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Rental property ownerships are a safe and efficient way of building long-term wealth. Millennial tenants are looking for flexible housing, which has led to a steep decline in property ownership and an increase in rental properties. With the rented properties growing faster than owned properties, landlords are going to have an edge over others in the real estate game.
Owning Rental properties is common in India as they are low-risk investments that offer high rewards and a definite asset appreciation.
Rental Property Investment For Retirement And Its Top Features
At the time of retirement, an individual needs to have enough income to maintain their lifestyle and secure their assets from risk. There are very few asset classes that can promise safety against the volatile market or through a pandemic-induced recession. And rental properties are one of them. It is still important to study the investment class and understand if it works best for you. Here are the top features of a rental property that you can consider.
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Demand for property
There is a tell to both, an in-demand and a not so demanded property. One of the biggest tells is a growing population and rising real estate market.
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Neighbourhood
The neighborhood also plays a key role in determining your vacancy rates and what kind of tenants you will be attracting. Mostly in cities with many colleges and universities, many students look to rent houses, similarly investing in cities like Bangalore and Chennai will attract young working professionals.
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Property Taxes
Property taxes can vary widely from area to area. It is alright to pay high taxes for an area that will be attracting high-paying long-term tenants, but the same would not be the choicest move for a locality that is not in demand.
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Future development
The upcoming projects planned for an area can affect the price or demand of your property. If the property is situated in a developing area, that might lead to an increase in the price of your property but at the same time, if there are any investments planned that might create competition in the future, you need to watch out for those.
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Average Rents
Assuming that the rental income is going to be your bread and butter, make sure that the investment is profitable in the future as you are planning to rent it out to generate a passive income.
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Schools
If you are looking to invest in family size places, having good quality schools nearby can also help land good tenants and increase the value of your property and the rental income it generates.
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Management options
If you are investing in rental properties as a side business, you will have to invest in a manager or management company in that area. An ideal property management company will have transparent fee structures, up-to-date tenant management, and procurement techs along with a good reputation.
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Job Market
Locations with growing job opportunities attract more tenants. A good job market can help increase rental income substantially as the property is immediately in more demand.
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Amenities
The rental income of housing property can also rise depending on the amenities found near the property and how easy it is to procure them. In cities like Bangalore, Chennai and Hyderabad, tenants prefer renting a place near the airport or their office.
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Number Of Listings And Vacancies
High vacancy rates force landlords to attract tenants, and they lose their trump. Whereas, low vacancy rates can help landlords raise prices.
Is It Practical To Rely On Rental Income For Your Old Age?
There are many factors that determine whether a rental property will make a reliable investment. A real estate investment requires large sums of money to purchase one asset only. That can mean you will only be able to invest in a couple of properties or even lesser at any given time, not leaving much scope for portfolio diversification. Talking of Liquidity, residential properties can, at times, be illiquid, and if you need money immediately, the complete process of selling off your property can take anywhere from three months to a year or two if the locality is not in demand. But at the same time selling off property can be very easy if your property is situated in a highly demanded locality.
On the other hand, a rental property only requires the landowner to pay for the property’s maintenance, insurance and taxes. Apart from that, they might need to take some time to list out tenants and frame contracts and that’s it. This is not a lot of work, but after retirement, one needs to figure out whether they would like to do the following from time to time.
Bottom Line
While rental property ownership might seem like the perfect deal, at retirement one’s ability to tend to household needs might wane. In that case, tending to the duties and responsibilities of a landlord can be difficult to manage.
In that case, there are many modern-day investment options that can give you returns and assurance of real estate and even better liquidity. Assetmonk offers real estate fractional ownership and real estate crowdfunding deals which are relatively hassle-free investments at attractive annual IRR of 14-21%.
FAQ’S
What is the best investment for retirement income?
In many instances, fractional ownership has been considered the ideal investment for retirees as these are comparatively hassle-free investments and as you are investing in real estate property, there is an assured asset appreciation.
Is rental income taxable in retirement?
While senior citizens might find it easier to procure money from the bank etc. Rental income is taxable even after retirement.
