Tag factors to buy rental property

Whether you’re looking to rent a home or buy one, you must base your decisions on your needs. Of course, with property ownership, you can enjoy the benefits of capital appreciation over time. But, conversely, when it comes to renting a home, you have the flexibility of using a property as and when required.

Going by your financial position, you must opt to either buy a home or rent one.

Scroll down to know about the different factors to consider before deciding whether renting or buying is your best bet.

• Consider annual payments

Before buying a home, the average person considers all the related aspects. While purchasing a home is an emotional decision for some persons, others prefer buying property over renting for the convenience benefits.

However, the property maintenance experts opine being financially prudent. They recommended buying a home if that is more profitable for you. On the other hand, you might want to consider renting a house if doing so makes more economic sense.

An important aspect that requires consideration when deciding between buying or renting a home is to compare the annual expenses.

In the case of home purchases, you have to pay a mortgage. A mortgage has two components: interest and principal. Because the principal is part of your savings, you should not include this component when calculating your expenses.

A prominent property management company in Delhi NCR will suggest using the interest component for calculating your expenses. This is because interest comes under your expenses. For example, your costs for buying a home include insurance, maintenance costs, property taxes, and interest (after subtracting the tax shield).

As far as your expenses for renting a home go, your calculations are relatively simple. First, you have to pay a deposit to your landlord. Deposit is not an expense but an interest-free loan, for you get the money back after the stipulated rent duration.

Other than that, you have to pay monthly rent. Here, you may want to incorporate the opportunity cost of your down payment if you’re buying a home. As such, you would earn income on your down payment money if you were not purchasing a home. So, you must deduct this amount from your monthly rent charges.

Thus, you have to compare your annual expenses of renting a home or buying one beforehand to make an informed choice.

• Future annual costs

Buying or renting a home are not short-term decisions. Also, you have to be committed to your choices for many years. So, comparing annual figures for the current year is not sufficient. Instead, it would be best to study your future expenses and cash flow to get an accurate picture of your costs.

Now, the story gets complicated because you cannot judge your property capital appreciation over the years. Yes, supposedly, you alter your capital appreciation by even a small percentage. But, the net present value of your property can change by a considerable amount.

Predicting future property prices is not easy too. So, the property managers tell you to be wary of your future assumptions when calculating your future property expenses for a precise representation.

• Risk for appetite

When concerned with your rent vs. buy decisions, your risk appetite also matters. If you have a risk appetite, you may think of taking a mortgage. With a mortgage, your risk increases because of the interest that you’ve to cough up. In addition, your net worth can change significantly if you’ve taken a mortgage due to market fluctuations. The reason being, a mortgage is a highly leveraged bet.

The rental property management professionals will recommend renting a home on the flip side if you’re not much of a risk-taker. You can always change homes and neighborhoods if rent rates rise in a specific locality.

• Constancy Vs. Flexibility

While owning a home provides stability, renting a house offers flexibility benefits. As a homeowner, you do not have to move homes frequently. And if you’re looking to experiment with different apartment sizes and localities, renting seems a natural choice.

In all, given your requirements, you should decide whether to buy or rent a home.

About LuXia LLP – A Property Management Company

At LuXia, we manage properties of landowners who reside elsewhere. Approach us to know about your various options for renting a home. We are well-versed with the real estate market and can offer houses on rent at competitive rates. Be assured that we will provide you with the best options as per your budget and preferences.

Alternatively, if you’re a property owner looking for top-ranking property management services, you can contact us to know more about how we can help you get the best deals.

Are you looking to invest in a residential rental property? As much as the profit prospects of the investment are quite high. But a little diligence and research is appreciated from the owners before making the purchase.

Real estate market is a tough to crack; hence the buyers and sellers are advised to come prepared for the dealing or your one mistake can wipe-out your returns.

Here are the 10 most significant features to consider while buying a residential rental property.

Top 10 features to consider when searching for a profitable residential rental property

1. Study the neighborhood

Do not neglect the neighborhood in which you plan to buy your rental property. This is because you get to know a great deal about the types of tenants acquiring your property and your property’s vacancy rate.

For instance, if you buy a property near a school or a university, then there are very bright chances that college students will take over as potential tenants and you may have to deal with vacancies every year.

2. Calculate property taxes

Property taxes tend to differ widely across your target area. So, you must be cognizant of how much property tax you will be paying to them. Although high property taxes are not a bad thing in a goof neighborhood which attracts long-term tenants. But some second-rate places too charge high taxes, which is not a profitable decision to make.

You can discuss the taxes with your property management company or he municipality’s assessment officer or you can even talk to other homeowners in the society.

3. Schools in nearby location

The value of properties which have reputed schools in their nighborhood is quite high. Hence you must consider whether or not the society has a good school in the localities.

Having a good school in nearby location ups the value of any residential property, both in term of monthly rent and also when you plan to sell it in future for excellent returns.

4. Safety arrangements of the area

In today’s world or even otherwise safety is the priority for almost all. Just check the arrangements made by the society to fix the crimes. The very basic is to have a CCTV camera installed and a guard to monitor the premises.

Apart from this also check with the local police for the crime statistics in the locality. Also check the rates for vandalism, serious crimes, and minor crimes, and note if criminal activity is decreasing or increasing over time.

5. Job Place

Locations which have increasing employment opportunities are tend to attract more tenants. It is an excellent idea to invest in a property which is in a location not far from companies’ hub location.

Having said that, it is also important to keep in mind that while a good business increases a property’s value, a not-so-good business in locality may have the negative impact and bring down the property prices.

6. General amenities

Take a tour of the neighborhood and check out the local markets, kid’s parks, eateries, gyms, public transportation and all the other benefits that attract renters.

7. Future developments and projects

The local municipal department has all the information about new ongoing and projected developments in the area.

If you see major constructions in the vicinity of your prospect rental property, then it is most likely a good growth area. Pay attention to any new developments that could cause a drop in the price of surrounding properties.

8. Quantity of listings and vacancies

If an area has an oddly high number of listings, then it signals two things – either it is a routine seasonal cycle or a locality is decaying.

As a real estate buyer your job is to find out which of the two signals is rights. In either scenario, high vacancy compels the landlords to lower rents so as to attract tenants. Whereas, lower vacancy lets landlords to increase rental prices.

9. Setting the right rent

Rental income is what you look for the most which buying a residential rental property. Hence, you need to enquire about the average rent rate in your prospect area.

Just ensure that any property you consider to buy returns you enough to take care of your mortgage payment, taxes, and other regular expenses. Research the locality thoroughly and calculate its position in the coming years.

10. Natural Disasters

The returns you get from your rental property are not inclusive of the insurance you buy for your home. Hence be very careful in choosing the area to buy your rental property.

Do not invest in an area prone to flooding or any other natural disaster to save your rental income by heaps.

The Bottom Line

​You may find a lot of properties for investment in the city of your choice. But before finalizing your rental property you have to do your due diligence and a lot of footwork to get the max returns on your rental property.

This may seem quite overwhelming, but you can always use the help of professional property managers in your area.

If you are looking to buy a property in Delhi NCR then our property management services in Delhi NCR will be very helpful in the entire process.

Get in touch now!

contact@theluxia.com |   +91 9810505543