You would be lying if you said your primary motivation for real estate investment is not rental income. Selecting the ideal property, such as commercial property, may result in spectacular and consistent rental income gains that will most likely expand over time. Tempting! However, the commercial property requires far too much labor and stress. W-R-O-N-G! You may easily make that consistent rental income with fractional ownership.
For investors, real estate is an excellent investment instrument. It is a prevalent misperception that real estate rental revenue does not necessitate any work. However, depending on the rental plan, such as residential real estate, owners must first establish the groundwork before making money.
Buying and leasing a property can generate passive income in the form of rental income and capital gain. However, if you actively manage the property, it will not be deemed a passive income investment. So, where will you put your money to work while earning a stable rental income? Commercial real estate offers you double in terms of rental income. But, commercial real estate has double the challenges of residential real estate. However, owing to fractional ownership, this is no longer the case. Do not miss Residential Vs. Commercial Properties: The Rental Income battle.
What Exactly Is Rental Income?
Rental income or revenue refers to whatever money you generate from utilizing or owning the property. All rental income generated by your properties must be reported. In addition to the usual rent, there are extra payments. These are considered rental income and must be reported on your tax return.
Rental income has long been regarded as one of the most advantageous types of passive income. Buying a property and leasing it out for a living generates rental income. For a variety of reasons, it is vital to understand where to invest a potential rental income.
Rental income from a property is termed passive income; yet, the cash flow may not seem to be sustainable. To optimize return on investment, a landlord should avoid involvement in day-to-day maintenance activities. Property owners have a lot on their plates, and to optimize rental revenue, they must actively engage in the maintenance and remodeling process. They must also be involved in rent collecting and tenant dispute settlement.
Other rental options, on the other hand, allow you to make rental revenue without owning or maintaining a property. All that is required is for you to invest your money in the property. How so? Such avenues include fractional ownership, REITs, and real estate crowdfunding. Do not miss How Much Can You Earn From Rental Income Properties In These Indian Cities in 2022.
Fractional Ownership Is?
That flashy and gorgeous commercial property besides your apartment will set you back crores if you want to invest. It is expensive and measured in crores. However, the fact that you do not have crores does not bar you from purchasing commercial property. You may advance even if you only have lakhs. With partial ownership, this is conceivable. Assetmonk, for example, permits a person to invest in a high-quality office building for as little as Rs. 25 lakhs.
Fractional ownership is a great way to invest in property without purchasing property and generating passive income. It enables investors to buy commercial property and reap all the benefits of property ownership without the original investment or current difficulties. It is more appropriate for high-end commercial real estate with a high-risk profile. It’s also advantageous for a single investor who might not be able to fund the entire property. Investors may buy a piece of high-end commercial real estate and create a steady rental income while growing long-term wealth. It is popular among institutional investors. But, it is also becoming a feasible investment choice for savvy middle-class and individual investors. Do not miss Debunking Popular Myths on Fractional Ownership.
How Exactly Does Fractional Ownership Help You Earn Steady Rental Income?
- Accessibility: It is feasible to invest in commercial space valued at Rs. 700 crores through fractional ownership. It is a large investment that is often only available to the rich. However, due to fractional ownership, anyone may buy an identical property for as little as Rs 10 lakh. These office buildings additionally give a 6 to 10% annual rental revenue. They also make between Rs 60k and Rs 1 lac in rental revenue every year. You may invest in commercial properties with Assetmonk for as little as Rs. 25 lakhs.
- Tenacity: Because of portfolio diversity, ease of departure, capital gain, and consistent rental income, average investors are increasingly becoming fractional owners of commercial properties. Furthermore, the commercial real estate market in India is expected to expand from 13 to 16 percent soon, making commercial real estate fractional ownership a successful investment. As a result, India’s commercial real estate market would experience a slight contraction in 2020. However, the third quarter witnessed a dramatic improvement. COVID-19 has reduced property values abroad, most notably in Stockholm, London, and Dubai. According to industry sources, office leasing increased over the same period as a result of India’s thriving outsourcing industry. Around 63 percent of commercial space in India is leased by overseas firms.
- Long-Term Renters: Renters routinely swap out of rental homes. As a result, the landlord must continue to pay rent until a suitable replacement is identified. Commercial leases are frequently for three years or more. Furthermore, leases can be extended. As a result, commercial properties provide investors with a consistent source of revenue. Large businesses, IT firms, and financial institutions rent high-end commercial space. These businesses always pay their rent on time. Furthermore, converting the buildings into offices took a significant amount of time, resources, and money, and many tenants would prolong their leases. To generate enormous profits, the greatest idea is to engage in a prior leased commercial property.
- Rental Return on Property Investment: Commercial estate fractional ownership provides a high return on investment due to continuing appreciation and rental revenue. Commercial real estate investment in India has expanded at a CAGR of 16% over the last five years. In addition to increasing value, purchasing through a solid fractional ownership organization like Assetmonk may result in a 15% boost in rental revenue returns over the next 3 years. The rental revenue is included in the lease agreement to buffer against inflationary pressures and to guarantee that your investment remains steady over time.
- Real estate diversification: You want to diversify your property assets but lack the funds to acquire residences throughout the country. It is possible to do this by investing in real estate in tiny increments. Joint ownership, for example, allows you to invest in real estate while still operating a company out of an office building, letting out your house, and paying your debt. Your finances are not tied to any particular piece of real estate. As a consequence, you may spread it over different households, economic levels, geographical locations, and places within the same country. You also have the choice of focusing on a certain industry or diversifying and profiting from economic downturns and upturns. It lessens the chance of market changes. With a fractional investment, you may broaden your portfolio without having to make large down payments on each property.
- Liquidity Issues: Liquidity issues impact real estate. In contrast, fractional ownership is not. Traditional real estate investments have lesser liquidity than fractional assets. You would need to check your contract, but it is unique to be able to sell your investment, potentially lowering your trading risk. Your commercial space is transferrable and can be sold.
- Real estate appreciation: There are two types of returns on commercial real estate investments. The benefits of fractional ownership include both appreciation and immediate cash returns. As a result, the value of the commercial property you own will rise. It is growing more financially appealing to typical investors.
Assetmonk is a real estate platform that focuses on commercial real estate investing. It offers prospects for investment in places such as Bengaluru, Chennai, and Hyderabad. Through fractional ownership, you may invest in luxury commercial buildings in these top locations. Our investors frequently express their gratitude for the high quality of our products and services.
Desire steady rental income? Here’s How Fractional Ownership Can Help You Achieve That FAQs
If the ownership agreement allows it, a fractionally owned property can be leased out as a short-term or long-term rental. Based on the terms of the agreement, all owners may be entitled to a portion of the rental revenue.
One of the main reasons why fractional ownership is deemed safe is because tenants must sign a five- to seven-year lease agreement. This makes it impervious to market volatility and economic cycles, ensuring investors steady rental income and capital appreciation.