Guaranteed Rental Income, too good to be true???

Hi, we have agreed to purchase at Marina Del Castello in Duquesa based on being told that we will get a guranteed rental income that will cover the cost of the mortgage. 

The rental agreement can last anything from 1 year to 5 years and we have been recommended to go for a 2 year deal initially until we find our feet and decide whether to keep the apartment or sell on.

Having read a couple of threads on the message boards I'm now unsure as to whether this guranteed rental income will materialise or not.

We have bought the apartment through Andalucian Dream Homes who are also offering the guranteed rental, the aprtment completion date is expected to be June 2008.  We have been given a copy of a rental agreement to look at and told that  a 'proper' agreement will be drawn up and signed nearer to the completion date.

Has anyone any experience of this?

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Kelju ask yourself the question how can they guarantee a period for rental? I do not have personal experience but there is every possibility the 12 months rental is being added to the price of the property that they plan to sell to you. Nobody can guarantee the property will be rented out. If it does get rented not only could you have paid the rent yourself in the purchase price but they are receiving the rent as well. Much is the same with companies saying they will pay the mortgage for the first 2 or 3 years or whatever - it is added into the price they are going to sell the property for.

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Hi Kelju,
We are coming up to our 3rd season renting on the Costa.
We have a Swimming Pool, Airco, Underground Secure Parking, and we're 8 mins from the beach.
It is a two bedroom, en suite, very nicely appointed apartment, coming up to 3 years old.
We consider ourselves very lucky if we get 10 weeks rent per year.
Our prices have also been pushed to the floor to get those few weeks rented.
We talk to many other owners and we always hear the same story.
Except perhaps in Torremolinos and Benalmádena, where we believe the market is still bouyant.
We agree with Smiley ........if it's too good to be true ....it ain't true.
Our agent also told us the same story that yours did.....it may have been true once, but not anymore.
There are just too many empty apartments and they are still building more.
Please reassess your position before taking the plunge.
Best of luck
Leo

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HI LeoLeon - where are you marketing it - are you doing it yourselves or through agents - if through agents how hard are they working it have you developed website and what part of estepona - in the town or just in the borough somewhere

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Hi Kelju,

I know that I've only just started posting on this forum, but believe you me, my partner and I read just about everything we could on the pros and cons of buying in Spain. We also looked at just about all the avaiable re-sale and off-plan developments that were avaiable at the time.

We then took the plunge and purchased a re-sale property in Princessa Kristina, Duquesa (just up the road from Castillio Duquesa) within our budget based on the fact that we could repay the mortgage without worrying about any rental income. Don't forget that you will also have to pay community fees of about €800 - €1200 a year, water, electricity, plus yearly taxes.

What rental income we get over the next two or three years should pay for this and a bit more if we are lucky as we are doing this for a Holiday home for ourselves, family and close friends. It's not being done as a business, if you want to make serious income then I would suggest what was suggested to us: Buy a property and then put a long term tennant in, this should give you €500 - €850 per month depending on how many bedrooms and view etc. However this means you can't use the property yourself but it should pay for your Mortgage.

BTW, I agree with Smiley

Hope this doesn't put you off buying in or around Duquesa, it's a lovely place, just be carefull and don't listen to everything a real estate agent says. Don't forget he/she is a Sales Person - I should know, I'm a Sales Person and I know BS when I smell it and there was a lot of it from nearly all the companies out there.

The only real estate company I thought gave honest advice was Duquesa Estates, we didn't buy through them this time although we wish we had. Go and see a guy named John Parry. He will help you find what you are looking for.

Hope this helps.

PS. It takes a lot of time to do anything in Spain.

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Hi kelju

I've been reading the forums for ages and this is my first post, but Justin did publish an article (to which I contributed) on this very subject a while back which is still very relevant. 

http://www.eyeonspain.com/spain-magazine/guaranteed-rentals.aspx 

TechNoApe, Smiley and LeoLeon have got in spot on. Most guaranteed rental schemes where 2 years are offered is simply built into the price, although I cannot speak directly for this particular development.  Also achieving good consistent rentals on the Sol is difficult (unless you have a very special apartment which is particularly well located) due to the sheer amount of property available for rent (basic supply and demand economics apply). Interestingly though villas seem to rent really well especially in the higher end of the market.  I have a friend who rents out top end villas and I nearly fell over when I heard what rents they achieve!  Anyhow, that is a small niche and my advice to anyone buying on the Sol is buy what you can afford, don't rely on "potential" rental income to cover you mortgage costs and enjoy the property for the reasons you purchased it. 

