New Builds with ‘assured’ or ‘guaranteed’ rental income.

lukepa96

This should probably be in the property part of the forum but thought it was more suiting for here?

Hi guys,

I’ve been looking into buying my first investment property for the past few months and have spoken to a fair few companies offering various ways of investing in property. From sourcing agents offering vanilla BTLs or HMOs etc to developers offering assured rental income for a set amount of years plus buyback options.

I am very cautious of making a move into property investment. Certainly on my own due to the risks involving voids (with mortgage/costs to pay) and maintenance of property etc.

So the idea of having ‘assured’ or ‘guaranteed’ net income for 2 or more years, would allow me to hopefully have the property paid off within that time period.

One company was offering 8% ‘guaranteed’ net income and 125% buy back option after 5 years.

The other which is the one I have spoken to most recently is called Signature Capital (parent company is Signature Living) and offering 7.5% net ‘assured’ income for 2 years on a development in Liverpool (which won an award from some property magazine)

Have any of you guys had any dealings with Signature Capital? Or purchased a new build property through a set-up like this before?

I’m very wary as to why these developers are offering these properties as guaranteed income investments and not just selling on the open market?

Any advice is much appreciated,

Luke.

jimjames

I think you're absolutely right to be wary. Unregulated companies can make any guarantee but it's effectively worthless as it depends on them being able to support it or even still in business. Effectively they can't guarantee it unless they are using other money to pay you back so either their own money or what you paid them or what others have paid them. Check exactly what you own, it may be that you have a worthless asset that you can't sell on and have no income either as many have found to their cost with similar schemes

firestone

Could be legit but if they can guarantee income & buy back why offer to others? Also is there any protection if it goes bust?Just as risky are BTL P2P companies such as Property Partner,Brickowner and Housecrowd etc but even they make no guarantees due to void periods and the housing market

dunstonh

Do not mistake the use of the word guaranteed to mean guaranteed in the same sense it is with financial services.

With commercial arrangements, it is only guaranteed as long as the company exists and is able to afford it. Lots of schemes have had so called guarantees and gone on to fail.

Jeems

They've over inflated the property cost and will pay you back your own money as part of the "guarantee".

Do your due diligence. What is the market rate for rental properties in that area? (speak to local estate agents). Invariably, the local rents will be lower than the guarantee, and then ground rent and service charge will likely shoot up after the guarantee period too.

I was in the same boat as you in 2015. Decided against any company offering these sorts of returns.

Malthusian

lukepa96 wrote: »

So the idea of having ‘assured’ or ‘guaranteed’ net income for 2 or more years, would allow me to hopefully have the property paid off within that time period.

If words like "assured" or "guaranteed" are attractive to you then you should be going absolutely nowhere near these schemes.

jamei305

There are plenty of rent guarantee and rent insurance products you can avail yourself of after purchasing a property the usual way e.g. via an estate agent. There's no need to deal directly with developers.

lukepa96

Thanks Jeems,

This is exactly what I had assumed..

Does anyone on here know of any decent companies that run or facilitate fully managed property investments?

Best,

Luke.

planteria

agree with Malth and Jeems..

i would say that if you want to buy a property to rent out then just do it yourself. an area you know well, that you understand thoroughly: lots of research with estate agents, letting agents, checking out the street carefully etc.

also, i would set up a company to buy the property rather than buy it personally. speak to your accountant before proceeding either way.

Fatbritabroad

dunstonh wrote: »

Do not mistake the use of the word guaranteed to mean guaranteed in the same sense it is with financial services.

With commercial arrangements, it is only guaranteed as long as the company exists and is able to afford it. Lots of schemes have had so called guarantees and gone on to fail.

Dunston! You're back!

badger09

Fatbritabroad wrote: »

Dunston! You're back!

He's been back nearly 3 weeks. Keep awake at the back:money: