A guide to creating wealth with Residential Real Estate Investment

How does an investor make the most of a property investment? We get the experts’ views on the factors and the regions that residential home buyers should consider

For any investment in residential property to provide effective returns, the chosen location should have good social infrastructure, adequate public transport and sufficient economic activity to sustain development and growth. These parameters apply to investments in non-agricultural land approved for residential development, as well as flats in residential projects.

However, to mitigate risks, one should stick to tier-1 and select tier-2 cities only. It is also prudent to invest in properties, where the prices range between Rs 2,500 and Rs 5,000 per sq ft, as this will provide protection against capital value erosion. Simply put, this is a safe price segment and almost guarantees capital appreciation.

Guidelines, to make the most of your property investment:

• Understand the property cycle, to identify the best entry point.
• Leasehold titles issued by the government must be fathomed.
• The investor needs to have a clear comprehension of unearned increase or capital gain and quantum of stamp duty that needs to be paid.
• Check the quality of the development because poor design and construction are common when the markets are depressed.
• The project’s development plans and all statutory approvals, should be in place. If the approvals are not yet in place, the investor should monitor them closely during the investment cycle.
• Check the credibility and track record of the developer and his arrangement for finance to complete the project, as even reputed developers have failed to deliver under the current market conditions.
• Enlist a reputed legal firm to carry out the due diligence on the property’s title. One can no longer rely solely on the due diligence of home loan firms, as they have targets just like developers.
• Understand the implications of the size and dimensions of the plot/apartment. Small plots or apartments may cost less but they may be difficult to sell.
• The location of the project may be important but so is the location of the plot or the apartment within the complex. Investors should avoid buying flats on the top floors of high-rise buildings, as the floor-rise charges will add to the cost.
• The price of the development, should be lower than the last peak (in 2008). However, exceptions can be made for quality, delivery date and location.
• The time frame for getting possession of the property and conveyance of land, must be explicitly clear. The penalties in case of delays, must be well understood.
• The investor must know the difference between soft launch, launch and current price of the developer. The resale price in completed projects, may be actually cheaper.
• The investor must understand all the clauses in the sale agreement along with the transfer charges that may applicable, in case he wishes to sell the apartment during its construction. He should also establish whether the agreement value includes the cost of all amenities, parking, etc., or whether these are to be paid separately.
• The investor should compare the project with others, based on its carpet area rate.

If all the above precautions have been taken, the property should ideally appreciate at a consistent rate of 15% per annum for three years. It is important to remember that one can almost never sell at the peak, just as it is impossible to always catch the lowest price.

​Best cities for residential property investment

• North India: National Capital Region, Lucknow, Chandigarh, Jaipur and Dehradun.
• East India: Bhubaneswar, Kolkata, Guwahati and Ranchi.
• West India: Ahmedabad, Mumbai, Pune, Nashik and Nagpur.
• South India: Hyderabad, Bengaluru, Chennai, Coimbatore and Vijaywada.

These cities offer the potential for higher capital value appreciation, depending on the demand and supply dynamics of their micro markets, the quality of the development, the reputation of the developer, location of the project and its timely completion.

Also read: Investment Tips: How To Buy A Home That Delivers Long-term ROI

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Co-living spaces versus hostels and PG accommodations: What should students choose?

Co-living spaces and student housing have emerged as viable alternatives for those looking for rental spaces in metro cities. We look at the factors that students should be aware of, before choosing such accommodations

With the growing migrant population across the country, the idea of shared living is finding many takers. Such accommodations are particularly useful for students, who head to cities to start their college life. While, earlier, hostels and paying guest accommodations were the available options, modern concepts for students include co-living spaces or student housing.

Concept of co-living spaces

“The concept of co-living involves having a common kitchen, a utility space and a lounge area, along with a common study zone that the students can use. This is apart from the private bedroom and bathroom that each resident has. It is a modern form of housing, wherein students stay in a common apartment or building, while sharing common facilities. Similar to how serviced apartments evolved, owing to the need for greater flexibility and freedom as compared to hotels, co-living has taken shape, owing to the need for a cost-effective, flexible and hassle-free lifestyle, as compared to traditional rental accommodations,” explains Divya Seth Maggu, senior associate director, valuation and advisory services at Colliers International India.

