QLD Brisbane-10 year rent guarantee

Discussion in 'Where to Buy' started by radioactive, 8th Jan, 2019.

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  1. radioactive

    radioactive Well-Known Member

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  2. radioactive

    radioactive Well-Known Member

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  3. kierank

    kierank Well-Known Member

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    Haven’t heard of either organisation.

    How long have they been in business?

    Will they still in business at the end of the guarantee period?

    Like all guarantees, the consumer pays for it.
     
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  4. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    It’s easy to build a rental guarantee into the purchase price. This makes new investors feel comfortable.

    Any decent property that is located well should be able to stand in its own right without the need for a rental guarantee. Whenever I see a rental guarantee advertised I run a mile and do not look back.
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    After 10 years, will the oversupply of units in the area have balanced out and the demand returned?
     
  6. albanga

    albanga Well-Known Member

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    Haha these rental guarantees make me laugh.
    Let’s do some basic maths.

    Standard House Price = 500,000k

    Weekly rent = $350
    12 months rent = $18,200
    10 years rent = $182,000

    House Price with this builder = $682,000
    Now ofcourse they would expect the property to be actually rented for probably 80%+ of the time so even if we take 1/4 of that your still looking at 45k built into the purchase price.

    Good luck with the Val’s on that one.
     
  7. Marg4000

    Marg4000 Well-Known Member

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    Why do they offer a rental guarantee?

    Isn’t the product good enough value to stand alone?

    To me, the offer of a rental guarantee is a loud warning that finding a tenant is going to be difficult. They build the rental subsidy into the price. The $500 rental guarantee only costs them $150 per week when they rent it out at the realistic $350, all that the property is worth.
    Marg
     
  8. David Shih

    David Shih Mortgage Broker Business Member

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    I've got a client who used DPN before they met me. They advised my client some brand new dual occupancy at Collingwood Park for a very expensive price and claimed to be cashflow positive from day 1. All looked good on paper but since settlement both properties has had issues getting stable tenant so they had to keep dropping rent and expectation too. Oh and they did chuck in rental guarantee for like first 3 or 6 months.

    I believe they get paid by the developer so you can tell where the real interest lies....

    As for rental guarantee - if it sounds too good to be true then the devil will definteily be in the fine print. I've seen something like if client doesn't take on the first proposed tenant then the whole rental guarantee clause will be void. Which means they can push whatever Tom, Dick & Harry into your place and then when the tenant moves out, you're left with your own problem. Can't see how that's in the best interest of customers really...

    Cheers,
    David
     
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  9. jazzsidana

    jazzsidana Mortgage Brokers - Investment Savvy Business Member

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    Anything that requires rent guarantee, i'll be very wary of it ...

    If follow the basic principals of investing, last thing you will have to worry about is if property will rent or not ...

    Cheers,
     
  10. Coxy89

    Coxy89 Well-Known Member

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    There is a risk that rents become depressed in areas because of these gurantees aswell. In Brisbane there have been a lot of units sold inner city with rental gurantees. The developers employ a building manager and give them a 90% occupancy target and a minimum rent number for them to break even on the deal, normally way lower than typical rents for the area. Easiest way for the building manager to hit their target is to just undercut everyone else in the area.Hard to compete in older units when the newer oversupplied ones are going for stupid rents.
     
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  11. werdna

    werdna Well-Known Member

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    Don't ever even go near any company offering rental guarantees.
     
  12. Joshua Boctorani

    Joshua Boctorani Member

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    Inexperienced investors feel comfortable with rental guarantee's because they're worried about an "extended vacancy periods" - a solid location should be rented without issue - these guarantee's are often not worth the paper they're written on..
     
  13. Big Will

    Big Will Well-Known Member

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    Change two letters and both statements appear correct.

    Inexperienced investors feel comfortable with rental guarantee's

    Experienced investors feel uncomfortable with rental guarantee's
     
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  14. Joshua Boctorani

    Joshua Boctorani Member

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    Spot on!
     
  15. Tony3008

    Tony3008 Well-Known Member

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    That, IMO, isn't a bad idea on larger developments. If you have 100+ apartments becoming available at once, everyone will want their one to be given top billing which obviously isn't possible. And then there's the practical side, that one, perhaps two, move-ins per day is the maximum possible. But more than this is questionable - In 2000 I bought my first Central Equity Melbourne high-rise with a 12-month guarantee, and at the end of 12 months the rent dropped sharply - "changed market conditions, you understand".
     
  16. Joshua Boctorani

    Joshua Boctorani Member

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    With all the high density dwellings popping up all round Melbourne, there is years of supply coming online which keeps rental yields down down down + tenants just move to the new building across the road for $10 per week less as owners get desperate to lease.
     
  17. Tom Rivera

    Tom Rivera Property Manager Business Member

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    Worth noting rental guarantee's are usually offered at very low yields, like 4%. If you can't get an amazing tenant in a heartbeat at 20% below market then you're doing something TERRIBLY wrong.

    Most of these investment companies wouldn't last anywhere near ten years, so it's easy to offer a guarantee for that long- especially with enough terms and conditions built in.
     
  18. Greyghost

    Greyghost Well-Known Member

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  19. Serveman

    Serveman Well-Known Member

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    I was always told when sellers have to offer 10 year rental garrantee, then it's a problem.
     
  20. Simon L

    Simon L Investment Property Buyers Agent Business Member

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    I would be more inclined to use their services if they honestly spruiked "guaranteed vacancies over 10 years!" instead
     
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