Planning to purchase a rental property in Pakistan? Real estate has produced some of the world’s richest people, so there are many reasons to think that it’s a sound investment. In the real estate market, a good location can never be undermined. In fact, it is the most important feature that determines a property’s value. However, many factors come into play to make a particular location good or bad. So, when you plan to buy a rental property, take a look at the following factors to choose the location that gives you maximum profits:
PRICE TO RENT RATIO
People who want to enter the Pakistan real estate market know that there are big risks involved. You can’t be sure when the property prices would go up or down. Moreover, the risks get higher when you put all your hard-earned money into a real estate investment hoping that it will give you good returns.
If you want to maximize the profits and minimize the risks, determine the price to rent ratio of the area you’re planning to invest in. This ratio will tell you if it’s the right time to invest in a rental property or if you should invest in that particular area.
Here’s the formula to calculate the price to rent ratio:
Price to Rent Ratio = Average Property Price/ Average Annual Rent
If the price to rent ratio is low, then it tells you that the average prices of property in the area are quite low and it’s easier for an average person to purchase a property. Thus, you can safely invest in that area at the time. However, it’s important to mention here that if you’re looking to generate rental income from that property investment, then you shouldn’t purchase it.
The last thing you would want is a rental property in an area that does not have basic facilities and amenities. When choosing a rental property, look for an area with basic utilities like water and electricity, a decent school, hospital & medical facilities, malls, parks, and restaurants. Moreover, select a neighbourhood with low crime rates, a growing job market, and that has quick access to public transportation. These facilities may lead you to a larger pool of potential tenants.
Property taxes vary greatly across areas, and you want to be aware of how much you will be paying. High taxes are not always a bad thing if you find a property in a great neighbourhood that attracts long-term renters. However, some unappealing locations may also have high property taxes.
Get all the tax information from the municipality’s office or the homeowners in the area. Also, be sure to find out if property taxes are likely to increase in the near future. A society in financial distress may increase taxes far beyond what you can realistically adjust in rent.
Gather information on development plans that have been zoned into that particular area. If a lot of construction is going on there, it’s perhaps a good growth area. Moreover, watch out for new developments that have the potential to hurt the price of surrounding properties.
Always be realistic in your expectations. Just like any other investment, rental property is not going to generate a large monthly revenue right away. Also, choosing the wrong property can be a disastrous mistake. When purchasing your first rental property, consider consulting an experienced real estate company as they have a better know-how of the local real estate market. With their assistance, your chances of finding the right property will also increase substantially.