- Kishor Pate, CMD – Amit Enterprises Housing Ltd.
From the initial choice to really purchasing your first rental property as an investment, there’s plenty of planning and work involved. Buying rental property should be approached with a lot of circumspection and forethought so as to get optimal returns and avoid a serious financial setback resulting from a wrongly-chosen property. There are a number of aspects to be considered when looking for an income-generating property.
You should begin hunting for your rental investment property with an unbiased approach to areas and all of the properties in your investing range. Let us have a look at the top ten things you need to think about when trying to find the best rental property:
Area: The quality of the location in which you purchase a rental property will determine the kinds of renters you will find, and how frequently you may face vacancies. For instance, in case you purchase the home in an area near a university, the odds are that your pool of expected renters will largely consist of students. You may be faced with frequent vacancies during the times when students generally return home for the holidays. Also, there would be a higher churn of tenants, when ideally you want long-term leases.
Examine the location and project for existing and planned public parks, shopping malls, gymnasiums, cineplexes, public transportation stops and all the other factors that would conceivably entice tenants. You can peruse developers’ project brochures and also do online research to establish the saturation of such facilities in a neighbourhood.
You also need to know what new developments are coming in, and what has been zoned for special purposes by the local municipality. You are looking for a region with excellent growth prospects where schools, business parks, shopping malls and entertainment zones are either already in place or planned. Simultaneously, be wary of any new developments which could reduce the value of surrounding properties, such as by causing the loss of green open spaces or public parking facilities.
Single-family homes often bring renters looking for long-term leases. A dual-income family is definitely preferable over single professionals, as they are likelier to pay their rent on time and to be fiscally stable. As a landlord, you would like to find an area where finding such tenants is likely and where such properties are available.
When you’ve narrowed down the right location, look for a property that can potentially yield you steady and growing rental income as well as appreciation on the capital value of the home. Consider properties which are within your budget and slightly above it as well. The slightly costlier options can be paid for by some bank leveraging, and developers may be open to negotiating the price.
Also, remember that buying property can become even more desirable with some modifications and cosmetic uplifts, which will attract tenants who are willing to pay higher rents. Such changes to the property will also serve the purpose of increasing the sale value of the home in case you want to put it on the market after some years of good rental income.
Every state and every city has areas which have both suitable and excellent properties when it comes to rental potential. In Pune, areas like Undri, Kothrud and Ambegaon are excellent locations for rental properties because of the consistently high demand. In Mumbai, the more cost-effective locations in Navi Mumbai such as Koparkhairne, Airoli and Ulwe are very good options, though property prices are naturally higher there.
Do your research well and ensure that you have your finances in place if and when a very good option comes up. Remember, real estate investing does not begin with purchasing a rental property – it starts with creating the finances where you can purchase a rental property.
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