Pros and cons of guaranteed buyback

Having faced its fair share of ups and downs in recent years, the international property market appears poised to mature. Following excessive amounts of speculative buying by first-time investors, buyers are increasingly aware of realistic growth opportunities. Because of this, guaranteed buyback offers on new developments have become more difficult to find, mainly due to the volatility of many emerging and established markets of late.

The idea of ​​a guaranteed buyback scheme is generally based on a contractual offer from a development company. The developers agree to buy back the property for a specified percentage of the price, after a specified period of time.

Guaranteed buyback offers are more likely to occur in strong emerging markets, where the potential for capital growth in the short to medium term is very high. If a developer is guaranteeing the buyback of a property for a specified percentage within a given period of time, a serious market analysis will have been done to ensure a potential high return for the developer.

Due to this market analysis, it is almost certain that smart investors, willing to devote time and energy to studying the market, could make higher profits. However, buyers who expect a quick return by selling on their own, regardless of capital gains taxes and agent fees, often receive a much lower return than initially expected.

The benefits of investing in real estate that offer guaranteed buyback options include an easily established exit strategy, without the need for homeowners to search for potential resale buyers in a foreign market. Additionally, the value of a unit is protected and there is no need to consider any long-term maintenance on the property, just general maintenance during the term of ownership.

Entering a guaranteed buyback scheme is similar to buying a low-risk investment, ideal for those with limited experience in foreign markets. Buyers are often more confident in a product and market that offers a guaranteed buyback, as their investment growth will not be affected by market fluctuations.

Decisions to enter a guaranteed buyback plan include realistic considerations for the buyer’s personal commitment. Accepting the buyback option will allow the buyer to retain his investment, knowing that he will obtain a great return. Opting for a guaranteed buyback with the goal of generating higher returns will require close monitoring of the market, knowing when the best time to sell has arrived. This also requires finding buyers for the property, as well as understanding the optimal exit strategies for that particular market and investment.

The ease of a guaranteed buyback works on many levels, ideal for buyers who wish to invest their funds in a highly secure option. Other considerations to make before accepting a guaranteed buyback offer include security. Ensuring that the developer has a solid track record is essential to avoid potential losses. The main names associated with the development or management company provide greater confidence and support to the buyer.

All benefits related to a region with guaranteed buyback options are likely to be found in the strongest markets, showing economic growth, stability and a positive future outlook.

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