​Benefits of co-living spaces, over hostels and PGs

The main benefit of a co-living space, is that one need not compromise on comfort, when living away from home. The facilities available, such as utilities and maintenance, are at par with what is available in one’s house. Although co-living may not be as cost-effective as a hostel, it does offer more benefits over the latter, at a slightly higher cost. Experts point out that hostels and PGs are mainly about lodging and boarding, while co-living provides an elevated lifestyle, with opportunities to interact and cohabit without the overbearing scrutiny and rules.

“Co-living spaces offer flexible lease periods that can range from short-term to long-term. Several co-living spaces also hold events like yoga, festival nights, movies, sports tournaments, etc., which takes care of the leisure activities within the complex. Also, hostels and PGs may have conditions, in terms of visitors, deadlines for returning home, etc., which can hinder flexible working hours,” adds Abhishek Kulkarni, chairman and managing director of Million Sqft Realty Pvt Ltd.

How does a co-living setup operate?

Companies in the co-living segment lease properties on a long-term basis from building owners, for a period of three to seven years. They revamp the interiors, to suit the requirements of students before renting it out. They also hire housekeeping staff and security guards, for property management and are overall responsible for providing the facilities. Students then sign the agreements with the co-living operators. Kulkarni explains: “The agreement includes details pertaining to the rental amount, the period of the lease and verified personal details of the person on rent. The responsibilities of the co-living operators include maintenance, cleaning, collecting rent, etc., thereby, eliminating the multiple levels of operations that exist in renting out a residential property.”

Before signing the agreement for a co-living space

It is important to establish one’s budget in advance, to ascertain the budget that you can pay every month, before starting the search. The next step is to align your requirements from the co-living space, with the budget. Finally, students should look for properties that meet their expectations, as well as budget.

Things to keep in mind, when opting for a co-living space

• Check the time frame of the agreement and the duration of your education.
• Verify the facilities and utilities available and the distance of the co-living space from the place of education.
• Explore various rental options, to ensure that the co-living space is at par with industry rates and not overpriced.
• Check on the privacy available, as a co-living space should offer a conducive environment for studying.
• Check the security in the place.

Also read: Dos and don’ts for relocating a house

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Dos and don’ts for relocating a house

May 2019

Shifting from one home to another, can be a tedious process. We look at some simple ways in which home owners can make the relocation process stress-free 

People often relocate to different locations, to pursue lucrative job opportunities. This is especially true of today’s millennials, who live in rental homes and shift within the same city or different cities. Hence, one has to ensure that the process of packing and moving, remains stress-free and smooth. Deepu Chandran, co-founder and CEO of Pikkol, a technology-centric relocation service provider, points out that renting and co-living trends are on the rise, with millennials moving into a new home every 11 or 12 months. “They have no qualms about moving into a new location or a new city, if they perceive certain advantages to their lifestyle or career. With the growth of the residential real estate sector, the options for property seekers in metropolitan and tier-2 cities, have increased exponentially, boosting mobility,” adds Chandran.

Credits : freepik.com

How to plan for a relocation when living on rent

Priyanka Mullick, an account executive, who came to Mumbai from Kolkata with only a few bags, maintains that packing and moving requires planning, in advance. “When I started working in Mumbai, I shifted along with my roommate, without taking any professional help. Now, I have mastered the art of packing. One has to pack wisely. For example, I even use the pressure cooker, to keep things in it. Simply fill the insides of all spaces, with something smaller. Always use good quality boxes to carry stuff and ensure that each box is not very heavy. Also, if one lives on rent, it is better to collect as few things as possible, to reduce the load when shifting. I am now a cautious buyer and believe in de-cluttering and getting rid of things that are not required,” Mullick explains.