Before anyone notices, I am an agent, so you will have to take whatever I say with a pinch of salt!!!  (however, I do have a long list of contented clients who would be happy to speak with you)

 

 

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Hi kelju,

I also agree with everything that has been said but I'm also hedging a bet they haven't discussed property management within the 'Guarantee Rental'. They will mark up the initial cost to entice you into buying the property but these are false promises unless you have penalty clause if they do not keep the obligation of regular letting (let alone a full year. We are from what some class as the 'dirty end' of the business, a property management company and I can assure you, we have been in touch with many people who have been burnt by this supposed offering. In our opinion, your property is only as viable as the effort and marketing you yourself put into it, you cannot rely on others. As I've posted before, you have more individual chance of higher yield if you advertise 52 x 1 week holidays on Ebay !!!!. Sounds ridiculous but that is where that site is now focusing...the holiday rental market, and you will see they've even set up their own spin off business to address the rental marketplace.

So how can i help you, not by pushing our own solutions, they are clear to be seen on the Residential Santa Ana del Monte threads, I want bring some hidden costs you also need to consider. Ok, so if they live by their statement of guaranteed income that covers your mortgage, you then have Spanish Earning Tax to pay on each and every Let, you have utility bills that also have to be factored into the Letting charge over and above the mortgage, you then have management costs - change of linen every week if not twice weekly, cleaning, garden maintenance, building maintenance, key holding, meet and greet, inspections etc etc. This alone can set you back nearly the cost of rental and cannot be done by yourself if you reside in the UK!!!.

However, you will purchase a great investment that will make you a small return and give you years of enjoyment whilst the capital cost rises. If you need any assistance regarding costs, I have produced an indicative rental calculator spreadsheet that could help you benchmark likely costs incured and how much you should be looking to charge during each seasonal period. Just drop me an email if you'd like a copy, no cost - no hard sell, it's there for your benefit.

Regards

Darren Ward

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Hi Darren,

Come and join us in the Agents Fight Back thread, we're having a right laugh,

Emz

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Darren,

Thanks for the swift reply and extremely useful Rental Worksheet.  A simple and very effective spreadsheet to determine all costs and the different charges depending on the season, would recommend it to anyone looking to rent their property.

Thanks again.

Kelvin

This message was last edited by kelju on 2/24/2007.

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Kelvin

Our pleasure, thanks for the positive response and glad we could assist and you found the Rental Calculator useful.

Any other Member of E.o.S that intends Letting, please feel free to contact us for a copy.

Regards

Darren

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Hi Darren

Thank you also for your very fast response and informative e-mail. I will keep a copy of your rental template which will be extremely useful to us on our completion and future rental. Have taken a look at your website also which again is very interesting and full of ideas. How far away are you from us at Roda Golf - is it about an hour?

Thanks again

June

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June

Our pleasure, glad it was of help !!!

Indeed, we are about an hour away, in busy traffic.

regards

Darren

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Oops...meant to say we are only one hour away even if its busy traffic !!!!

Darren

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Hi Darren,

Many thanks for your rental template it will prove very useful to us. Your web site also is of interest but I think we are quite away from you in Duquesa CDS?

Many thanks once again for the rental calculator.

Alan

 

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Thank you Darren for sending the calculation sheet so quickly. Although I have not yet completed on my property, I am sure this will be very useful once I start renting.

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Hi Darren,

Many thanks for sending the calculation sheet so promptly. It looks most usefull.

Kind Regards,

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Darren

Thanks for the spreadsheet...looks very useful and handy for the future

john

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Hi Darren

Many thanks for your quick response with the rental calculator, it will really come in useful.

Pauline

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Anyone requesting the Calculator, please can you remember to attach your personal email address for me to attach the spreadsheet to.

Glad it's of use to so many.

Regards

Darren

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Hello Darren

Wow, what a quick response, it looks really useful too.

Many thanks

BROADCHA

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