India is a rapidly developing country on its way to beat the market slumps in different industries. What can keep you afloat or even ride the tide in future are diversified smart investments that pose less risk. Apart from buying gold, investing in real estate has been and continues to be probably the safest long term investment option that guarantees a return. If you are a new bee in the world of real estate investment and do not know where to start, then becoming a rental property owner is the way to go. Here’s why:
1. Passive Income You Can Retire On
First and foremost, the most lucrative reason to buy a rental property is that it becomes a secure source of income with minimum time and efforts. Now let’s not think it’s all nice and amazing and there are no risks. Like all investments, real estate too poses risks, but they are usually bearable if you give it time to appreciate its value. You can own a rental property for years, and direct the cash flow towards a retirement fund—or even pay off your loans with the rental income.
2. Gives You Leverage
Owning a rental property is good for the health of your investment portfolio and gives you higher leverage when applying for a loan. Real estate investment is comparatively a safe bet, and even the banks know that. This allows you to buy a rental property without digging up your pockets for 100% of the purchase price. Borrowing money from the bank or some other source causes an increase in the potential return.
3. High Appreciation and Returns
Since a rental property keeps generating income, it lets you hold the property for longer. This creates opportunities for high appreciation. As a real estate investor, a buy-and-hold strategy keeps your investment with minimum risk. The value may fluctuate, but in the long run, it will always make you money. Real estate market allows you to sell whenever you want to or if you need to.
As mentioned earlier, for property investment, it is easier to find banks and independent parties who would loan you part of the amount required. So, in reality, you are putting in only a small portion of your own money. Over time you’ll get a better return on investment or ROI. The rent you receive will take care of both marginal expenses and the interest on your loans. In such a situation, your profits will exceed the interest owed, and that is an increase in ROI.
4. A Cushion during Inflation
With an ever-growing population in need for housing, real estate becomes a great market that will help you cope with inflation. Price rise all other areas of living costs drives the property prices in the same direction. Buying at a low-interest rate helps you without risking your business. Among additional saving and investing options come saving accounts, recurring deposit accounts and fixed deposit accounts. However, in times of inflation, these sources hardly compensate for the basics like food price inflation, let alone the total increase. The money you set aside in a fixed deposit account today will not be sufficient to buy the same amount of goods services when it matures in future. These accounts offer up to eight percent interest on your money. Hence, we can say that the returns fail to prepare you for the real value required after five or ten years of inflation.
5. Tax Benefits
Investing in real estate gives you an excellent opportunity to opt for rental property tax deductions. The Income Tax Act allows you attractive reductions in property income. The tax rate is considerably lower on rental income than on usual income sources like salary and business.
As a rental property owner, you are required to pay taxes not only on the rental income itself but also on the deemed rental amount on the property in some cases. The important thing is to know how to calculate the annual taxable value of your rental property. While computing the tax amount, you can subtract interest you are charged on loan you availed for buying this rental property. You can also deduct municipal taxes and the cost of any repairs done throughout the year they were carried out. If you fix the plumbing or repaint the building, the costs can be subtracted.
For Renters – Rental properties not only favour the landlord/owner but the tenant/renter too.
Rented living solutions are ideal for students and young working professionals. It is especially beneficial if your job requires to travel a lot or has temporary locations of business that requires you to move every few months or years. Additionally, for most young professionals owning a home may prove to be an expensive affair with having to pay the down payment that is often twenty percent of the complete purchase price. Residential property values have risen faster than incomes and are therefore less affordable.
7. More for Less
As a renter, it is ideal to rent a living space at residential properties developed by well-known real estate developers that offer value for money. You are not required to pay maintenance costs or property taxes, and still, avail all the amenities provided by the developer. Amenities like 24×7 security of a gated community, power back-up, gym or swimming pool privileges go a long way to add quality to your lifestyle. Some rental homes come in semi-furnished or even fully-furnished condition. This reduces the expense of having to purchase everything while staying there and gives you the freedom to easily move to another location whenever you need to. Some top real estate developers even offer services that help you with the packing and moving process!
Rental Property Investment in Jaipur
Jaipur is a state capital, a tier-II city, one of the twenty smart cities under the government’s development scheme and due to its proximity to Delhi NCR, an upcoming hub for MNCs and IT firms. It also boasts of fantastic institutes that offer quality education. All these factors over time have attracted a considerable population of students and migrant working professionals to the pink city. These Millenials fall in the age bracket of 18-35 and prefer flats on rent or co-living solutions that fit their budgets.
Both as a landlord and as a tenant, it is beneficial for you to invest in apartments and residential spaces developed by renowned real estate builders. The developers offer excellent quality construction and a host of healthy amenities like swimming pools, health clubs, gym, jogging tracks and more. The developers often construct their projects at prime locations that are close to key points of the city. Finding the right property helps it stay occupied through most of the year and giving minimum gaps in rental incomes. Apart from the property itself, it is also essential to find good tenants. An understanding of laws and rights available for both the parties involved can help in this regard.
While renting out commercial outlets, co-working office spaces, warehouses and factories are the upcoming trends. Residential properties still make for the significant 80% of the rental property investment. Thorough research should help you pick and choose the kind of residential unit would fetch you the highest rental return on investment.
Before investing in any kind of rental property, residential or commercial, you need to assess the value of the features. The location, understanding market conditions, and keeping a note of all the facilities and amenities offered that truly make the investment a wise one.
So, don’t wait any longer, get researching and planning for your smart real estate investment today! Are there any benefits we missed? As a renter, what attracts you the most in a well-developed residential project? Let us know in the comments below!