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  • Buy-to-Let

    Guaranteed rent

    Hi

    I was wondering if anyone has guaranteed rent  in place but the developer is struggling to top up the rent?

    I have two apartments in Liverpool that have been empty in the last two quarters (too expensive I reckon) but I kind of don't  mind as the developer has to top up the rent.

    But obviously indirectly this might affect me. The developer seems to be struggling.

    There is an agency that is marketing their newer properties but I was wondering if there is a conflict of interest for them if they know that any guaranteed rent they advertise for newer builds may not be met.

    How long do I wait before taking legal action? There are other investors in same boat as me  fortunately awrly for me the new builds are completed.

    Regards

    Soe

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    Guaranteed by whom - an individual, a ltd company, what, please?  Is there somebody who has been credit checked and/or owns property who is also a guarantor?

    Sorry to hear you story: Suspect there may be many more as economy grinds slower...

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    More and more developers are struggling to off load stocks and offering better and better deals just to off load them. I understanding some are accepting a lost to exit as soon as possible. Offering very high yields with longer periods are the norm now.

    Simple over supply problem, totally expected. Search for lettings in Liverpool and too many to choose from. Most are advertised for over a few months.

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    I agree so take them to court? Iis not tootomuch of a big issue for me yet as one of them is rented out. Happy to rent them out for lower rent but I don't have a say in it  lol.

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    Take them to court on what? You willingly bought the property and they are doing their part of the deal.

    The only issue is after the rent guarantee period.

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    My understanding is the "rent guaranteed" period is already taken into account in the sale price and will be ok to be left empty for that period.

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    Guaranteed to buyer by the seller. Is a common incentive in Liverpool. Sometimes when it is rented out, the developer tops up a bit.

    So on sale of property the agreed top up is legally binding.

    Regards

    Soe

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    There is a contract in place lol. So developer signed up to adhere to it. Is not word of mouth lol.

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    Hi Soe,  You are right that it is a very common incentive for buyers of new build flats in Liverpool at the moment.  The reason is simply to imply that the yield is higher than it actually is.  If the developer guarantees a rent of £850 pcm for 3 years on a £140k flat he is saying you will get 7.3% gross yield.  Often the real achievable rent for these flats is actually £700 pcm, or 6% gross yield.

    The vendor covers the loss on the rental return in 2 ways:

    1.  By increasing the asking price for the flat.  The resale value of many of these is often considerably less than the initial sales price due to supply and demand / over supply issues and the fact that the yield is low (especially after high service charge and ground rent) making them less attractive investments on the resale market.

    2.  Offering the rental guarantee via a separate limited company that it then liquidated some months after the sale, making the guarantee worthless.

    Unfortunately both these are very common in Liverpool at the moment.  To avoid this do your DD before buying; on the real value of the flats, the bona fides of the guaranteeing company and also on the likely rental return once the guarantee period has finished.


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    Andrew McCausland

    Hamilton Square Estates Ltd

    Wirral Property Group Ltd

    Sourcing and renovating investment property since 1994

    Hi

    I am aware of this font worry. However the developer would have a lot to lose as he has a big project going on in Liverpool. I have not made a loss if the guaranteed rent falls flat as I would either break even or made a profit. I have had them valued.  So I am ok.

    But seen some offering 7% but the properties are expensive, so reflected in the price.

    Regards

    Soe

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    Does this developer use EXACTLY the same name on your guarantee as on all his other developments?  If, say, it is "Dodgy developer Liverpool 2014" on your deal but "Dodgy developer" on the other deals then your guarantor, "Dodgy developer Liverpool 2014", can go bust, you get nothing, bit the rest of his business continues.

    Do let us know...

    PS Bit early for the situations people have been ignoring for some time emerging in the new year, what usually happens 1st week of the new year.

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