​The advantage of selecting a professional relocation service provider

Although there are many online platforms offering packers and movers’ services, a lion’s share of them are lead-sharing platforms or are based on the marketplace model, where the requirement is ultimately fulfilled by a local vendor. “An individual faces many issues when it comes to moving to a new city, starting from packing and moving, to unpacking and getting settled into the new home. Professional relocation service providers are, ideally, those who can be your ‘companion’, ensuring that when someone moves to a new city, they are not just packing and unpacking their household goods. Hence, there is an increasing demand, for relocation services globally,” says Aakanksha Bhargava, CEO PM Relocations Pvt Ltd (PMR).

How to choose a credible, professional mover and packer

The choice of a professional mover, should only be done after a thorough research. “The major deciding factor, when choosing a professional relocation company, should always be the quality of the service, instead of the cost alone,” adds Bhargava. Before finalising a mover, check the credibility of their service, by reading online reviews or talking to their previous customers.

“One can spot a good service provider, by gauging the level of detail they take for the inventory. If a detailed inventory is being collected, it could mean that they care about the safety of each and every item that needs to be moved. Their online presence should be independent and not through lead-sharing platforms or marketplaces. Ensure that they provide extra services like carpenters, plumbers and other technicians, to avoid a last-minute rush, to find vendors for the same. Ensure that the price quoted for the service is final and there will not be any additions, later. The availability of online payment as an option, rather than cash, could also be a sign of transparent and reliable operations. Essentials like insurance, after-service support and a reliable customer care system, are also indicators of a trustworthy packer and mover. With a professional packer, one does not have to worry about procuring packing materials. A professional service provider will also offer options, vis-à-vis dates for relocation, additional services that may be needed while moving and transparent pricing with convenient mode of booking, payments and billing, etc.,” states Chandran.

Supervise the packing

It is advisable to be present when your belongings are being packed, loaded and unloaded. “Supervise the packing team and do not let them pack things in your absence. This will help you to organise things at the destination and also check if something is missing. In case you are hiring a professional, they will carry out this activity but do keep a copy for yourself, as well,” adds Bhargava. Once all the stuff is packed, make sure you have minimal essentials and things to eat at both, the origin and destination. If one is moving a pet along, make sure that the pet is trained to stay in a crate. If you are relocating overseas, ensure that you have all immigration and other formalities in place.

Tips, to make relocation a smooth process

• Pack things that are not needed every day, well in advance.
• When packing, label the boxes clearly, room-wise, so you know its contents.
• Pack the basic essentials that you need separately, like medicines, mobile chargers, mugs, plates, kettle, some snacks, a pair of clothes, etc.
• Always carry valuables (like bank papers, documents such as Aadhaar card, birth certificates, credit cards, passports, jewellery, etc.) yourself.
• Bubble wrap fragile things. You may need multiple layers of packing, to ensure safety from impact, moisture and static, in the case of appliances, especially for inter-city relocation.
• On the day you shift into the new house, make a prior appointment with an electrician or carpenter, to fix your gadgets and furniture in the new house.

Also read: Home Buyer's Checklist

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How to buy a home that delivers long-term ROI

May 2019

The decision to buy a property, should be based purely on the needs of the individual and the inherent value of the unit. We look at how home buyers can ascertain this, to choose a property that provides good returns on investment

With the Real Estate (Regulation and Development) Act (RERA) coming into force, as well as various other policy initiatives such as the Benami Transactions Act and the government’s push to affordable housing, we are seeing increased activity in the residential property market in the larger cities. After the dampener of demonetisation in 2016, the positive buyer sentiment visible now is especially significant. Consequently, builders are determined to capitalise on it, via increased marketing efforts. Given that there is already a lot of supply in the residential market – a lot of it for ready possession – fresh launches have been curtailed, so that the existing inventory can be absorbed. Much of the intensified marketing efforts are centered around special deals and offers.

Credits : freepik.com

How to ascertain the real value of a home

While this may be advantageous for property buyers, they should be judicious while evaluating offers and schemes and base their purchase decisions solely on the real value of the home. Freebies such as gold, cars and household goods, have an undeniable attraction but they are fundamentally frivolous in nature and do not add to the value of the home.

