing purposes.