Pre-leased is the new fixed deposit!!
“Landlords grow rich in their sleep without working, risking, or economizing.” – John Stuart Mill
“Flat for sale” is a terminology in real estate we have been hearing for decades & the advertisement shall continue for centuries. It may change to a 2BHK flat for sale or shop for sale but it shall never state the returns you shall get from buying it. In India, we still market real estate as a need and not an investment that guarantees returns. The banking sector is still limited to the return on investment for most people in India.
The fixed deposit has been the traditional way of investment followed by us for generations. It’s a zero-risk instrument that makes all investors extremely comfortable. But we should always remember the fact that “low risk leads to low returns.”
This era has coined a new form of fixed deposit. What’s that? Pre-leased.
Now how do you define Pre-leased in Real Estate?
It’s an arrangement to rent space in a building before it is purchased or invested.
In simple words, the occupier has already occupied or assured to occupy the property and promises the rents before the property is either constructed or sold.
Nowadays, generation Y investors are preferring to invest in already rented properties. Earlier our forefathers used to invest in banks in instruments like fixed deposits to get assured returns. Then with the changing times, customers started buying properties and then put them on rent in order to earn income from them.
Now, the investors have become more mindful & intellectual & they are searching for properties where there the tenant has already occupied the real estate. In this case, the investor doesn’t have to search for a tenant after procuring the place & then start generating revenue from it.
So, what are the pros & cons of investing in a preleased space?
Let’s look at some of the benefits first:
- Income: Earnings start from the very first day.
- Deposit: A lump sum amount is credited to your account immediately.
- No scouting: No need to search for tenants.
- Tension free: No hassles in negotiating the agreement or terms with the tenant.
- Legal: Less legal hassles.
- Less Paperwork: The title of the property is assured as it’s preoccupied.
- You earn what you save: Savings on the interest cost of the invested money.
- ROI: Better & assured returns than any other source of investments.
- Increments: Regular appreciation in rental income.
- Value: Property appreciation is anyways guaranteed anywhere in India.
- When in need: It can help generate future bank finance.
As such there are no losses in this proposition but still, let’s try to find out what’s there on another side of the coin:
- Patience: Difficult to find good properties with high returns.
- Big money: Need high investments.
- Not for amateurs: Suitable for investors only & not for first-time buyers.
- It all depends on the advisor: Need a good consultant to make a deal on your behalf.
- White-collared: Need to consult the chartered accountant.
- Grab the chance: It’s all about opportunity. So one should always be on his toes.
One more important point to be considered by all investors should be that the association with consultants should be retained for longer terms in order to negotiate or renegotiate the terms with the tenants. As it becomes less painful at a peanut of cost.
Although bank instruments & mutual funds are performing very well 2022-23 looks like a market dominated by the existing revenue-generating assets and this investment may work wonders in days to come.
In case you are buying a new pre-leased property do keep in mind the following points:
- Check if the property is RERA registered.
- Check the agreement of the existing tenants.
- Check if the terms match the verbal information given to you.
- Understand a transfer process in detail.
- Hire a real estate consultant apart from the broker to execute the deal for you.
You may contact us for any real estate consulting or advisory anytime.
Kindly give your feedback to info@mevolvee.in
#Happyinvesting #Happynewyear #preleased #investmentadvice
Read our previous Blogs:
The Value of Commercial Real Estate
Advantages of Buying an Under-Construction Property
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