Real Estate Guaranteed Return - Everything You Need To Know Below are friends, continuing posts with tips and…
Real Estate Guaranteed Return - Everything You Need to Know
Hi guys, continue in the posts with tips and recommendations for investors, and today I will address one of the most common aspects of real estate marketing - guaranteed return. I will explain the background to the return promises and what should interest us as investors in this regard.
First of all, what is a guaranteed return? A guaranteed return is Marketing element In a real estate investment transaction. It allows the seller, entrepreneur or marketer to sell the property or investment at the price they want Risk sharing with the buyer. Instead of the buyer taking all the risks in the property, the seller takes some of the risks on it, and thus manages to sell the property at the price he wants.
In other words, the buyer receives a return on the return, which apparently reduces the investment risks for him. But there are no free gifts - it pays for guaranteeing this return, by making the price it pays for the property higher than without guaranteeing the return. That is, the buyer pays for this risk sharing.
Important note - sometimes marketers and entrepreneurs inflate the value of the property and, through the difference, guarantee the buyer's return. This may already be a real scam, especially when the property is being marketed to the buyer at a price that reflects its fair value. Therefore, you should pay close attention to the property inspection (as detailed below) in such transactions.
Then we realized that return guarantee was a marketing element, designed to ensure the sale of the property at a price that it wanted to sell, with risk sharing. But when you think about it more deeply, understand That a return guarantee is actually the creation of two separate contracts - The first contract is the sale contract of the property or investment contract, and the second contract is the contract of promise.
The promise contract is actually an attachment contract, a completely separate contract between the buyer, the recipient of the guarantee and the promise giver (who may not necessarily be the entrepreneur or marketer, but can also be some third party that guarantees finding tenants for example).
And when you look at it this way, you realize that the promise contract is actually a loan contract. and then, When considering investing when there is a guaranteed return you need to look at the two investments that are here. One investment is the direct investment in the asset, and the other is a loan that gives those who guarantee the return.
First, consider the first investment, which is in the property or investment itself - Check that the property is sold at its fair value, that it is not only inflated by the need to ensure the investment, that the business model is in line with reality, and all the usual checks that need to be made when making investments.
And how do you test the second investment - the promise? Checking out just like checking out a loan. Checking the borrower (who gives him the loan, ie who guarantees us the return), checking his repayment and repayment, checking the collateral he can provide, checking what his sources are, checking whether his model relies on reasonable data or not, etc. . This is a commitment and loan for everything, and should be reviewed in the same way.
The bottom line - Securing real estate returns is actually a marketing act between the investor and the investor. This promise creates two separate contracts - the investment contract and the security contract. These two contracts must be examined in depth, making sure that both are wise and worthwhile investments.
The only ones that can guarantee a return are banks and governments and that is not always the case.
This is usually the case - when the yield is guaranteed - the fund is at risk 😛
There is no such thing as a guaranteed return in real estate. Because return is something that is not something expected and therefore cannot be guaranteed. Those who do not understand the field and this is what they are told should do some homework.