A Guaranteed 8% gross return or a 6% Cap Rate
For the first 5 sales of 2021 at 42 Degrees North, we are offering a rental guarantee of 8% or a 6% Cap Rate, whichever is higher. (The cap rate is the net rent after all expenses except financing divided by the purchase price). You probably have questions. Here are a few that we have tried to answer. If you have any others, please drop us an email at email@example.com.
How is it Guaranteed?
We will deposit the first year’s payments in to your account from the closing proceeds. Effectively, we are renting your chalet for the year with the rent payable in advance. The annual rental is 8% of the purchase price. 30 days before the first year anniversary, we will start paying you the second and third year’s payments monthly in advance.
Are all Chalets Included in this Offer?
No. This offer is available for all our ski chalets of 5 bedrooms or more. That is the Ellicott, Allegheny and Elk Creek chalets. The reason for this is that, in our experience, the larger models give a better rental return relative to the purchase price.
How Long is the Contract?
The minimum contract length is 3 years, but the maximum is up to you. In our experience, much of our rental business comes from repeat business and referrals. As such, it can take a little time to build that revenue stream. We may need to subsidize a little in the first year and then make it back in years two and three.
For that reason, if you want a contract longer than 3 years, we would be happy to oblige.
What Happens if the Rent is More than the Rental Guarantee?
We keep it. As previously mentioned, we take a view of over the length of the contract. If the rent is less than the guarantee early in the contract then we subsidize it. If it’s higher later in the contract, that’s when we make our money back.
What if I Want to Use My Chalet?
The guaranteed payment is an annual rental and we recoup the cost of the rental guarantee by renting your chalet on a short term basis. Obviously, if you are in your chalet, we can’t rent it and we can’t get our money back. At the same time, we know it’s hard to own such a beautiful chalet and not be able to use it. As such, if you do want to use it, you can effectively rent it back off us. We charge you 100% of our advertised rate for super-peak times such as Christmas, New Year and school breaks. 75% of our peak times such as prime ski season, winter weekends, festival weekends and holidays. We charge you 50% of our advertised rate during during off peak.
Who is Responsible for All the Expenses?
We are responsible for any expenses related to short term rentals – marketing, cleaning etc. Additionally, we will charge a security deposit to cover any breakages or damage caused by renters. You are responsible (out of the rental guarantee) for all of the running costs such as property taxes, insurance, utilities and any financing you may have.
For more information, or if you have any questions on 42 Degrees North or the Ellicottville real estate market, please email us at firstname.lastname@example.org