The price of a home is obviously an important consideration for middle-class property buyers. However, the strategy of looking for the cheapest options on the market, does not make much sense because it is quality that determines value. In the case of residential property, the quality of an offering depends on three aspects:

• 1. The quality of the location.
• 2. The brand value of the builder.
• 3. The availability and quality of facilities and amenities in the project and in individual units.

​The importance of location in a property’s value

Central locations are traditionally the costliest, as they offer great access to many important parts of the city , such as the CBD (central business district) and SBD (secondary business district). These areas tend to host the offices of high-profile companies and offer a vast cross-section of jobs, from highly-paid management to more modestly-paid support staff jobs. Even the second category of jobs is attractive, because the growth prospects in high-profile companies, are usually very good. This is what makes living in central locations very desirable and from a real estate pricing perspective, very expensive.

In India, this mantra held true for a very long time, until the advent of the infotech culture. The IT/ITeS industry, tends to offer very good salary packages but is not focused on high-value locations. Quite to the contrary, such firms prefer to set up shop in peripheral locations, so as to save on the real estate costs. As a result, many cities’ outskirts have become very desirable places for home buyers and they are far less expensive.

For IT professionals and industrial employees, as well as property investors, buying a home in a peripheral location that connects to an IT hub and/or manufacturing belt, makes perfect sense. Unfortunately, such locations attract all kinds of developers – from those who have a reputation for creating true lifestyle value offerings, to those who specialise in constricted, ‘pigeon-hole’ homes. This is where the brand value of a developer plays a significant role.

Correlation between brand value and quality

With a lot of housing supply available in the new growth corridors, buyers are spoilt for choice. The cost of a flat is obviously important but one still only gets what one pays for. Ultimately, a home is not just an asset but one which performs the very critical functions of offering refuge, comfort and security. Buyers must look for options, which offer them these three advantages to a satisfactory level. Branded builders provide these as part of their standard value offering, because their reputation demands it.

Facilities and amenities that add value to a property

Urban life today, places a lot of stress and demands on us. Consequently, our homes cannot be mere places of refuge but must also provide healing and rejuvenation. A clubhouse, swimming pool and children’s park, are no longer luxuries but the bare minimum that Indian home buyers can and should expect. Nevertheless, even projects without such offerings will find buyers because of their lower prices. While short-listing prospects for home purchase, it is important to ensure that the final selection provides a decent lifestyle and not just an abode.

If one looks at the supply in the residential property market from this perspective, the choice of options automatically narrows down to a more manageable and comprehensive level. Buying the right home is not just about present and future comfort, but also about investment growth. Homes in good locations, built by reputed developers with a good saturation of amenities and facilities, will always yield better capital appreciation, as well as potential rental income for property investors.

Also read: Dos and don’ts for buying a property to earn rental income

Back to All Thane Real Estate Resources, Thane Property News and Articles

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Source: housing.com

Home Buyer's Checklist

April 2019

Searching for a home buying checklist online can be annoying because so many of those websites are not written by veteran agents with decades of experience. They are often just a compilation of ideas put together by a writer or journalist. Not real world and not always practical. Below is a home buying checklist put together by a full-time real estate professional.

Credits : freepik.com

Find a Real Estate Agent

First and foremost, a good real estate agent can answer all of your questions and point you in the right direction. Even if you are not ready to buy for a while, an agent's advice will be invaluable. Avoid early disappointment. You cannot begin the process of determining a sales price until you get prequalified, nor look at homes until you know how much home you can buy, all of which an agent can assist. Here are some tips to get you started: 

Most buyers work with the first agent they run into or a close family friend. You can find an experienced professional who will listen to you, conduct herself ethically, and knows your market well through referrals, open houses and other recommendations. 

Study the rules for working with a real estate agent to make sure the entire process moves smoothly for you.

​Talk to a Mortgage Lender

Lenders come in all types. Some make only certain types of loans. Others have a broader ability to match a loan to specific needs. Don't automatically assume that the place where you maintain a checking account is the best place to get a loan. Ask your real estate agent for a referral. Agents know which lenders perform and which do not. This checklist will help you find the best loan: 

Get a free credit report from the only reputable place online to obtain such a report. Don't bother paying to get a FICO score because your lender will use a different service. 

