How to make your rental investments more profitable

August 28, 2020 2:21 PM

Getting your property rented is just the tip of the iceberg. You have to be in the game wide-awake to reap the maximum benefits, or it may not turn out a sound financial move for you.

home investment, rental investment, real estate, empowering homebuyers digitally, government, financial institutions, homebuyers, contactless lending, e-KYC, aadhaar, PAN, income tax, income tax return, ITR, tax-saving investment, Real-estate is a tough business, which if not handled aptly can wipe out your returns.

Why do we buy properties? Well, most of us do so to boost our investment portfolio. And when it comes to investment and returns, residential rental property is the best bet. But the idea is often misunderstood by most of the investors.

Real-estate is a tough business, which if not handled aptly can wipe out your returns. That is why it is crucial to know the pros and cons before making any decisions. Here’s what to keep in mind to make your rental investment more profitable.

A rental lease should not be the only motivation

One has to be clear vis-a-vis the objective of buying the property. Though renting is a good option, yet it only earns 2-3 per cent of the asset, especially in India, where the rate of a rental lease is low. So, the ultimate goal should be to liquidate the property after a specific time but not before making the most out of the rental asset in that duration.

A vacant property eventually hits your pocket. Make sure that the rentals are recurring and come with minimum loss. To ensure this, you have to package the property well. It is advisable to take an industry-expert onboard to get the details or pictures of the assets professionally to feature it in the best possible light in the market.

Also, a well-endowed property does not guarantee good returns. Hence, we cannot rule out the importance of a judicious approach before making such further investments, which again, is best offered through a professional property manager. Ask the expert how much investment would do w.r.t. to property profile, area, and other aspects.

Pre-empt Maintenance issues

A rental property is prone to wear and tear, which we call the running repairs. These can be about regular painting, electrical works, walls chipping off, woodwork, etc. or could be issues like leakage, damage caused by the tenant and so forth. Large spends can significantly bring down the yield of the rental property.

A professional property manager can help in pre-empting these issues by periodically inspecting the property and following a check-list to avoid unnecessary expenditure on maintenance post-facto. They can timely advise the clients on the issues that might come around.

Tenant profile

We risk our properties to unknown tenants ignoring how heavily the action can cost us. Make sure the tenant is of the right profile, not only in terms of ethnicity but also in evaluating the tendency of defaults, ability to pay rent on time, or creating other issues. It becomes impossible for a retail investor to manage such a case if the tenant refuses to vacate the home in the absence of robust rental regulations.

Take the help of a professional institution to screen the tenant for the above aspects. A professional setup has the right resources and tie-ups to manage such incidents effectively.

Safeguard property against heavy losses

You want the asset to be in the best possible condition forever. Having insurance or the provision of maintenance contracts helps property stay covered against the damages that can erupt in the asset life cycle like issues with a modular kitchen or HVAC system. A large institution setup with its proper collaborations, arrangements, and contracts will be able to give a better deal/ offering to increase the lifeline of the amenities.

Liquidate at the right time

Mostly, owners sell off their properties in haste in the time of distress, jeopardizing the returns. Though there is no database or scientific approach about the pricing or the right time to sell, yet, a professional intervention or a good property manager would be able to take care of the owner’s interest duly backed by data and market conditions.

Getting your property rented is just the tip of the iceberg. You have to be in the game wide-awake to reap the maximum benefits, or it may not turn out a sound financial move for you.

By, Pankaj Singh, Founder & CEO, Multiliving Technologies

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