Guaranteed Yield Rate, What Is It?

DDproperty Editorial Team
Guaranteed Yield Rate, What Is It?
The guaranteed yield rate is a percentage of return you make from the amount invested on an annual basis and is a widespread strategy among residential projects which helps attract investors.
When choosing a project to invest, investors usually look at the guaranteed yield rates between different projects and select one with the highest figure, the most profitable one. After they pay the price, the property will be rented for a specific number of years (undertaken by the management team), and at the end of each year, you will receive return according to the promised yield rate.
For example, if a condominium project guarantees 3% yield rate for 3 years and is priced at 1,000,000 baht, this means you will earn 30,000 baht at the end of each year.
After all, there are also other factors you need to consider when deciding to invest in a property. These factors are the following.
Projects with high yield rates are usually located in tourist destinations where rental demand is higher than residential demand, or a central working area where a lot of foreign expats gravitate. With healthy rental demand and low vacancy rate, there’s no reason for a project not to guarantee a high yield rate and property value not to surge in time. 7% guaranteed yield rate for 5 years is pretty common in these locations.
High yield rate indeed looks attractive but it’s vital to also look at the developer’s reputation. Is their rental service team reliable and able to keep our property in great condition during the rental period? If you have time, go check the developer’s profile, past records, and feedback from their customers, to make sure that this project is trustworthy and worth your money.
The guaranteed yield rate must be reasonable and clarify the source of it. Many novices rush to invest in unworthy projects only because the yield rate and location look ideal, yet they forget to read the contract thoroughly to understand what’s the figure actually means and where does it derives from. If a project declares they have a 14% yield rate with 2-year term, that probably means 7% per year (Some investors had actually fallen for this enticing figure). And that 7% must come from the rental income of your property only, not other sources.
Having read through this article, your understanding of the guaranteed yield rate would be surely improved. However, no matter how cautious we approach the investment, there’re still some uncontrollable factors such as economic depression, natural crisis, and political turmoil that could plunge the return and value of our property down. For this reason, besides a high and reliable yield rate, you should also look for a project that’s practical for a long-term investment, one which you can resell in the future with profits.
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This article is written by Kittikom Pojanee, Content Writer at DDproperty.com. For more information, please contact kittikom@ddproperty.com
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