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The Rise of Asset leasing

  • Author: Sri Rakesh Chintapalli
  • 5 min read
  • October 13, 2023
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In today’s dynamic economic landscape, the only constant is change. To succeed in this environment, investors are preferring new investment approaches. Today’s investors are smart and believe in making wise decisions. They want a diversified portfolio with consistent passive income and fixed returns, but are also willing to invest in alternatives to create wealth from multiple sources.

Asset leasing, with its potential for lucrative returns and tax benefits, has emerged as a compelling investment avenue. Asset leasing is one strategy that opens the doors to such adaptability and flexibility in the subscription economy. .Asset Leasing plays a vital role in this subscription-based economy because it gives businesses the ability to offer customers on-demand access to assets without the hassle of ownership. 

Considered one of the most trending passive and profitable options, Asset leasing is an investment that one should know about.  

What is Asset Leasing?

Asset leasing is a great new-age alternative investment (AI) option and is preferred by many companies due to its benefits. Before we dig deep into the concept of lease investing, let’s understand its basic concept. Leasing is a financial arrangement in which an individual or business rents out their assets to generate income. These assets can range from real estate properties, equipment, machinery, and vehicles. Unlike traditional renting, asset leasing is a more structured agreement with predetermined terms and conditions.

The global enterprise asset leasing market is expected to reach $3,659.05 billion by 2032, growing at a CAGR of 13.46% from 2023 to 2032. The market size in 2022 was estimated at $945 billion.

Source: precedenceresearch.com

This form of investment allows individuals and businesses to access and benefit from high-value assets without the need for significant upfront costs or ownership responsibilities. These days, large companies and multinational corporations (MNCs) are opting for leasing since  companies require a lot of assets, and leasing can be one of the best sources of passive income for the owners of these assets.

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How Does Lease Investing Work?

Real estate leasing provides property owners with the opportunity to earn passive income by renting out their properties. Equipment leasing allows businesses to obtain the equipment they need without purchasing it outright. Vehicle leasing provides individuals with an affordable alternative to owning a car. By entering into a contract between a lessee (user) and a lessor (owner), payments are made periodically as consideration for the used asset over a predetermined period of time.

In addition to considering leasing commercial real estate, individuals looking to optimize and diversify their real estate portfolio may also consider the realm of ​​structured debt investing in the commercial real estate sector. 

This avenue offers the opportunity for great returns and a stable monthly income. Structured real estate debt is a customized financing solution for commercial real estate companies, allowing investors to potentially achieve attractive returns and regular income. 

This investment opportunity can be accessed with a relatively modest initial capital of 10 lakhs and has the potential for returns of 12% to 20%. These opportunities are offered through trusted and reputable alternative investment platforms such as Assetmonk.

Why Asset Leasing?

Simply said, Asset leasing is an excellent option for businesses that need a variety of operating assets but wish to maintain a low asset load. Instead of purchasing assets, some businesses opt to lease them. As an investor, this low-risk, Alternative investment fetches fixed and lucrative monthly returns enabling investors to diversify their portfolios. 

Asset leasing offers numerous benefits as an investment option.

Benefits of Asset Leasing

1. Steady Stream of Passive Income: Leasing assets provides a reliable source of passive income, allowing individuals to earn money without actively managing the assets. Investors receive fixed, guaranteed payments throughout the lease term, unaffected by market fluctuations.

2. Diversification of Portfolio: Investing in asset leasing allows individuals to diversify their investment portfolios beyond traditional options such as stocks and bonds. By diversifying investments across different assets, individuals can mitigate risks and increase their overall returns.                                                                              Commercial property for lease enables efficient portfolio diversification with minimal capital outlay, reducing overall risk.

3. Tax Benefits: Asset leasing often comes with tax advantages. Depending on the jurisdiction, investors may be entitled for tax deductions on expenses related to the leased assets, such as depreciation, maintenance costs, and interest on financing. Taxes can often be deferred until lease payments are received. Commercial property leasing can lead to reduced tax liabilities and access to government incentives.

Risks of Asset Leasing

Though asset leasing can be a valuable investment option, there are risks involved. It is important to be aware of these risks and take appropriate measures to mitigate them:

1. Potential Damage to Assets: Leased assets may experience wear and tear or even damage due to negligence or accidents. Investors should consider insurance options and thoroughly evaluate the reliability and track record of the borrower to ensure the protection of their assets.

2. Defaulting Lessees: There is always the risk of lessees defaulting on their rental payments. You can minimize this risk by conducting thorough background checks and working with a reputable company like Assetmonk. Additionally, Investors should have contingency plans in place to deal with such situations. 

