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Rental Income

  • 22-06-2006 5:56pm
    #1
    kraggy
    Closed Accounts Posts: 6,414 ✭✭✭


    hi there,

    quick question.

    when foreign property companies advertise a development and state that there's a guaranteed rental income of 5%, does that mean that they'll rent it off you? and also, is that 5% of the value of the property?

    thanks


Comments

  • #2
    Lplated
    Registered Users, Registered Users 2 Posts: 372 ✭✭Lplated


    Unhelpful answer is - it depends.

    Most common (i think) example of this concerns 'lease back' schemes in France. These schemes, while privately owned and operated, were created (in legislative terms) by the government to stimulate investment. Your rental return here (french leaseback) is guaranteed (backed by a bond/insurance) and will be in the contract. From the ones I've seen the % offered has ranged from about 4% to 7.6%. The % relates to the purchase value of the property at the time you purchase it.

    I've seen similar type ads for properties in Italy, Spain and elsewhere. There the 'guarantee' is from the management company or developer. While it will still be written in to your contract, I dont think (but may be wholly wrong) that there is any underlying government legislation or policy backing the scheme.

    If I were you I would check out the company offering the % (i.e. history, other projects involved in etc...). Would also check things like dates - for example, do you have to pay now for a property that will be first let in 2009? When and how will the rent be transferred to you etc...

    Should say finally that I've heard of ads with a 'guarantee' of X% where the 'guarantee' means the seller assures you you'll make X%, its not contractually based.


  • #3
    Carb
    Registered Users, Registered Users 2 Posts: 831 ✭✭✭Carb


    kraggy wrote:
    hi there,

    quick question.

    when foreign property companies advertise a development and state that there's a guaranteed rental income of 5%, does that mean that they'll rent it off you? and also, is that 5% of the value of the property?

    thanks

    It probably means that the rental amount you're been gauranteed has largely been added into the price, so you're basically paying your own rent. No doubt, there may be exceptions, but its commonly accepted that these guarantees are just a marketing tool, which people end up paying for themselves.


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