Renprop > Landlord > Rental guarantees set to attract investment buyers

Rental guarantees set to attract investment buyers

Between 2003 and the start of the global financial crisis in late 2008, the local residential property market experienced a boom that hadn’t been seen in decades. Both first time property owners and established landlords rushed in to snap up investment properties. As a result the buy-to-let residential market experienced strong growth with some investors owning up to three and more buy-to-let properties.

Things have quietened down since those heady days and the sluggish economy over the past decade has not helped this segment of the market.  But one property development company looks certain to change this with the introduction of a unique rental guarantee product that delivers an 8% net return to investors. Not only is this an inflation-beating return but, according to Chris Renecle, managing director of Renprop, it is “achieved even after costs such as levies, rates and taxes, and refuse have been deducted”. 

Another selling point is that investors receive this return immediately without having to wait for a tenant to occupy their unit. Renecle adds that a rental guarantee is a “way to offer investors income security for their purchased property, from the very first day they take ownership”.

The residential rental market hasn’t dropped as much as interest rates have, meaning that if you invest in a property for the purposes of letting it out, this 8% return is a lot higher than what would generally be offered for fixed deposits.

 “A rental guarantee is an opportunity to earn solid predetermined returns on your investments,” says Renecle, adding that this this applies to developments that are still to be built, under construction and completed, “allowing investors to reap the benefits of rental income from transfer, for between 6 to 12-months.”

Explaining how rental guarantees work, Renecle says that, put simply, a developer guarantees a rental income for the investor buying the property. This is typically set between 6 to 12 months depending on the value of the property and it “takes the risk away from the investor to rent out the property”.

Renecle says while activity in the buy-to-let market is subdued at the moment, now is a perfect opportunity for investors to snap up properties saying that the current low interest rate environment makes it a good time to buy. The segment with the most activity in the present climate includes properties in the R800,000 to R3million price category.

But at the same time Renecle advises any would-be investor to do their homework and make sure they can afford their newly purchased properties when the inevitable rise in interest rates comes. But as things stand now, the residential property market is sitting in a sweet spot for investors thanks to a benign interest rate environment, which makes owning property more affordable than it’s been in years.

“Judging from what is happening in the SA economy at the moment, I expect that we can enjoy low interest rates for possibly another 18 -24 months or so. This gives buyers a perfect window to get into the property market,” concludes Renecle.

For properties with rental guarantees offered see