I've seen so many RENTAL GUARANTEES been offered all over Australia that it looks like it's the only way to sell a property these days, but do you know who is really paying for it?

Just remember one thing if you see a property that has a rental guarantee attached to the sale, or is advertised with a rental guarantee, who do you think is paying for it?

No business or person will give a rental guarantee out of the kindness from their heart to help you out. In most cases they have calculated the rental vacancy or shortfall on rental to be added to the price tag of the Investment.

I remember approx 5 years ago when an elderly couple came to me after I helped one of their friends get into a couple of investment properties. Now they wanted me to help them get into another investment, but when I had a look at their present situation I could see it coming to a dead end.

Why????

They had already purchased 2 Investment properties that had a 1 year rental guarantee attached to it, which was good for that year, but only for that year.

With the rental guarantee in place yes they could comfortably afford another investment but I smelt a RAT somewhere here. The figures just weren't making sense to me.

So I asked the couple to do some research on the existing properties and see without the rental guarantee what would the rental be.

The very next day the couple rang me with a sadness in their voice. The rental given to them without of the rental guarantee was way below what they expected and I quickly ran some figures for them to see what their weekly investment was going to be to hold the investments and guess what?

They had reached their limit on what they could afford to invest in.

Important point to understand here....When Investing in property just make sure what your figures are and your out of pocket expenses is expected to be. When you monitor this correctly you will know where you stand at all times.

If your purchasing an Investment directly from a Developer etc....be one step ahead and you ask if they will give a rental guarantee.
If they won't, then you can do it yourself.

All you do is ask your financier to increase the loan amount (I call this sleep money).

Calculations
Lets say for this example the investment property is to bring in $300 per week.

Lets work on 10% so lets say the worst case scenario the rental will come in at $270 per week. SO that will be $15 less per week and to calculate 52 weeks comes to $780.

Now lets calculate vacancy of 1 month - $1290 ($300 X 4.3 weeks)

So all you would need is an extra loan for approx only $2000 and you have created your own rental guarantee. Depending how many years you would like it, just times it. If you don't use it then it just sits in your account for any emergencies that may come up.

This way you can have yourself a "Rental Guarantee" without paying extra for the Investment, better in your account than some developers.

Please Note- If you stick to our criteria's you should not be in a position to get less rental, have no tenant or be in a position where there is a vacancy period.