Investing in rental housing Is it profitable?
Islamabad, Pakistan // PRODIGY: Feature Story //
First how to buy a house for renting
Having a house or apartment is the dream of every person. Having your own place to live is a great achievement, since it improves the quality of life significantly. Think for a moment about how important it would be for you and your family to have a home of your own and all the benefits it would bring, not only financially, but also personally, since being able to acquire it represents a great important achievement in your life.
Do not see buying a house as an expense, on the contrary it is an investment for a lifetime, as long as you are organized, the first thing you should do to buy your house is to have savings, at least 20% so that the bank can lend you the rest of the value of the property.
As an incentive to favor the purchase of a home, there are several credit options offered by different entities with good interest rates. Approach financial institutions and ask what options they have for mortgage loans. Park view recommend you visit different financial institutions, as some may have better benefits than others.
Mortgage loans are an excellent financing option to buy, build or remodel a house, you only have to have saved a minority of the value of the property and the bank provides the rest, the amount granted by the bank is calculated in such a way that the monthly payment that you are going to pay does not exceed a percentage of your income. Within the calculations you will also have to consider the writing expenses that will be informed before making the purchase.
A loan is considered a mortgage because a mortgage is generated, this is a document through which it is established that the property that is acquired also works as a guarantee.
If you are in this article you want to know: how a mortgage loan works, for them we will describe the operation itself, the characteristics of this type of loan and the advantages and disadvantages of obtaining one.
And now, how does it work?
The way it works is simple: the bank gives you the mortgage and every month you will have to pay the fee you agreed with the bank. This includes the capital, which would be the real value of the property and the interest is the profit that the bank has for having lent you said money until the entirety is completed and thus the house remains in your name without any pledge. As the years go by, the capital will be less, therefore you will have to pay less interest
Another use of mortgage loans, apart from buying a house, is for the bank to lend you an amount of money on the property you already have, either for the use you want. Obviously, the house will also be in mortgage until you finish the debt with your bank.
Steps or tips for buying a house or apartment
- Self-assess your personal finances: Take into account the money you have available at the moment and what you must lend for the down payment
- Mortgage credits: you must bear in mind that if you do not have all the money for the immediate purchase, you will have to resort to a loan where your house will be mortgaged until you finish paying the entire debt.
- Think about the future: buying a house is one of the most important things you can do in your life, you must keep in mind that you will have a heritage that will contribute to you in the future
- Location: a well-located house always tends to be valued, keep in mind that it has strategic points such as: schools, supermarkets, hospitals, church and parks.
Advantages of owning your own home
- Having a house of our own gives us security and tranquility, apart from this we provide stability to our family.
- Economically it will be much better to be paying your house than rent, because the interest is deductible from your taxes.
- You always pay the same value monthly, while with rent the value always rises.
- Your money is definitely valued when you have your house. The purchase is an investment, we know that the best thing we can do in our life is to invest in a property since it always tends to appreciate.
- Long-term investment: It can be your retirement plan. Since you could rent your first house and you go buying another and so on.
- You have the freedom to make the changes you want in your home
- Your house will be the heritage of your family
Investing in rental housing Is it profitable?
Buying a home to rent is one of the most used practices in recent years in much of the world, this business model has been characterized by being moderately profitable and the most important thing is that it is usually stable and easy to implement. But is this way of generating semi-passive money still profitable? In this article we will give you the necessary guidelines to make the purchase of a property to rent a profitable business.
It is profitable to buy a second home to rent.
This question is very subjective, it will always depend on many external factors which can affect the investment value and its return, but in general it can still be a profitable business and a sustainable and stable source of income, for this reason at present it is a modality very implemented by all kinds of people, real estate companies, even anyone in general without any knowledge of the subject.
Normally this type of investment is made for a loan since it is difficult to have an economic solvency high enough to acquire a property at any time. The person who wishes to acquire the house does so through a bank loan with which a house, apartment or any real estate is purchased, the most normal thing is that this property is made available to a real estate agency that carries out all the procedures for be leased with many benefits for the tenant. Currently we see people who rent a home without intermediaries, this was a widely used practice a few years ago, but it has lost strength due to the great disadvantages at the level of control and guarantees it provided.
Advantages of renting a house or apartment
This type of business provides certain advantages that captivate and drive a large number of people to implement it as a business model and income generation, below, we will list the 3 main short and long-term benefits of investing in housing for rent.
- Periodic and stable income: One of the most attractive advantages for real estate investors when renting an apartment is the fact of receiving a constant and stable monthly income which is maintained during the period in which the person is occupying the house.
- Easy to rent : There is currently a great demand to occupy houses for rent , every day there are more people occupying the corners of the world and less space to have their own house, for this reason it is usually easy to constantly receive offers to occupy a house.
- Safe business: With the help of real estate agencies it is a much safer business than in the past where we found ourselves with irresponsible tenants who did not pay the rent and we did not have enough tools to proceed with them, real estate agencies help us by providing us with more security thanks to its insurance and policies which assure us our income month after month regardless of the behavior of the user who lives there.