Just because you like a lender's website is no reason to get a loan from that lender. First study the various places to get a mortgage loan.

There are many types of mortgage loans, make sure you choose the mortgage best for you. Ask your agent how easy it is to get some of these financing contingencies accepted by a seller.

Get Your Finances in Order

Once you have determined your down payment amount, set the funds aside and do not alter your financial situation. Lenders will track all monies coming into your checking and savings accounts, and large unexplained sums or monies from unusual sources could cause difficulties. Ideally, you want the money in your account for two to three months, which is called "seasoning." Make sure you: 

Get a preapproval letter. There is a difference between being pre-approved and pre-qualified, and pre-approval is better.

Do not make any large purchases on credit or by diluting your cash reserves. Learn what can go wrong in underwriting that could cause your loan to be rejected.

Study the top three loan approval mistakes made by home buyers. Presenting the wrong type of preapproval letter could affect your chances of offer acceptance.

Find the Perfect Home

The best thing about home shopping after following this home buying checklist is the fact you have covered all of your bases up front. You know you are prequalified to buy a home. You know you have the funds available to purchase. And you know you have hired the right real estate agent to help you successfully navigate the journey of home ownership. These steps will help you reach your goals: 

Once you have selected a neighborhood, you need to find a home to buy that meets your price range and fulfills your desires. 

Even though your agent is sending you listings every day, some buyers cannot resist the do-it-yourself approach and want to find the best places to find homes for sale online. 

Rarely will a foreclosure be your best option but that doesn't stop buyers from wanting to find foreclosures and government-seized homes.

Make a Purchase Offer

Little is worse than writing offer after offer and none accepted. It can dampen your spirits and make you start to wrongly believe that you do not deserve to buy a home. Start by listening to your agent's advice. Don't be that buyer who thinks she knows best or you may become that buyer who needs to learn the lessons of rejection. Follow these tips to catch the eye of the seller: 

When you find the perfect home, you need to make a purchase offer immediately. Many buyers are looking at the same homes who have similar desires and tastes. If you encounter a multiple-offer situation, make your offer shine above all the rest by seeking out expert advice from your real estate agent. Some lucky buyer will win, and that buyer could very well be you.

Study the market comparables and your present type of real estate market, which changes all the time. Then learn how to make an offer to buy a home that will blow the seller away.

​Close on Your New Home

Once your offer is accepted, you will enter the process of closing on your new home. Part of the home closing process involves due diligence on the part of the buyer. Talk with your agent about types of inspections you might want to order and the timeframe for your contingencies. These steps will help you close:

First order of business is to obtain a home inspection for your own edification. Use this handy home inspection checklist to make sure you examine the essentials. Set aside funds for your home buyer's closing costs. It is money in addition to the balance of your down payment.

You may pay upfront for an appraisal from your lender. Here is the entire home closing process, and the types of mistakes that can cause delays.​

Also read: How To Get A Home Loan To Construct Your Own House

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Agreement for sale or final payment: What constitutes a transfer of property?

April 2019

When there is a delay between the date of registration and the full execution of an agreement to sell a property, when is the transfer said to be complete? We examine a Bombay HC decision and the implications for property owners

For the sale of an immovable property, generally two types of agreements are made – an agreement for sale and a sale deed or sale agreement. The agreement for sale is required to be stamped and registered, as per the law of registration. There may be a delay between the date of registration and execution of the agreement. It is generally believed that on registration of an agreement, the rights in the property always get transferred from the vendor to the purchaser. However, this perception is not always right. The Bombay High Court recently had an occasion to deal with this question, in the case of The Principal Commissioner of Income Tax-25 Vs M/s Talwalkars Fitness Club, which was decided on October 29, 2018.

