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I've
seen so many RENTAL GUARANTEES been offered all over Australia
that it looks like it's the only way to sell a property these
days, but do you know who
is really paying for it?
Just
remember one thing if you see a property that has a rental
guarantee attached to the sale, or is advertised with a rental
guarantee, who do you think is paying for it?
No business
or person
will give a rental guarantee out of the kindness from their heart
to help you out. In most cases they have calculated the rental
vacancy or shortfall on rental to be added to the price tag of the
Investment.
I remember approx 5 years ago when an elderly couple
came to me after I helped one of their friends get into a couple
of investment properties. Now they wanted me to help them get into
another investment, but when I had a look at their present
situation I could see it coming to a dead end.
Why????
They had already
purchased 2 Investment properties that had a 1 year rental
guarantee attached to it, which was good for that year, but
only for that year.
 With the rental
guarantee in place yes they could comfortably afford another
investment but I smelt a
RAT
somewhere here. The figures just weren't making sense to me.
So I asked the couple
to do some research on the existing properties and see
without the rental
guarantee what
would the rental be.
The very next day the
couple rang me with a sadness in their voice. The
rental given to them without of the rental guarantee was way below
what they expected and I quickly ran some figures for them to see
what their weekly investment was going to be to hold the
investments and guess what?
They had reached their limit on what they could afford to invest
in.
Important point to
understand here....When Investing in property just make sure what
your figures are and your out of pocket expenses is expected to
be. When you monitor this correctly you will know where you stand
at all times.
If your purchasing an
Investment directly from a Developer etc....be one step ahead and
you ask if they will give a rental guarantee.
If they won't, then you
can do it yourself.
All you do is ask your
financier to increase the loan amount
(I call this sleep
money).
Calculations
Lets say for this example the investment property is to
bring in $300 per week.
Lets work on 10% so
lets say the worst case scenario the rental will come in at $270
per week. SO that will be $15 less per week and to calculate 52
weeks comes to $780.
Now lets calculate vacancy of 1 month - $1290 ($300 X 4.3 weeks)
So all you would need is an extra loan for approx only $2000 and
you have created your own rental guarantee. Depending how many
years you would like it, just times it. If you don't use it then
it just sits in your account for any emergencies that may come up.
This way you can have
yourself a "Rental Guarantee" without paying extra for the
Investment, better in your account than some developers.
Please Note- If you stick to
our criteria's you should not be in a position to get less rental,
have no tenant or be in a position where there is a vacancy
period.
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