Property Investment Abroad — Beware of Guaranteed Rents
UK buy-to-let investors are being tempted by offers of guaranteed rents on property deals around the world, but how good are these deals in real terms and will there be any rental demand once the guaranteed period ends?
Investors are looking beyond the overcrowded UK market for untapped property hotspots in Eastern Europe, the Middle East and out to the Far East.
Deciding on the best foreign markets to invest in is a case of weighing up the potential for growth and rental income against the risks and costs.
For example prices of residential homes in Beijing rose by 20% in 2005 (according to the Beijing Municipal Construction Committee), however there are many issues regarding the transfer of funds out of China, a 5% tax on rental income and the possibility that the Chinese government could claim the land back.
Latvia on the other hand presents a lower risk to foreign investors, with membership of the EU and the ability to borrow up to 90% of the value of the property making it a more appealing choice.
However, this is not to say that an investor can simply buy any property in Latvia and expect to make easy rental returns. Like any foreign market, the risks are generally higher than buying in the home market.
Incentive to buy
To help encourage potential landlords to overseas markets, a number of investment companies are offering guaranteed rents for anything up to 5 years. Rental guarantees, it is argued, provide a reliable safety net for riskier markets, however many experts warn they are merely a marketing tool and advise investors to look very closely at the deal being offered.
One of the biggest issues with guaranteed rentals is a lack of demand for the property once the period has finished. Guarantees are often used to market properties that otherwise would not sell and many investors are shocked by the resulting drop in income.
In addition to this, it is often the case that investors end up footing the rental bill themselves, when developers inflate the price of the property to cover the guaranteed rent. This can provide a further shock when the investor tries to sell the property and realises that it is not worth as much as they originally paid for it.
If you do opt for a guaranteed rental deal, make sure that it is properly underwritten by a bank. Otherwise you would be at risk of losing the guarantee if the developer were to go out of business.
Poor regulation means that it is also worth checking the small print for any hidden clauses that enable the developer to avoid paying the guaranteed rent and it is always a good idea to seek expert advice.
'The attention to detail and professionalism that Troy and his staff brings to our contract drafting process is unmatched. It’s a rare occurrence to find a law firm that cares as much about your legal protection as you do. But, Doucet Co. LPA is that law firm."
Mr. Doucet and his staff handled two foreclosures and a related matter for me. I found everyone in his office to be professional, effective and responsive. Everything he handled for me got me the results I expected. I highly recommend Doucet Co., LPA.
As an attorney and former client of Doucet Co., LPA, I was very impressed with the representation of Troy Doucet and his firm. I would recommend him to all who face difficulty in saving their home or getting cooperation with their mortgage companies.
If you need legal assistance regarding foreclosure, I urge you to consider putting your complete trust in Doucet Gerling. They will employ their vast knowledge and expertise on your behalf and work to attain a great outcome for your individual needs and situation.
"Troy Doucet is one of the most gifted attorneys that we have ever had the pleasure of dealing with. He treated us with kindness and generosity. We were most impressed with his integrity and high sense of duty to us. If you are looking for an attorney to get the job done we highly recommend Troy Doucet. Our family can never thank him enough for getting our foreclosure problem solved."
My company has worked with multiple law firms in the past, but none have come close to matching the quality we are seeing from Doucet & Associates. If you want an attorney who has a deep understanding of both the legal system AND business, hire them – you won’t be disappointed.
"Mr. Doucet worked wonders in my case. He stood up for me when I felt overwhelmed and helpless and kept my credit rating and future intact. Thanks you so much for helping me and my family."
"My family and I would like to send a thank you with sincere gratitude for all the time, hard work, and long hours set a side daily to represent and speak on our behalf during a very challenging time in our life. Our success is a reflect of your commitment. Thank you Troy Doucet & law firm."