How much do you know about Guaranteed Rental Return (GRR)?
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May 22, 2023
How much do you know about Guaranteed Rental Return (GRR)?
Want to invest in real estate but are afraid of not finding a tenant? Don't worry, some developers have launched Guaranteed Rental Return (GRR - Guaranteed Rental Return), which means signing an agreement with the developer to guarantee that there will be tenants within a few years to ensure that the project you invest in is safe and stable. So, how much do you know about GRR?
a. Guaranteed rental return (GRR - guaranteed rental return) model
1. Introduction
- This scheme is a unique “buy first and rent later” model, where homeowners purchase properties from developers and allow homeowners to earn passive income in the form of monthly rent.
- For example, when you sign a 5-year 6% GRR agreement with the developer, you can ask the developer to keep the unit for you. No matter whether your house is successfully leased or not, the developer will still pay the rent according to the agreement. The payback goes back to you.
- When the agreed 5-year return expires, the homeowner can choose to live in it himself, rent it out to other tenants, or sell the unit!
- This unique model makes your capital turnover more flexible, and you can easily invest in other real estate projects.
2. Algorithm
- GRR is calculated as: GRR x total property price x year.
- To make an analogy, if your house price is 600,000, and you agree with the developer to give 6% of the GRR established for 5 years, then calculate according to the above formula: 6% x 600,000 x 5 years = 180,000, then add 180,000 Divide 10,000 by 60 months (5 years), then you will get RM3,000 monthly rental rebate.
b. Benefits of guaranteed rental return (GRR - guaranteed rental return)
1. Get rid of the risk of vacant properties
- After buying a house for investment, many homeowners are worried that the house will not be rented out, but through the agreement of this plan, the developer will rent back the house to the owner in a unified way, so the homeowner does not need to worry about not being able to rent out the house!
- Most of the tenants will not live in a rented house for a long time. They may live for as short as one year and as long as two or three years. The owner usually needs to find another house after the tenant moves out. New tenants may also face a short-term vacancy period in the process, losing several months of rent in vain.
- However, this GRR rental return guarantee plan will be based on the return period stipulated in the agreement, so that the homeowner does not need to worry about any rental issues or vacancy periods within the specified period, and can earn rent steadily!
2. No need to worry about mortgage
- The GRR plan is enough to save you a lot of housing loans.
For example, if you buy a home with a loan of 600,000 and pay 4.5% interest for a period of 30 years, then your monthly loan payment is about RM3,000. - And based on the house price of 600,000 to calculate the 6% rental return for 5 years, 6% x 600,000 x 5 years = 180,000, and then divide 180,000 by 60 months (5 years), then you get The rental fee of RM3,000 is enough to help you pay the mortgage for 5 years!
- If the mortgage interest is lower, or you pay a higher down payment, then the rental return you get is higher than the monthly loan payment you need to pay! And after paying off the mortgage every month, there is still a cash flow, which can be said to kill two birds with one stone!
3. More flexible investment capital turnover
- What should homeowners do after reaching the GRR program deadline? This is a question that worries many people, but don’t worry! After a few years, the price of real estate has risen, and the owner may consider selling the house to make a profit.
- If you used the GRR rate of return to pay the mortgage in the first few years of buying a house, and sold the house a few years later while the house price was rising, this is really a very rare and successful investment in real estate without a huge amount of money investment opportunity.
Everyone may think, will such good health be risky? If you don’t do your homework, there are risks! You need to have a clear understanding of the developer’s background, the real estate project you are buying and the location.
After all, there is still some news on the Internet about unscrupulous developers defaulting on the owner’s GRR payment, so you must choose the developer carefully! And everyone should have heard of the famous developer EXSIM, right? Not so. For example, their Millerz Square on Old Klang Road has a 2-year 6% GRR plan.
If you want to know more about the Guaranteed Rental Return (GRR) offered by reputable developers, Aunty Caroll Property can help you! All you have to do is click on the WhatsApp Chat Now link below to get in touch with us, and please stay tuned to Aunty Caroll Property’s social media.
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