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What Happens After The Guaranteed Rental Package Ends ?
This is a good question and unfortunately , an answer is not always provided by the company providing the GRR package . This is mainly due to the fact that most businesses understand that the future is not guaranteed .
A few options exist . The common ones are :
• The GRR agreement is renewed when nearing the expiry period .
• A new tenancy agreement is arranged on a yearly basis .
• The management arranges a profit sharing agreement with the owner .
• The property is passed back to the owner and it is up to the owner to manage .
However , keep in mind that for the GRR to exist in the first place , that area is usually a good rental area , making it easier to rent or sell the property in the near future . If the initial GRR agreement is for 5 years or more , that is more than enough time to handle the property .
Why Are They Offering It In The First Place ?
Another burning question and there are usually 2 main reasons for this :
1 . As a marketing selling point to attract buyers ; and / or 2 . To earn an ongoing profit .
Just like the owner , the developer can earn in two ways , either sell or rent the property . Offering GRR gives the property an added advantage to potential buyers . Renting it out will incur additional costs ( management fees , etc .) but the profit earned is more ongoing . Developers will usually choose to offer the GRR if they think that the property has a high potential for rental profit .
With selling it on GRR , the developer will be able to reduce their costs and earn an initial profit through the sale and then increase their ongoing profit via the rental of the sold property .
What Running Cost Is Not Covered by The Package ?
As with all properties , be sure to double check what the running costs are that still needs to be paid . Usually , the maintenance and sinking fund is still borne by the owner even under GRR .
At the end of the day , it is your due diligence to ensure that the package offered is worthwhile or not . There is no perfect package or investment , there is only the best package and investment according to the needs and wants of the buyer .
Bottom line is , before plunging into any investment with GRR , you need to ask yourself these 3 important questions :
1 . If the GRR wasn ’ t part of the deal , would you still buy the property ?
2 . Is the GRR offered realistic to existing rentals of similar properties within the same area ?
3 . Is the property selling price fairly the same to other similar properties within the same area ?
If your answers to the questions are NO , chances are you could be better off looking elsewhere . Till then , invest safely and wisely .
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