Investing in commercial & residential properties which are already rented to tenants (Pre-Rented) is the flavour of the season. In general, investments in real estate deliver returns in two ways – capital appreciation and rentals. In this respect, commercial real estate can not only provide solid, predictable returns but also a steady cash flow distributed to you monthly. Pre-Rented commercial property has a unique characteristic: in a way, it is a hybrid between fixed deposits (rental income) and equity (appreciation) but with a lower downside risk than equities and a higher upside possibility than fixed deposits.
1. Superior Rental Returns
Did you know? India is one of the few countries in the world where residential properties in one prime location are usually more expensive than commercial properties in the same location. Due to such inflated prices, you end up earning 1-3% of the property value in rental income annually by investing in residential properties, barely beating inflation. On the other hand, investing in commercial properties such as office spaces, warehouses, shops or banks fetches you 6-11% returns annually from just rental income. Commercial properties have also huge prospects of increasing in underlying value. No fresh big supply of commercial properties in India and continuous demand due to increased opportunities in India create bright prospects of appreciation. Investing in rental commercial property in India is a no brainer!
2. Immediate Passive Income
Pre-leased commercial & residential properties are properties which are already rented out to a tenant for a long duration of 3-15 years. When you invest in a tenant occupied property, you start earning rent immediately from the tenant in place. Invest and forget rule best applies in this case. Earn good and constant passive income for you and your family so you don’t have to worry about the daily market movements.
3. Easy Loan Approval
One of the biggest advantages of PreLeased assets is that you don’t have to put any collateral to get approved for the loan. Loan disbursement for pre-leased properties is calculated on the basis of rent paid by the tenant – so don’t worry about your personal income/assets. In most casis, the rent paid by the tenant goes towards the EMI, and in a few 10-12 years after paying back the EMI, the property freely becomes yours. This is called Lease Rental Discounting, simply put loans disbursed today are calculated by discounting and adding all the rents in the future. If you’re looking for a loan for your PreLeased assets, don’t worry and just reach out to our team at PropReturns, and we’ll assist you in getting a loan from our partner banks!
4. Tax Benefits
Two things you can’t escape – tax and death. Tax makes up one of the biggest unrealized expenses in India. Owning a rental property has some sweet tax benefits. Your rental income is subject to a 30% tax deduction, so only 70% of the rental income is taxable. Reach out to your accountant who can tell you more of the tax benefits of buying rental property. Our users who have invested in PreLeased properties through PropReturns have saved Crores in unrealized expenses, so start saving when you invest.
5. A Safe Bet
Are you a safe real estate investor but don’t want to sacrifice too much on returns? Then this is the best bet you got. Firstly, pre-leased properties minimize your risk since there is already a tenant paying rent. Secondly, you can earn steady rental income for long periods due to long leases. Don’t wait for market conditions to decide your property value, when you can earn good rental returns on your property and also participate in capital appreciation at the same time!
