Saturday, September 1, 2018

What is the guarantee of Guarantor

Investoshashtra !!!📜📜📜
इनवेस्टोशास्त्र !!!📜📜📜

Recently, I come across an advertisement wherein a company has put big signboards around the city guaranting income for 9 years @9%, *by purchasing a pre leased commercial property through them.*

On website it's mentioned that they lease property to IT companies. Also occupancy or non occupancy doesn't impact Investors return of 9%.

As a financial planner when I digged into the offer found following points to ponder for investors, before falling prey to it :

1) Price of property is decided by them: Even in this bearish phase they dictate their price and inflate it, making it costlier for investor.

2) Rate of return@9% is not adjusted for inflation. Assuming even 6% inflation your return would be meagre 3% from very next year and will keep going down with every passing year. After 6 years effective real return would be negative.

3) Income tax on rental income : Obviously person buying such a costly property must be falling in top tax bracket.So if accounted for tax their is hardly any income.

4) Maintenance and wear and tear.

5) Property tax - Being a commercial property taxes are going to be high.

6) They are giving post dated cheques as a guarantee for rent.PDC's really😖😖

*_The big question is what is the guarantee of Guarantor._*

*With a little common sense, a little patience, and a little sense of humour you can live well on this planet - W.Somerset Maugham*

When we all know rental yields are in the range of 3-4% then why we fall for offers which is *too good to be true.*

It always helps to have a professional by you side, who can guide,analyse pros and cons and help you take a informed decision.

*So next time whenever see such lucrative offers think twice before investing or contact a financial advisor to help you with.*

Have a rocking weekend.

Raj Talati

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