Beware rental guarantees

At present, houses make poor investments; however, apartments are even worse. That's why developers and promoters of apartment blocks use some slick marketing to sell units.

One technique is the offer of guaranteed returns. I notice advertisements offering apartments for sale with returns guaranteed for two or three years at 6 per cent.

This is a fairly obvious marketing technique, but it does seem to work.

I guess some people are hoping that by the time two or three years are up, the apartment will be getting sufficient rent to make that sort of return.

For some, no doubt, the guarantee period will also make their financing easier.

However, if a property needs a rental guarantee, it is unlikely to stack up properly and you probably don't want a bar of it.

To read the full NZ Herald article, click here

Posted: 8 Nov 2009

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