Investors, be warned. If a developer offers you a guaranteed rental return on one of their properties that lasts a year or two after you have bought it, then it may have inflated the sales price to fund that.
“A property priced at GBP80,000, but worth GBP60,000, allows the developer to give back to the purchaser GBP20,000, fulfilling a guaranteed yield of GBP10,000, or 12.5 percent per year over two years,” says John Scott, director at property investment specialist, Asset Property Brokers, “This ruse particularly applies to apartments, villas or hotel rooms, built in areas with poor occupancy rates and oversupply.
"The result is at the end of the guarantee period in the third year buyers are left with properties that earn them very little, if any, rental income, and a financial disaster.”
From Turkey to Thailand and beyond the phenomenon is widespread, so buyers must do their homework on prices, rents and rental demand Scott says.
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