24/12/2021
How to calculate ROI in Rented Property? Question & Answer about Rented Property
What is Rented Property?
Property which is Ready to move and fetching rental income called Rented Property. If this kind of investment is new for you, you might have "n" no. of questions?
How to calculate Property Value on the bases of ROI and Rent ?
Property Value = Rent*12/ROI%
How to calculate Return in Rented Property?
ROI is calculated by subtracting the initial value of the investment from the final value of the investment (which equals the net return), then dividing this new number (the net return) by the cost of the investment, and, finally, multiplying it by 100.
ROI=Net Profit/Net Investment*100
Why Demand for Rented Property is increasing in India?
Now global investors also look-upon Pre-rented Property for sale in India. One of the major drivers for the growing interest of investors in the commercial office space and retail space has been the government’s move to bring in progressive modifications in the REIT policy, making it more market friendly, because of this global investors have invested significant capital in acquiring large office assets for building their REIT portfolios in India. There are many metropolitan cities in India which is good for real estate investment like Gurgaon, Delhi, Bangalore, Mumbai, Pune, Kolkata, Chennai, Hyderabad, Noida etc.
When, where, why, and how to choose best Rented Property?
We assist our investors in acquiring Pre-rented Property in Gurgaon which are all freshly rented to large corporate, spread over different areas in Gurugram. The ROI (Return on Investment) ranges from 5%-10% depending upon the location and building and terms of the lease.
How rented Property is good for investment in current market scenario?
In the past major demand for Rented Property came from either old age Investors or HNI clients, who was more concerned about safety and regular rental income but now due to uncertainty every investor want 2nd income source so they invest into commercial Pre-leased property.
What are the risk involve in Rented Property?
If you follow the principles of long term investing, you can earn much higher returns than most debt instruments. Keep the following points in mind while investing.
Location
Location play important role into Real-estate Investment. Commercial Pre-leased properties provide returns in 2 Ways, 1st is rent and 2nd is capital appreciation. Both are heavily dependent on the location. Look for locations where vacancy is less than 20-25%. This will mean that supply is in check and tenants are less likely to vacate, leading to higher rents and capital appreciation. A high vacancy location gives tenants options to move and renegotiate rents. (In the case of newly constructed building situation may differ)
Quality of the building: B, B+ OR A
Two buildings may be in the same location, but the one boasting better quality will always get rented first. It will also attract better quality of tenants. Needless to say it will fetch the investor higher rents, better tenant retention and higher capital appreciation.
Multinational tenants are always willing to pay a premium for quality. Look for certifications like LEED gold or platinum ratings or buildings that have nicer looking lobbies, more elevators, higher ceiling heights and better views. Higher quality properties are also more liquid and can be sold much faster.
Demand and Supply
This is one of the first things an investor has to analyze before committing to buying a commercial rented property. Every city has different micro-markets. In Gurgaon there is Golf Course Road, Golf Course Extension, Sohna Road, MG Road, udyog vihar, Cyber city, electronic city. In Bengaluru there is ORR, Whitefield, Electronic City while in Mumbai you have BKC, Nariman Point and Parel, among others. Each micro-market has a stock (amount of office already completed and leased) and upcoming supply. Annual demand is also published regularly by brokers like JLL, CBRE, PLP Advisory services, cushman and wakefield.
If the annual supply over the next 2-3 years exceeds historical demand, the rents and prices would come down. A disproportionately high supply will affect both new and old buildings. New buildings will command lower rents as tenants will get more options in the market while tenants in older buildings will renegotiate rents and escalation clauses.
Market rent vs in-place rent
This is a slightly advanced concept that institutional investors use to see how risky the property is. Let’s assume that there are three properties available at more or less the same price but each with a tenant paying different rents.
Building A has tenant paying Rs 11 and is selling for Rs 105
Building B has tenant paying Rs 9 and is selling for Rs 95.
Building C has tenant paying Rs 10 and is selling for Rs 100
Which one would you choose? Many would say Building A because it has the highest rental return (10.5%). However, an intelligent investor will first ask, “What is the rent in the market?” meaning what are new buildings being rented at today.
If the market rent is Rs 9, Building B is the safest investment as the tenant is least likely to vacate the property. Tenant A and C will most likely renegotiate their rents or not pay the escalations when they become due. Another way to look at it is that you are buying an over rented asset at an above market price.
Quality of tenant
A good tenant can significantly increase the value of a commercial Pre-leased property. It is advise to prefer bluechip multinational tenants. Good tenants pay rents on time, pay higher deposits, stay longer and increase the value of the property. Exceptions are always there so you can also look upon in which sector company is what future plan Company have, A company expending very fast and a company at synchronization stage both condition are not favorable for investor.
Interior fitouts
As an investor, you should always ask who has done the interior fitouts in the property. When an office is delivered in India, it is provided bare shell (like a garage). The tenant needs to do the flooring, ceiling, air conditioning, wiring and the interior cabins, conference rooms etc. Some tenants like to do their own fitouts while others ask to the investor to do it for them for which they pay an additional fitout rent. Fitouts generally cost between Rs 1200-18000 per sq ft and investor charge Rs 20- 25 per sq ft per month (Rs 240-300 per sq ft per year). A tenant who has done his own fitouts is likely to stay longer in order to sufficiently recover the costs.
Lease structure
Commercial lease structure is very different from residential ones. They are structured as 3+3+3 or 5+5+5 meaning 9-year (or 15-year) lease with escalations every 3 years (or 5 years). They are also one-sided. The tenant is locked till lock-in period whereas the landlord cannot ask them to leave for the lease period. While analysing an investment, the investor has to understand how the lease is structured and the inherent risks involved. In general, the longer the lock-in, the better it is for the investor.
Security deposit
Security deposits in commercial properties vary between 4 and 6 months’ rent.
Diversify your investment
We’ve all heard that diversification reduces risk. This is especially true in commercial Rented Property because If you invest all your savings in one property, you are exposing yourself to a higher risk. In case the tenant vacates, rents will stop while maintenance payments, property taxes etc will have to be paid. It is advised if you are looking for Pre-leased Property for sale, Invest into multiple properties across cities will reduce variance in income by diversifying property level risk.
Type of Rented Property?
Bank rented Property
Rented retail shop
Rented Warehouse
Rented Commercial Building
Rented Office space
https://commercial-property.in/pre-leased-property-for-sale-in-gurgaon/
Rented SCO
Rented Guesthouses
Best Pre-leased Property in Gurgaon upto 12% ROI. Rented Bank, Rented Retail, MNC rented Property, SCO are best Rented Property in Gurgaon
