Rental Guarantees for New Condo Developm

04 November 2015

This week Inside the Real Estate Market I want to talk about rental guarantees for new condo developments. This is the latest trend offered by developers. Usually how it works is a developer will pay the buyer somewhere around 6% per year of the purchase price for a period of two years. A $300,000 condo will generate $18,000 per year or $1,500 per month. The developer is responsible for renting out the unit, paying the commissions, and any vacancies. The developer also keeps the rent.

What does the buyer get?

The Buyer receives peace of mind and a guarantee return for two years max.

Why does the developer do it?

They offer this service to attract more buyers. Real Estate can be risky and real estate can also involve some work dealing with tenants. The idea is to get passive investors involved in real estate, making it feel like buying shares or a bond. When the developer makes the guarantee offer, they have already made the calculations. If they think they will lose money they just up the sale price to cover any losses over two years, pretty standard.

Should you do it?

That’s where you need to hire a skilled Real Estate Agent. They can pick the right condo projects to invest in and they can do the math for you.