Anybody ever heard of anything like this?
I was going through some listings and came across an ad that said this:
"Signature Platinum Property - This home qualifies for a special investor program. It comes with 90 day rent protection so the payment is covered for the first 90 days while as you look for a tenant. You will need to not worry about repairs for the first year either as these will all be paid also. "
What is the actual name for this program? Any catches/hitches to something like this?
It’s just a marketing ploy. They guarantee your rent for 90 days - who do you think pays for that? The pay for repairs for the first year - who do you think pays for that? It’s just a way to sell newbies rentals at a higher price and make it appear that you’re getting a good deal. Operating a rental property business is ALL ABOUT THE NUMBERS. I certainly wouldn’t buy a property for any other reason.
Mike
That’s what I was thinking. I’ve never heard of anything like this before. I figured if that was being offered, it would only be because of the price you paid. But, being not very experienced in the rental business I was curious if there actually was a program like that.
They just tack all of the estimated repairs and rent loss onto the sales price. The sales price is probably already a retail deal (see also won’t cashflow) to start so you’re already getting shafted.
It can be a good selling or buying tactic. My first year I would never have bought a vacant property, too scary. So on a few bids I put down that I wanted the rent to be guaranteed for 3 months. Now I like buying vacanct properties, but in the beginning it was different. In the beginning its not enough to find good deals if you don’t have any money to obsorb the loss in rents for the first month and don’t completely know your market YET.
I thought about putting a guaranteed rent in a purchase agreement if I bought a large apartment building that was vacant. I could buy it, rehab it, and rent it. I can roll the purchase price and rehab costs into the loan, but could I afford the loss rent for 4-6 months it would take to rehab it and get it fully rented. The answer might be NO.
The seller and buyer can use this to help a deal go through. Help a seller sell it and help a buyer feel ok with buying it. But no matter what the numbers have to crunch.
The property would cashflow, but not much. No where near the 50%! PITI would be right around $550, it would rent for $650-$700. So cashflow $100-$150.
Not a deal I’m considering, I was just curious about the “rent protection”.