HOT TOPIC
1
How long and how much ?
This is undoubtedly the most important question . A normal GRR package can run from 5 to 10 over years . Of course , some people say that the longer the better ! Why go through the trouble of looking for a tenant if it ’ s already provided ? However , there are also those who prefer a shorter period . But why would someone choose a shorter period if a longer guarantee is offered ? The answer is the rental amount .
In Malaysia , most GRR packages between 6 % to 7 % returns . It is very rare to find something lower than this range . This amount is calculated on a yearly basis on the price of the property ( usually net price ).
2
Does The Rental Amount Change With Time ?
This is another important things to consider when taking up a GRR package . As time goes by , the rental may increase as well . This is due to rising cost of living , inflation , economy , to name a few . In any normal circumstances , rentals will increase over time . However , there are a lot of GRR that promises a long period of guaranteed rental with no change in rental amount . Bear in mind as it prevents the owner from increasing their rental yield with time .
It is best to find a package that either changes the rental return amount with time , or a shorter guaranteed rental period so that the owner can increase the rental following the current market rate .
3
How Can They Guarantee Your Rental ?
Most properties that offer GRR usually has a very strong advantage in rental rates in order to offer their buyers the package . Typically , these properties are located next to an educational institution , where the rental is easy and almost guaranteed . However , a GRR is sometimes not so guaranteed after all . In 2000 , a developer had enticed buyers of a GRR scheme of between 8 % to 10 % for 15 years . The property was to be rented out to students studying in a higher learning institution nearby . However , 6 years later , the investors received a letter from the property management company which stated that the GRR scheme would be terminated two months from then . It turns out that the students had been provided with hostels and in the end , renting out the units was almost impossible . The value of the apartments has since plummeted by almost half . Make sure you do your own research about the potential of the area to see whether or not it is feasible to safeguard yourself from any unexpected future pitfalls that might occur . Quite often , though , properties near popular landmarks ( that generate a high number of tourists ) may offer the package as they will have no problems getting tenants . Such a property is definitely ideal for investment .
4
Who Guarantees It and How Safe ?
A GRR package will usually be done via a tenancy agreement or a leaseback agreement with the management company . Be sure you read up on the management company background and see if they have the proper experience in handling your property .
There are also rare cases where the company will take an extra step and set up an insurance protection for the rental or an external independent trustee company to handle the rental money . This is not common and is definitely an added advantage .
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