Disadvantages of renting a house or apartment
Like any business, not everything is rosy and profitability is not 100% guaranteed, there are certain cases in which our good investment can turn into a great nightmare.
- Additional expenses: as every business requires investment and maintenance, a home is not usually something stable and immobile that nothing bad happens to it, to these houses or apartments it is necessary to periodically make certain adjustments to ensure that the tenant is satisfied and our house does not go to the floor. Not counting the possible problems that may arise, such as structural damage, plumbing or any other kind, it can generate recurring expenses which will make housing and rent less profitable than expected.
- Difficult to rent : I know that in one of the advantages we talk about how easy it is to rent a home, but not in all cases this is the case, sometimes due to external factors or prices it is complex to rent it, and sometimes a large amount of months unoccupied offering us more expenses and losses than benefits.
- It is not an exponential source of income: the profitability of a business speaking of growth is based on the fact of evolving and growing income day after day. In the case of a home, this does not apply, since the rents are usually stable and continuous for at least a whole year, in which when it is fulfilled, we can increase its value by a certain percentage, which is too little to consider a business profitable in the long term, rather it could be considered a stable and sustainable business over time that will give us recurring income, but will not make you rich in the long term.
Tips for renting a home
If you want to invest in real estate to rent and thus achieve a recurring source of income over time and ensure that it is as profitable as possible, we will offer you 7 tips to ensure that your investment can be recovered and begins to be profitable.
1. Location is the key to profitability.
One of the most important key factors when investing in a home to be rented is its location, this not only affects the rental price, but also the possibilities of renting it easily. When a person wants to buy a house to live in, he expects a quiet, safe area with access to schools, supermarkets and other amenities for daily use, therefore offering a house in a dangerous, noisy and far from civilization area not only affects the price will also make it much more difficult to rent and make the people who live in it stable.
2. A used home has more advantages.
Many people choose to acquire a new home to use as a rental business, what they do not take into account is that if the purpose is to rent it there is no advantage to being new, it brings many more disadvantages and the most prominent is the fact that that the investment value is usually higher than a used home and at the time of renting it must be offered for the same value as a used one, which will make the return on investment take much longer and profitability be affected.
3. Avoid purchasing very expensive homes.
When we intend to use a house or apartment to rent, an important factor to take into account is not to invest more than $ 200 million COP or $ 70 thousand USD in its purchase, since therefore the rent must be approximately 600 USD or $ 1,500,000 million COP This is usually a costly lease for much of the world and it will be more difficult for them to accept it and to start generating profitability.
4. It is more beneficial to have a dwelling in a residential unit.
Currently, people are looking for the comforts of a residential unit to rent a house or apartment, since the rent difference is not much and this type of housing has many benefits such as swimming pools, gyms, security and constant maintenance, which is very attractive especially for families with children.
It does not mean that a house outside of a unit is not profitable, but when you go to compare it you will notice that the benefits of one and the other make the choice process easier.
5. Size matters a lot.
At a general level, the houses that have the most demand are those that have medium spaces, not too large, not too small, on average families have 4 members, so a very small house will have a smaller objective and will be more difficult occupying it, and a very large house will have the disadvantage that the value will be higher and for a large number of potential clients such a large space is necessary, so choosing a medium-sized home will give you a great advantage in the real estate rental business and it will normally be more sustainable and stable.
6. Conduct a competition study.
Yes, it is not a joke, this term is used at the business level to launch competitive products and fight in the business war, renting a home is not far behind, if you want to be competitive you must know the rental values of the neighbors of the area where you are, this will give you a rough idea of the value you should put on the house to ensure that it is easily rented and that it is consistent with the area and the house.
It is very normal to find a house which spend months and months unoccupied, many people think it must have something wrong, and when Tajarat Properties look deeper, we realize that the rental value is too high for the type of home and the area where it’s found.
7. Innovate, it can be more profitable.
This business usually brings recurring but stable income, these do not go up or down, but there is a strategy that is currently gaining strength to guarantee greater profitability and to be able to increase income periodically. Try to innovate, evolve and reform your home. If you are in an area where on average a rent is at $800,000 COP or $300 USD, you can reform it by building a play area, barbecue or swimming pool, this will be a plus for many people and will attract the attention of people who want to live in her, with this strategy you can increase the rent by 30% and even then it will not be expensive for a person who values the structural changes that it has.
About Sky Marketing
Sky Marketing is the pioneer of sales & marketing in the real estate sector of Pakistan founded by Usman Alam. Sky Marketing has an outstanding reputation for mastering the concept of being a transparent and trustworthy institution. Sky Marketing has been dealing in the real estate industry successfully for 15 years and is counted as one of the most reputable real estate marketing companies in Pakistan.
Company: Sky Marketing Islamabad
Phone: (051) 848-7777
Release ID: 16249
Disclaimer: The PR is provided “as is”, without warranty of any kind, express or implied: The content publisher provides the information without warranty of any kind. We also do not accept any responsibility or liability for the legal facts, content accuracy, photos, videos. if you have any complaints or copyright issues related to this article, kindly contact the provider above.