A first time home buyer or anyone even looking for a second home for investment should go about the process with a lot of thought. This is to get the best returns and also to avoid serious financial setback which could result from a badly chosen property. Developers had always tried to lure buyers by offering them gifts and discounts of all kinds while booking a flat but now the option of “Guaranteed Income” has been added to the list. This is mostly to portray that the property is good enough that it will definitely be rented by some prospective family for rent, which will surely generate added income. Hence, the property is marketed not just good for personal use, but also an income generating property. And who does not like some added income, right?
The point is that no matter what the developers say, it is always important to go for a ground check to ensure that the property is indeed viable for rent or it will generate the amount of income as portrayed by the developer. To start with, the search for the property should begin on an unbiased note.
What is Guaranteed Rental Scheme?
The Guaranteed Rental Scheme offer rent payment options to buyers for two or three years from the date of possession. Naturally, the buyers feel less pressure when they are paying off their EMIs, and by agreeing to start the payment of rents from a pre—determined date, the builder will remove the concern of delayed possession of flats. This move has been lauded by industry experts as from a buyer’s point of view, it eases pressure on the EMIs and gives them extra time to allocate resources. This also acts as an incentive to buy a second home and reduces the hassle for looking for a tenant at the same time. Moreover, the maintenance of the building during the time is also handled by the builder and that makes for worry- free investment. The guaranteed rental is however, not given to the buyers as monthly payment but as a discount. Hence, the rental amount would be deducted from the cost of the flat and that would reduce the EMIs paid on that amount as well.
There are some other factors as well to ensure that the home buyer gets return with or without the scheme:
And this would start with the area or locality in which the property lies. The quality of the location will also determine the renters who will rent it. If the apartment is located near a IT hub, there will be a lot of working families looking for apartment in that area while if it is located near a university, then students will be the primary renters. On the other hand, if one wants to look for long term leases, then they should be mostly concentrated around residential pockets as that is where the families mostly tend to reside for a long duration.
It is also important to have a look at the amenities that are located near the project or will be coming up in the recent future. One should be on the lookout for parks, schools, local markets, shopping complexes and gymnasiums, banks and ATMs and also ease of public transport- in other words, all the things a family requires when they move in. Apart from the developer’s brochure, that mostly tends to point at the advantages only, it is also a good idea to put in some own research and go through the reviews that the locality has and find out whether the locality actually has those amenities or not. One can also make some enquiries at the local municipality and find out about the growth prospects of the region.
One of the things to take care about is also to have an eye for new developments that could reduce the rent or income of the property in the future. So for example, you could have invested in a wonderful south- east open flat, only to find another building coming up and blocking the view.
An overview of the property taxes that has to be paid on it is also crucial to look into. These taxes are often not standard across the states and one has to know whether the rent one incurs will make it worthwhile to pay for the taxes and maintenance and then keep some profit. In case of good localities, the high taxes are justified and they also tend to attract long time renters, which is why people are looking for apartments in growth corridors. Areas with growing employment opportunities are also going to attract young and dynamic families who will find it easier to commute to work which is why flats for rents in work hubs are generating more revenue.
Project quality is another major factor today and families are naturally on the lookout for projects that will add to their lifestyle. Nowadays all the major projects come equipped with gymnasiums, lounges, cafes, children’s play area, parks, jogging tracks, reading area for the elderly and the like. The overall environment and ambience is definitely a cause of concern for renters, especially if there are kids in the family.
One should also have a good idea of the typical amount of rent that the region has and find out the history of appreciation- preferably in the last five or ten years. The rise in property taxes and the developments in the area could make them less or more affordable in the future.
Once all these factors have been looked into, one can expect a more or less steady income from the rent as well as the growth of capital value of the home. So if the property really shows promise, try working with banks and acquire it, even it is slightly over budget. A good property will yield enough returns to pay off the loans and will fetch a good price even if you want to sell off the property in the future.
Moreover, there is always a way to make a property more attractive and more viable and renters will often agree to pay more for amenities and facilities that they do not find anywhere else. So you could install a modular kitchen, or install fire alarms, or even a CCTV in the flat for security. These facilities are sure to impress the renters who come looking. There are some excellent localities in every city and the idea is to go through all of them and pick out the best ones.
Most importantly, make sure that you will be able to pay off your bank loans, taxes and other debts and completely secure the flat in the near future, or the entire enterprise might end up becoming a liability, rather than being a source of profit.
