Guaranteed Rental Income

Wouldn’t it be wonderful if a residential property investment could pay towards the mortgage, hassle-free? Guaranteed rental income promises just that - fixed income, as well as the management of the property. Guaranteed rental income are carrots often offered by property developers, which many investors bite, yet real estate watchers prescribe caution when choosing guaranteed rental income schemes.

Guaranteed rental income is a fixed rent, for an agreed period of time that a property developer or management company promises at the time of purchase irrespective of whether the property is occupied or not. Apart from the fixed income, the developer also manages of the property in a guaranteed rental income plan, which is appealing especially for offshore investments. A recent report by Alliance and Leicester states rental markets are booming. In this environment yields offered by guaranteed rental income schemes can be quite exciting.

However, the risk involved in renting properties is factored in to the yield guaranteed rental income schemes provide. Further a profit margin is usually set aside by the developer when fixing guaranteed rental income. Sometimes developers mark up the price of a property to include the guaranteed rental income. Therefore, if the investor is confident of minimizing the period of non-occupancy and looking after the property, then not opting for guaranteed rental income can in fact optimize rental earnings.

One also needs to consider that when the guaranteed rental income period is up the investor will be relying on the open rental market. A good property should be easy to rent out irrespective of a guaranteed rental income incentive. For all these reasons, when considering guaranteed rental incomes thorough research is essential.

Guaranteed rental income works best for the investor who is looking at capital growth as his main criteria for investment. The investor may not want to manage his property and yet earns a fixed income that comes as an added bonus.