Investing in Properties With Assured Returns
Many advertise offers of assured return on your property investment.
Did you ever wonder what it means and what its implications are? Whenever an assured return is offered on a property that's under construction, a formal agreement between the buyer and the seller is done, under which the seller promises to give the buyer an assured sum each month till the property is ready and possession is formally handed over.
Assured property returns are promised for built up properties as well wherein the seller finds a tenant for the subject property and assures a fixed rental income for the buyer.
Important thing here is that, both property buyer & seller have to mutually decide and agree on the assured amount, which is decided as a percentage of the total worth of the property.
This percentage normally varies around 9 to 13 % as seen in property advertisements in real estate classifieds.
Although, it looks like a lucrative proposition, but buyers who get tempted to go for assured return for their property investment should know a few important facts: Firstly, these offers are more conducive for commercial property investments Secondly, the seller expects complete payment at the time of signing of the agreement; though some sellers are known to have taken 90 to 95% as initial payment and rest on possession by the buyer.
Thirdly, many sellers keep the leasing rights with them even after the property is ready for possession and continue to pay the buyer the agreed up on money until they find a tenant for the property.
From thereon, tenant pays the rent directly to the buyer.
Once a buyer invests in a 'property with an assured return', there is no exit from the agreement as the sellers don't refund money (unless there is an exit clause in the signed agreement).
In booming Real Estate Markets like properties in chandigarh, buyers do fall in the trap where these is no going back.
So, its something you should consider while signing the agreement.
Lastly, another risk for a buyer in case of assured return properties is that he/she may not like the tenant chosen by the builder.
It's a seller who selects the tenant not the buyer.
Remember, such arrangements are created by sellers/ builders in their own favour keeping their own interests in mind, especially when it comes to the leasing rights, which most of the builders retain.
A seller could, as per the rent fixed earlier, let out the place to a tenant at the same price and help himself to a hefty "goodwill" amount even though the rentals might have increased.
Did you ever wonder what it means and what its implications are? Whenever an assured return is offered on a property that's under construction, a formal agreement between the buyer and the seller is done, under which the seller promises to give the buyer an assured sum each month till the property is ready and possession is formally handed over.
Assured property returns are promised for built up properties as well wherein the seller finds a tenant for the subject property and assures a fixed rental income for the buyer.
Important thing here is that, both property buyer & seller have to mutually decide and agree on the assured amount, which is decided as a percentage of the total worth of the property.
This percentage normally varies around 9 to 13 % as seen in property advertisements in real estate classifieds.
Although, it looks like a lucrative proposition, but buyers who get tempted to go for assured return for their property investment should know a few important facts: Firstly, these offers are more conducive for commercial property investments Secondly, the seller expects complete payment at the time of signing of the agreement; though some sellers are known to have taken 90 to 95% as initial payment and rest on possession by the buyer.
Thirdly, many sellers keep the leasing rights with them even after the property is ready for possession and continue to pay the buyer the agreed up on money until they find a tenant for the property.
From thereon, tenant pays the rent directly to the buyer.
Once a buyer invests in a 'property with an assured return', there is no exit from the agreement as the sellers don't refund money (unless there is an exit clause in the signed agreement).
In booming Real Estate Markets like properties in chandigarh, buyers do fall in the trap where these is no going back.
So, its something you should consider while signing the agreement.
Lastly, another risk for a buyer in case of assured return properties is that he/she may not like the tenant chosen by the builder.
It's a seller who selects the tenant not the buyer.
Remember, such arrangements are created by sellers/ builders in their own favour keeping their own interests in mind, especially when it comes to the leasing rights, which most of the builders retain.
A seller could, as per the rent fixed earlier, let out the place to a tenant at the same price and help himself to a hefty "goodwill" amount even though the rentals might have increased.
Source...