Now that you have made up your mind to invest in real estate. If you want to invest in rental income property then you have made a great choice. There are many chances for you to succeed in this field. But it is important to do good research before you dive into this world for the first time. Many factors help you to find a good and profitable rental property. For that purpose, you also need to take some help from the agents and consultants.
If you want the rental income property that suits your budget and expected rental income then first you have to collect the investment amount you need and then target the properties you are interested in. After that, you have to calculate the amount of the rental income you expect to receive. Now, it is your responsibility to do all these assessments and further discuss these with a professional realtor to match your expected property with the existing ones. After calculating and discussing the results, you have to start a search for the rental property. You have to consider the following points while looking for a right property.
The neighborhood directly affects the vacancy rate of the property. If the neighborhood has all sorts of amenities available and the inhabitants of the area prefer to stay there or people are living there for a long period then you can consider the place worth buying. Many other things like the culture of the town or place may also affect your tenants’ experience because if there is a majority of one community there, it will not be easier to keep your property occupied. Religious/Cultural differences may seem like no problem, but you have to keep these in mind while finding the right rental income property.
Taxes and Exemptions
The tax rates and reliefs are different for different places in Pakistan. First, check your budget and then look for a property. You can also get help from a property lawyer and he will suggest you good places to find rental income. Another way to find out the tax information is to visit the municipal offices or ask other houses’ owners to know the tax rates of the area. High tax rates are not always a bad thing, because they depict a high standard of the place and that people like to live there..
No one wants to live in a crime hub of the city. Do your best research before making up your mind about a certain place to invest. An area with a high crime rate like robberies, theft, mobile snatching, and illegal land occupation will never keep your property occupied by the tenants for a long time. That is why first ask about the location’s reputation and look for a well-reputed area.
You may also want to take the help of local police and ask for the rise or decline in criminal activities in the area.
Different locations mean a huge difference in property values and rental income. You may want to buy a property in main city or in a suburban area with a serene surroundings and a nature friendly view. Maybe you find the selling price in the city to be higher than the rental income or the suburban area with less selling price and higher rental income. Maybe the situation get opposite. So, choose the location wisely and don’t get rushed.
Facilities and Amenities
Check the necessary and other facilities like water, gas, electricity, sewerage system, waste disposal system, infrastructure, and nearby commercial areas. Unavailability of even one facility will make the vacancy rate higher and the income span will break. Also look for the improvement in the availability of these amenities and contact the relevant authorities to get the verified information.
Nearby educational institutes like schools, colleges, and universities are likely to bring you decent and educated tenants. These type of families are usually cooperative in many matters like maintenance, repairs, and contract renewals. Sometimes these areas might bring you students tenants and then in summers you’ll face high vacancy rate. So, think wisely.
The properties in developed areas are likely to get tenets more frequently. Now, it is your job to find about the development status of the area. You may ask the residents of the place, or may also hire an agent to gather the development information about the selected places.
Low Vacancy Rate
Low vacancy rate can occur due to multiple reason. It could be increase in rent, unavailability of necessary amenities, non cooperative land lords, or increase in the crime rate in the particular area. Check all these factors before you make a final decision about buying property. Make sure you grab the property and ensure the tenants about their monetary, and physical security for the future.
You will have to deduct the insurance cost from the rental income. If the area is likely to get affected by natural disasters like floods, earthquakes, forest fires, and storms then there will be a need of property insurance as well. So, keep an estimate that insurance should not exceed 1/4th of your annual rental income.