In a country like India, where there is a clear lack of pension products to provide regular post-retirement income, an investment property could be ideal for anyone looking for some stability during their golden years. Property is a relatively safe long-term investment and a great way to create wealth. However, before making any big decisions, here are a few ideas to consider.
It’s best to know how much you can afford to invest. Usually, salary times four is an affordable mortgage for your own home but with buy to rent properties, you need to be able to cover the remaining payment not covered by the rent less expenses. It’s best to try and pay off most of your existing home loan before investing in another home.
Be realistic and try not to over exert yourself. Keep some buffer in place cause your property will be foreclosed up if you don’t keep up with your payments.
Rental Yield –
For an investment property, you want to look at up and coming areas rather than areas you might actually want to live in. You want to ensure that you can earn a high rental yield rather than just rental income on your money. Buyers pay a premium to live in very desirable areas but tenants may not be as willing to pay the same and you’re more likely to end up getting a very low return on your capital.
The rental yield is considerably higher on 1 or 2 BHK flats. Smaller flats ensure that they are always occupied because most people renting tend to be younger and single. Hence should likely be looking for a smaller flat.
Ensure that you make a clear note of all your monthly inflows and outflow. The only inflow you would have is the monthly rent. However, you are likely to have a number of outflows such as utility bills, property related taxes, mortgage payments among others.
If you’re someone who’s particularly hand-on or creative, you could potentially transform a property to help add considerable value to it. Flats in a poor condition can be ideal investment properties but you need to be incredibly careful about the costs associated with turning the flat around.
Sometimes, a good way to improve the value of the property is to hire an interior designer who can improve the existing layout. Adding an extra bathroom or bathroom, provided it logically flows with the property, can also add value to a property.
Lastly, whether you decide to buy, sell, or rent a property it’s always best to take your individual circumstances into account before investing because the advice provided may not work for you.