Guaranteed returns: Why we don’t like them

guaranteed returns
Reading Time: 3 minutes

Guaranteed returns are nothing more than another marketing tool being used by real estate developers and agencies.

That’s what we think, and here’s why.

The basic fact is that if you do your own research, you can find a great property in a good location that will find a tenant without too much trouble.

Guaranteed returns are generally being used, from what we see, for new Thailand property projects that have trouble selling because, often, they’re located in a less-than-ideal situation.

Another aspect you need to confirm is the background of the company that is providing any guarantees.

In two examples recently, an apparently “successful” developer was touting 8 percent net guarantees for five years, and an optional buy-back at 110 percent of the original purchase price after those initial five years.

Upon further investigation the “successful” developer was providing the guarantees through a newly-formed subsidiary company with no accounts, no trading history and no assets. The guarantee it is currently still offering, now at least, is legally worthless.

The developer was unwilling to discuss providing the guarantee through its established, and cash-rich, main company,

To us, and to you too, this should ring alarm bells.

The other issue with guaranteed returns is they are so often significantly higher than what you, the buyer, will get once the guarantee has expired.

So once the 8 percent is up, how does between 3 and 4 percent sound? That’s what you can realistically expect to get, after all costs, as an average throughout Thailand.

Only one person pays for the costs of using guaranteed returns as marketing, and we can tell you it’s not the seller.

That’s the same as any other marketing or roadshows that are conducted for specific properties.

Guaranteed returns are worth considering for short-term investors who are extremely sure of exist strategies, and have no prior experience of the Thailand property rental market.

As always with any Thailand property investment, we urge you to undertake legal due diligence prior to signing any legal sales and purchase agreement. Your chosen law firm should point out the pros and cons of guaranteed returns, and alert you to any issues with companies that guarantee them.

If you have experience of buying property in Thailand with guaranteed returns, please do let us know.

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