As a seasoned property investment advisor, I have seen many tactics sales agents and property spruikers use to entice potential investors. One such tactic that has gained popularity is the rental guarantee. While it may seem like a safety net, assuring the common fear of a property not being rented, I’m here to tell you that rental guarantees are often nothing more than fool’s gold. A rental guarantee offers nothing more than the Illusion of Security in Property Investment.
A rental guarantee is a promise from the seller or agent that the property will generate a certain rental income for a specified period, regardless of whether the property has a tenant. On the surface, this seems like a win-win situation. However, if you need a rental guarantee to feel confident about an investment, it’s a strong indicator that you are making the wrong decision.
Rental guarantees often inflate rental returns, are under the market rent achievable, or mask actual vacancy rates. They are a sales tactic designed to overcome your fears and make a property seem more attractive than it truly is. Remember the old adage, “If it seems too good to be true, it often is.”
You, the investor, ultimately pay for the rental guarantee or get diminished returns. These guarantees often result in lower returns, higher fees, and less control over your investment. Do not be fooled into thinking that someone else is footing the bill.
If you have researched the market, you would know the demand and supply for a location. You should not need a rental guarantee to feel secure in making your decision. The property manager or whoever offers the rental guarantee is not motivated to get the highest return for your investment. They are there to make a profit and deliver any subpar terms in the guarantee agreement.
The devil is in the detail. Read the fine print and ensure you model the property investment analysis and run scenarios. Once you get past the marketing hype or persuasive sales tactics, you will see that the numbers do not stack up in your favour. Always understand what you are signing up for.
Property investing comes with risks. However, do not be fooled by sales tactics used to make something look better than it is. Run your numbers, analyse data, and work with professional property advisors who work for you, not a vendor selling a property.
Remember, a real estate agent or marketer is selling you a property. They work for their commission and the vendor, not your financial success. A property investment advisor, on the other hand, is working for you. They are there to provide independent and objective advice to help you make informed decisions that align with your investment goals and financial situation.
Rental guarantees can be fool’s gold, not the safety net they are portrayed as. Pure and simple, they are a sales tactic to overcome common investor fears. As an investor, it is crucial to do your due diligence, understand the market, and work with professionals in your best interests. Do not be lured by the illusion of security and returns offered by rental guarantees. Instead, make informed decisions based on solid research and professional advice.
Always review any property investment strategy, location research, and investment analysis data with a professional, QPIA (PIPA Member) qualified & accredited ASPIRE Property Advisor Network Advisor. Never rely on glossy sales brochures or property marketing information, ensuring a property is right for your strategy. Property Investing is about BUYING a property that matches your goals and aligns with your investment strategy. Never be SOLD an investment, know your numbers!
Visit www.aspirenetwork.com.au or call our office to be connected with an accredited and independent Property Investment Advisor on 1300 710 933.
