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Buying Properties with High Rental Returns - November 2011

You often see properties advertised with high rental returns. These can be properties based in the mining towns or serviced apartments in the City. While these properties can be good investments you need to check out certain aspects of the property before you buy them.

Firstly you need to ensure the rent is realistic. Some properties guarantee a, for example 7%, return for 3 years. This may not reflect the true rental market and when the 3 years ends the rental return drops to 3%. The price of the property is often increased to compensate the developer for guaranteeing the rental return.

Secondly you need to make sure the organisation renting the property or guaranteeing the rental return can honour its commitments. If it is a company then a guarantee from the director should be obtained, unless it is a large company.

We therefore recommend you obtain advice on the lease or rental return guarantee before signing contracts.

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