Q: What is a Good Strategy Buy to Let?

Guaranteed Rental Schemes

An increasing number of developments offer the potential of guaranteed rental returns. Guaranteed rental is exactly what is suggests. When you buy the property, you sign a contract with either the developer or a management company to lease the property from you for a fixed annual amount for a set number of years. The management company will then use your property to let to tenants and take the risks and rewards for doing so. Whatever happens, you receive your pre-agreed rental. Yields tend to be 6% to 7% or more of your initial purchase price and the term can least from one to 20 years. These schemes can take much of the stress and effort out of investing abroad. It is, however, important to remember that the guaranteed income you hold is only as good as the company guaranteeing it. These schemes may seem very attractive but we have seen and heard of developers increasing the purchase price to compensate to cover the yield. A simple way of checking this is to look at the price of comparable developments in the area.

It is also prudent not to be blinded by the initial guaranteed rental period. Many of you will be buying for investment so it is essential that you consider what will happen once the guaranteed rental period has elapsed. It is likely that you (or the person you sell your apartment to) will be able to rent if out and generate a good yield? Often, in areas where there is a lot of development (such as the Black Sea coast in Bulgaria or parts of Cyprus) many developers offer schemes to differentiate themselves. You have to remember that your apartment will be competing with other apartments in the vicinity once the guaranteed rental period is over, so you will need to be confident that there is sufficient demand.