It is no secret that real estate is all about buying, selling and renting out. Today renting out the real estate brings more income than its sale. Real Estate as an investment is always an integral part of an investor’s portfolio, especially the benefits of owing rental properties are as vast as your goals and desires. A majority of demand for homes in India is in the affordable segment. There is a huge unsold inventory that it would take at least five years in the NCR and three years in other cities to sell them off. Thus return comes in two ways, capital gains from the appreciation in the home prices or rental income.
In India, the cities which currently offer a higher rental yield are Mumbai, Pune, NCR-Delhi, Bengaluru, Kolkata, Chennai, Hyderabad, Ahmedabad. All these cities offer a rental yield of 2 per cent and above, and you can be assured that the average is not going down anytime soon. Investing in these cities will offer maximum returns on investment in properties bought for generating rental income.
Rental property investments are generally capital-intensive and cashflow dependent with low levels of liquidity. As compared with equity markets, rental property investments are normally more stable, have tax benefits and hedges against inflation much better. It’s not that rental properties aren’t worth the effort nor unprofitable. Given proper financial analysis in the decision making, they can turn out to be profitable and worthwhile investments.
Benefits of Rental Property:
- Potential Appreciation: Rental property provides investors with a steady stream of income from rental checks. The return from the rental income alone is often quite attractive. In addition to the rental income, a property investor can also benefit from the appreciation of a property’s value.
- Tax Benefits:- You can deduct certain expenses from your income reducing the taxes you owe. Deductions can include interest, property taxes, insurance, utility bills, maintenance/upgrades and property management fees.
- Regular Income:- Rent can be a passive income stream, allowing you to focus on other things in life, the average person could typically manage between one and five properties while still keeping their full-time job.
- Low Risk:- Even if the economy collapses, people will always need housing.
Rental properties can also give you peace of mind as you grow older. If you purchase rental property and you hold on to them for many years, you can later sell them and make money later due to home appreciation. You can also benefit from tax benefits. Every state and every city has areas which have both suitable and excellent properties when it comes to rental potential. Real Estate investing does not begin with purchasing a rental property, it starts with creating the finances where you purchase a rental property.
This guest post has been written by Gunjan Johar, Real Estate Analyst & Home Decor Blogger.