Credits : freepik.com

Agreement for sale versus final payment: Decision of the Income Tax Tribunal

M/s Talwalkars fitness club had agreed to sell a flat for Rs 2.2 crores and had received an advance of Rs 20 lakhs against the deal. The agreement to sell was executed on February 14, 2011 and was duly registered. The agreement had a clause to the effect that the sale/transfer would take effect, on the full consideration of Rs 2.2 crores being paid. As per the terms of payment in the agreement, the final payment was to be made by May 26, 2011, i.e., in the next financial year. As per the terms of the agreement, the possession of the property was also to be handed over on full payment of the sale consideration. The vendor was also required to pay for the maintenance charges and other charges, till the possession was handed over. As the date of agreement and the date of final payment/possession fell in two different financial years, a dispute arose between the tax authorities and the tax payer, as to the year in which the profit on sale of this property would become taxable. The Income Tax Department treated the date of registration of the property, as the date on which the transfer took place and had, accordingly, taxed the capital gains in the assessment year 2011-2012. The dispute went to the Income Tax Tribunal.

On reading the agreement in its entirety, the Income Tax Tribunal came to the conclusion that the sale or transfer was not complete on the date of execution of the agreement and that the transfer of the property took place, when the balance payment was made and possession handed over to the buyer, which happened during the financial year 2011-2012. Hence, the capital gains were taxable in the assessment year 2012-2013 and not in the assessment year 2011-2012, as was done by the assessing officer erroneously. The tribunal also observed that the agreement which was registered, was an agreement to sell and not a sale agreement.

Decision of the Bombay High Court

The Bombay High Court, while deciding the case on October 29, 2018, held that the conclusion arrived at by the Income Tax Tribunal was correct and the sale/transfer of the property in question, was complete only during the financial year 2011-2012. The court also observed that the tribunal was right in its conclusion that on facts, the agreement executed on February 14, 2011, was an agreement for sale of immovable property. The law then prevailing, required such an agreement to be registered. In any event, merely because it is registered, it does not partake the character of a conveyance or a sale deed automatically.

Implications of the Bombay HC decision, on capital gains computation and income tax

The decision of the Bombay HC has wider implications for taxation of capital gains on sale of properties. With respect to the year in which the profits from the sale of a particular property will become taxable, this decision will have no impact as long as the date of registration and date of final transfer fall in the same financial year. However, it may have implications for determining the period for which a particular asset has been held by the seller, on the date of sale/transfer. It will be the date on which all the conditions, as enumerated in the agreement for sale, are complied with. Presently, for qualifying an immovable property as long-term capital asset, profits whereof are eligible for exemptions and concessional rate of tax, the date of transfer as intended on the basis of the agreement, will have to be taken into account.

Likewise, there are provisions in the law, where an assessee is required to invest in another residential property within a particular period. For example, under Section 54 and 54F, an assessee can claim exemption from long-term capital gains, if he buys a residential house within one year before and two years after the date of sale of such long-term asset. He can also construct a house or book a house within three years, for availing of the above exemption. So, for computing the period of one year, two years and three years, the actual date on which the assessee became the owner of the property will be relevant, to decide whether he has complied with the conditions within the time prescribed.

Likewise, a tax payer is required to hold the residential house, purchased with a home loan, for a minimum period of five years, failing which the tax benefits availed of under Section 80 C, for repayment of principal amount of the home loan, are reversed in the year in which the house is transferred. Here also the actual date of transfer will be taken into account and not the date of execution/registration of the agreement.

It may be noted that merely because the full consideration is not received, the agreement will not result into transfer of the ownership. There may be various other terms and conditions, which may be imposed on buyer and seller, to make the sale complete. In case the vendor agrees to treat the sale consideration, partly or fully, as loan to the buyer and where no other conditions are needed to be complied with further, the date of agreement and registration will be taken as the date of transfer and other consequences will follow.

Also read: How To Get A Home Loan To Construct Your Own House

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Dos and don’ts for buying a property to earn rental income

April 2019

An investor, who is looking to buy a property and lease it out, should approach the process with a lot of forethought, to get optimal returns and avoid a serious financial setback from a wrongly-chosen property. Here’s what you should consider, when looking for an income-generating property

From the initial choice, to finalising the purchase of your first rental property as an investment, there’s plenty of planning and work involved. You should begin hunting for your rental investment property with an unbiased approach, to the areas and all of the properties in your investing range.

