I recently bought a property worth 65 Lakhs and I now make an average rent of 50K/month on it. This is a rental yield of 9.2%.
But if you take an average property in Delhi that is worth 1Cr. Your monthly rental income would be ~25,000. Yearly: 3 Lakhs. Rental Yield: 3%.
A much better Rental Yield
Let me take you through the key points to maximize your rental income:
1. Buy directly from sellers, not builders
- We simply go by what the builder tells us.
- And, this is one of the key reasons why our 'rental yield' is abysmally low.
- For example:
- A 2BHK flat in North Goa could set you back 2.5Cr, if it is close to the beach and purchased through a builder.
- These are crazy high prices
- I bought the property directly from the seller (not the builder), so I got a good deal to begin with.
2. Buy at the right price
- If a property does not generate or would not generate a rental yield of 4% or more in the near future, there is no point in buying it.
- Unless of course you are buying it for consumption and don't see it as an investment.
- I checked this before buying my property.
3. Buy under construction/look for opportunities to renovate
- In most cases, you will get a discount of 20-30% if you buy under-construction compared to a finished property.
- But remember, only do this if you are completely certain that the project will be completed.
- What I did was add value to my property.
- If you can buy an average property and make it 'good' by doing better interiors etc, it adds value.
- For example:
- I had purchased 2 flats in Panjim.
- I have the opportunity to make it unique/valuable by combining it to make it a 4BHK.
- Find such opportunities.
4. Create a 'business' on the property
- For example, I am currently doing short-term rentals (Airbnb) on this property.
- Given the market in Goa: Short-term gives better ROIs than long-term.
- If you can't manage your property yourself, go through a rental manager.
- Example:
- I purchased this villa below for approximately Rs. 2 crores.
- Monthly, I get a rent of Rs 81,000 - a fixed income from my manager.
- This is a rental yield of 6%.
- If I were to handle the business myself and put in more effort to run the business, the rental yield could easily escalate to 12%
5. Spend time scouting/learning about the local market
- After reading this post, you too would be tempted to buy properties here.
- But know about local laws,
- whether AirBnB/rentals are allowed or not,
- how to check documents,
- how to list... (there are 100 other things)
- Every market has its pros and cons.
- As we covered before, so does Goa.
→ Pros
- Higher ROI
- Low ticket size
- Lower maintenance charges:
- Short-term rental opportunity
→ Cons
- Portuguese succession law:
- Builders Overcharging
- Local Administrative Issues
- Garbage collection.
- Clearances
The idea is:
You need to have a hypothesis of what your property’s use case is,
Before you buy it.
Your rental income can be increased when you:
- Understanding the market
- Acquire property at a good price
- And set up a business on it
Source
- Akshat Shrivastava 25/30 days Newsletter.
