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Investment
Guaranteed Rental
The provision of Guaranteed Rentals in Cyprus is not commonplace
amongst the Developers. Some Developers will offer properties
for sale and offer to rent them back from the purchaser for
a guaranteed return. Some of these arrangements are more open
in that they leave the purchaser carrying some of the risk
if the occupancy rate is not achieved. Such arrangements are
not likely to suit many individuals and it may be better to
use a Property Management company if you require a certain
return on your investment. Zest can provide advice on the
current Guarantee schemes and assistance in identifying Property
Management Companies.
Some developers offer Guaranteed Rental schemes on some of their
new developments. There are however two issues to be cautious
about here:
- Inflated Purchase Prices.
Do your groundwork and ensure that the property you are
purchasing is being offered at market value for the area.
It has been known that some prices have been inflated by
thousands of pounds to fully cover the cost of the rental
guarantee – therefore you could be paying the full
cost of the rental income you will derive during the guarantee
period.
- Build times and Guarantee
Periods. Another one to watch is that most Rental
Guarantees are only given on “Off-Plan” purchases.
The Guarantees are usually guaranteed as a percentage of
the Purchase Price. In buying Off-Plan you would anticipate
a significant increase in the Capital Value of the property
at the time of completion (otherwise why take the risks
associated with Off-Plan purchase), and therefore the guaranteed
amount will often be significantly eroded in value by inflation
and the Capital Value of the property. It is quite likely
that any guaranteed value will be well below the market
rent by the time you receive your return.
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