I recently purchased an apartment and as it was going to be treated as an investment for the first 10 years of ownership, I decided to negotiate a rental guarantee of 5 per cent with the developer for the first 12 months.

However in hindsight, I possibly should have taken a different route. And here’s why.

First up, make sure you view the rental guarantee at the time of signing the sales contract because this is when you hold the greatest power.

I did not see my agreement until after signing the contract of sale, and by then I had no bargaining power.

Secondly, while you don’t get to choose the managing agent – you still pay all the associated fees such as the managing agent’s appointment, advertising and applicant checks.

In addition, you have no power over the managing agent, as the relationship is between the developer and the agent.

Next, you have no say over the tenant who’s selected for the property.

And if the developer is keen to rent the property (to help offset their costs) they may not be too fussy about who they let to - and that could be a significant risk to the property owner.

You will also not be able to access the property for inspections, nor will you receive property inspection reports.

Despite this – you still pay the inspection fees, as well as landlord insurance and other associated fees.

Unlike renting in the normal circumstances, you receive the rental guarantee monthly in arrears (rather than fortnightly in advance) and furthermore, the rent from the developer gets paid to the agent (who they choose) on the nominated date and then you have to wait for the managing agent to transfer the remainder of the funds to you (which could take up to a week).

Having now experienced this process in full, next time I purchase I would be likely to negotiate an alternative incentive such as having the developer pay the stamp duty for the purchase.

In my case the dollar sum would have been about the same, but the comfort of controlling the rent, the tenants and my property far outweighs the rental guarantee benefits.

If you are able to negotiate the conditions of the rental guarantee at the time of presenting the formal offer, you could certainly address these points and then the incentive would be more
attractive on all levels.

In the case of buyer incentives, the old adage, “buyer beware” truly prevails and I recommend you read the fine print!

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