Guaranteed Return on Investment: The Hard Truth

Guaranteed Return on Investment Condo Decoded: Is it Good or a Scam?


Guaranteed Return on Investment Condo Decoded: Is it Good or a Scam?

Guaranteed return on investment or yield have been one of the most successful campaigns that attracted many condo investors. Many projects with guaranteed return on investment sold very well. The popularity led to many new projects come up with this offer. But is it really a good investment, because sometimes the offer is too good to be true. Before we investigate into that, lets understand first what exactly is a  Guaranteed return on investment property. 

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What is Guaranteed Return On Investment?

Return on investment is the revenue that property, you invested in, generates. For measurement, investor look at it as a percentage called ROI ( return on investment) or Yield. For example if you invested $100,000 and it generates $4,000/year for you. Your ROI is 4%

So, Guaranteed Yield or Guaranteed return on investment is a percentage that the property developers guarantees the buyers for a certain period of time. For example: 

A marketing campaign may say,” Condo for sale, 25 sq.m start at 1,799,000 baht. Guaranteed Yield 10% for 5 years” 

It means that the developer will pay you 10% of 1,799,000 baht, which is 179,900 baht per year for 5 years. So, that you don’t have to worry whether you will be able to find a tenant or not. Your investment is guaranteed! 

This, also, means that in 5 years time, you will get back 179,900 x 5 = 899,500 baht. Which is already 50% of 1,799,000 baht that you paid for the condo. Again, it is guaranteed! You will get it for sure. Here is the list of benefits: 

  1. No management headache: You don’t have to find tenants or manage your condo. 
  2. Worry Free: No one is renting your condo? No problem, it’s the developer’s problem. They guaranteed to pay you 179,900 / year (or 14,992 baht every month). 
  3. No Agent Fee: Without the guarantee, each year when you find a new tenant you’d need to pay the agent. With guaranteed Yield, it’s the developer’s responsibility. 
  4. No vacancy gap: Every time the previous tenant leaves and before a new tenant moves in, investors usually lose a month or two in rental while finding a new tenant. With guaranteed return on investment, you get 5 years continuously. 

What better investment could there be on this Earth, right? After 5 years, the condo is still yours, you can find tenants on your own, rent it out and still generate income. Imagine, the first 5 years getting 10% each year, if that money were to be kept in a bank, you’d be making 1% or so. Some developers give, as much as, 6-7 years, long guarantee periods, which makes investments extremely attractive.

Putting that money in the bank would simply get eaten up by inflation. This is why investors have been flocking to buy these investments projects… not because they are smart (sorry to say that)… here’s the twist, it’s because they don’t know how to think.

They don’t know how to think

Many investors don’t understand basic real estate and maths. So, my objective of writing this article is to teach them how to think, connect the dots, analyze and find out if they’re making a correct and good investment or not. 

Jerbit 2-4 Thinking Process. Continue reading on the next page.