Credits : freepik.com

Let us have a look at the foremost things that you need to consider, when trying to find the best rental property.

Area

The quality of the location in which you purchase a rental property, will determine the kind of renters you will find and how frequently you may face vacancies. For instance, in case you purchase the home in an area near a university, the odds are that your pool of expected renters will largely consist of students. You may be faced with frequent vacancies, during the time when students return home for the holidays. Also, there would be a higher churn of tenants, when, ideally you should look for long-term leases.

Examine the location and the project, for existing and planned public parks, shopping malls, gymnasiums, cineplexes, public transportation and all the other factors that would conceivably entice tenants. You can use developers’ project brochures and also do online research, to determine the availability of such facilities in a neighbourhood.

You also need to know what new developments are coming up and what has been zoned for special purposes by the local municipality. Ideally, you should look for a region with excellent growth prospects, where schools, business parks, shopping malls and entertainment zones are either already in place or planned.

Simultaneously, be wary of any new developments that could reduce the value of the surrounding properties, such as by causing the loss of green open spaces or public parking facilities.

Property taxes

Property taxes aren’t standard across the board and as an investor intending to earn money from rent, you should know about how much you will have to shell out, as taxes.

High property taxes are obviously justified in very good areas, which are superlatively connected. Such areas also usually attract long-term renters. Locations in upcoming growth corridors should be preferred.

Educational institutes

Your tenants may be a family with kids, or intending to have kids, who would prefer areas which are near to one or more good schools. The presence of quality schools in the area you invest in, will positively impact the worth of your investment. Remember, the total worth of your rental property comes into play, when you finally sell it, even though you’ll be mainly concerned with earning monthly rentals in the interim.

Job market

Areas with growing employment opportunities have a tendency to draw more people – meaning more renters. Obviously, the most desirable situation for you, would be to own a rental property near to or well-connected to an established or rapidly-growing workplace hub, with reputable companies active and generating jobs there.

Project quality

Today, rental home seekers prefer projects, which add value to their lifestyle. Good projects with the best lifestyle deliverables, may be out of their purchasing reach, but they expect to get such facilities in a rental home. Projects with amenities like gardens, children’s play area, sitting area for elders, reliable security and professionally managed maintenance, are always preferred by families hunting for rental flats. The ambience inside the complex is very important to them.

Rental amount

You should be aware of what the typical rent in the region is. Make sure you find out enough about the region, to judge where it is headed in the following five years. Property taxes may rise and even if you can afford them now, significant developments in the area which increase property taxes, may make them less affordable.

Single-family homes often bring renters looking for long-term leases. A dual-income family is preferable over single professionals, as they are likely to pay their rent on time and to be fiscally stable. Hence, as a landlord, look for areas, where it is easy to find such tenants and where such properties are available.

When you’ve narrowed down the right location, look for a property that can potentially yield steady and growing rental income, as well as appreciation on the capital value of the home. Consider properties which are within your budget and slightly above it, as well. The slightly costlier options can be paid for by some bank leveraging and developers may be open to negotiating the price.

Also, remember that a property can become even more desirable, with some modifications and cosmetic changes, which will attract tenants who are willing to pay higher rents. Such changes to the property will also serve the purpose of increasing the sale value of the home, in case you want to put it on the market after some years of good rental income.

Every state and every city has areas, which have suitable and excellent properties when it comes to rental potential. In Pune, areas like Undri, Kothrud and Ambegaon, are excellent locations for rental properties, because of the consistently high demand. In Mumbai, the more cost-effective locations in Navi Mumbai, such as Koparkhairane, Airoli and Ulwe, are very good options, although property prices are naturally higher there.

Do your research well and ensure that you have your finances in place, if and when a very good option comes up. Remember, real estate investing does not begin with purchasing a rental property – it starts with creating the finances where you can purchase a rental property.

Also read: Which is more attractive: Rental income from residential or commercial property?

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