Asset Leasing vs Other Investment Options

When considering investment options, it’s important to compare asset leasing to other popular choices such as stocks, bonds, and mutual funds. Each option has its pros and cons:                    

  • Asset Leasing:
    • Pros:
      • Provides a regular stream of passive income
      • Offers diversification by investing in tangible assets
      • Potential tax advantages
    • Cons:
      • Requires initial capital investment
      • Subject to market fluctuations and risks associated with specific assets
  • Stocks:
    • Pros:
      • Potential for high returns
      • Easy to buy and sell shares
      • Diversification through a variety of industries and companies
    • Cons:
      • Volatile market fluctuations
      • Requires active management and research
  • Bonds:
    • Pros:
      • Fixed income and regular interest payments
      • Lower risk compared to stocks
      • Diversification through various issuers and terms
    • Cons:
      • Lower potential for high returns
      • Subject to interest rate fluctuations
      • Requires proper credit analysis to assess the issuer’s reliability
  • Mutual Funds:
    • Pros:
      • Professionally managed investment portfolios
      • Diversification across various asset classes
      • Potential for high returns
    • Cons:
      • Management fees and expenses
      • Subject to market fluctuations
      • Limited control over individual investment choices

Real Estate Leasing: A Lucrative Asset Leasing Option

Real estate leasing offers a potentially lucrative opportunity for individuals and businesses looking to invest in tangible assets. By leasing properties, investors can benefit from regular rental income, the potential appreciation of property values, and tax benefits associated with real estate investments. Commercial property for lease can be an attractive strategy for generating passive income and diversifying your investment portfolios. For instance, you can also benefit by investing in pre-lease commercial properties for sale in Hyderabad, Bengaluru, or Delhi. It offers several advantages:

  • Regular Rental Income: Real estate leases can result in a steady stream of income through rental payments, providing a reliable source of passive income.
  • Potential Property Appreciation: Over time, real estate properties may appreciate in value, allowing investors to benefit from capital appreciation when choosing to sell the property.
  • Tax Advantages: Real estate investments often come with deductible expenses, including mortgage interest, property taxes, and depreciation benefits that can reduce taxable income.
  • Easy DiversificationCommercial property for lease enables efficient portfolio diversification with minimal capital outlay, reducing overall risk.
  • Short-Term Investment: Compared to traditional instruments or volatile market-linked options, commercial property for lease involves shorter investment durations.
  • Asset-Backed Security: Investments are backed by tangible assets, typically used as collateral for loans, offering security and returns.

How does Commercial Property for Lease Compare to Other Investment Alternatives?

Investing in commercial property for lease presents an attractive opportunity to generate returns from real estate without the need for direct ownership of the underlying asset. Commercial real estate for lease investments can yield higher returns than other low-risk investment opportunities, with certain properties delivering returns of up to 12% per year.

Additionally, commercial property lease investments are liquid and easy to manage, making them an attractive option for individuals looking to quickly diversify their portfolio. In contrast to high-risk investment products such as stocks and commodities, leasing offers a more stable investment option with lower volatility and income potential.

Tips for Optimizing Passive Income through Asset Leasing

To optimize passive income generation through asset leasing, consider the following tips. 

  • Thorough Market Research: Identify market needs and trends before investing in asset leasing to ensure sustained demand and profitability.
  •  Select reliable lessees: Carefully screen lessees to minimize the risk of nonpayment and ensure a consistent flow of lease payments.
  •  Regular maintenance and Asset Upkeep: Maintain leased assets in good condition to maximize revenue and attract quality lessees 
  • Leverage technological solutions: Utilize advanced technology solutions to streamline your lease management process and reduce manual effort and potential errors. 

By implementing these strategies, investors can maximize their passive income potential while minimizing the hassle of managing their asset leasing portfolios

Asset Management

Bottom Line

Asset leasing offers a new avenue for generating passive income, and its growing popularity is a testament to its potential benefits.

Commercial property for lease promises higher returns, long-term capital appreciation, and tax benefits, making it an attractive option for savvy investors. As you can see, its unique features and benefits can help you build a more robust and profitable portfolio.

Whether you’re an experienced investor or just beginning your investment journey, exploring the world of leasing can open new doors to financial growth and security. So, don’t hesitate to take the next step to integrate leasing into your investment strategy and  reaping the rewards it has to offer.

In India, Assetmonk stands out as a premier alternative investment platform that offers a wide range of attractive opportunities to savvy investors. These opportunities include the commercial real estate structured debt space and carefully selected alternative investment opportunities. With a minimum investment of 10 Lakhs and a guaranteed 17% IRR, Assetmonk offers exclusive and customized investment options to its valued customers.

Related Articles

1.Commercial Property for Lease 

2. How To Invest 10 Lakhs Rupees For Monthly Income 

3.Best Investment Options in India to get Higher Returns 

4.Best Passive Income Ideas In India

FAQS

Q1. How to invest 10 lakhs for passive income?

A.  The best way to invest Rs 10 lakhs for passive income is through structured debt real estate. Structured debt backed by real estate refers to investment products that provide fixed-income opportunities by utilizing real estate assets as collateral. Real estate-backed investments can offer attractive returns through interest payments and potential capital appreciation. Generally, these investments have the potential to yield returns ranging from 12 percent to 18 percent.

Q2. What is IRR?

A. The internal rate of return (IRR) is the annual growth rate that an investment is expected to generate.

Q3. Can I invest money and get monthly income?

A. Yes, you can invest your money and earn monthly income. In fact, the best way to invest and get monthly income is via real estate. You can get real estate monthly income via rental income.

Q4. Which investment will give me monthly income?

A. Commercial real estate structured debts will give you monthly income. You only need to invest with just Rs. 10 lacs and get an assured IRR of 17 percent via Assetmonk.

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