What are rental guarantees & assurances? Are they a good thing?
Currently there are a number of student projects that offer rental guarantees and assurances. It is important when considering a project to understand which is offered and what is behind the offer.
Rental Guarantee or Rental Assurance?
A rental guarantee is a guarantee where funds have been set aside; for example a solicitor's client account to pay the investor an agreed amount and this should be verified by the solicitors acting on the project.
A rental assurance is a contractual commitment by the developer to pay the investor an income for agreed period of time. It is normally contractually guaranteed by the company set up by the developer for the project.
It is important that the rental guarantee is based on rents that can be realistically achieved, so it is sensible to look at supporting evidence such as a proven track history or comparable properties, for both rent and length of tenancy.
It is also important to ensure that the costs are correct, including management, service charges, ground rent, etc. and check that these costs have not been reduced for the period of the rental guarantee.
The operator is also important with either option, as this will help establish the development and also assist with occupancy and rents.
In today's market, some assurances are being incorrectly described as guarantees and some are based upon unrealistic rents or tenancies, therefore the savvy investor should verify this information before committing to their purchase.
Principal International are delighted to discuss this with investors and demonstrate how our student projects such as Appleton Point work.
For further information on the Appleton Point investment, please click here.