Ways to monetize your residential property investments
You have recently bought or own an excellent real estate property and now wondering on how to go about monetizing it? First of all, congratulations on your investment! Real estate is one of the most price resilient asset one can own in today’s times. Not only is real estate resilient to changing market trends, it also offers you an option to monetize while you own it.
Now let’s look at how you can monetize your real estate investments.
There are 2 broad ways in which you can generate cash flow returns from real estate asset investment –
Rentals Cash flow – By renting out your property, you can expect to generate monthly cash flows from your property.
Capital appreciation- The value of the property can increase due to various factors. Though, this appreciation in value can only be realised when you sell the property. However, it does influence the rental cash flows as there is a positive correlation between the two.
We would be focussing on rental returns in this blog. If you are interested in knowing about capital appreciation i.e. want to sell your property, you can reach out to us at firstname.lastname@example.org
In Bangalore city, there are multiple options available to Owners in terms of renting out their property. Two broad categories of usage are –
1) Residential – renting to individuals/families etc.
2) Commercial – renting to companies, offices etc.
The type of usage is dependent upon various factors such as Govt. approval on the purpose (residential or commercial), location(residential, commercial), design etc.
For example, a 2BHK property in an apartment complex would be registered as a residential use and designed primarily for residential purposes only. And since the property is inside the residential block, it’s not attractive for commercial usage such as office, retail, warehouse etc. However, the common areas (club, shopping centre etc.) in the apartment complex are designed and approved for commercial usage.
Monetizing a Residential Rental Property
If you have a residential property and looking to rent it out for residential purposes, below are various options with you –
a) Rent to a single individual/family – Most popular option today, you can rent out your property to an individual (either with family or friends) and get into a rental agreement. The tenant will pay you the negotiated rent on a month on month basis which would be your rental cash flows from the property. Possible mode of transaction here -
Manage the transaction yourself with/out help from a real estate broker. Hire a service provider like Unplan to manage all the property maintenance works needed during change of tenant. OR
Hire a property management company (like Unplan) to manage the complete transaction by paying a fee for their services.
Pros - Easy to manage the transaction, Minimal investment needed from your pocket, property is generally maintained well by the tenant, Lesser marketing effort etc.
Cons - Medium yield(2-3%).
b) Rent to multiple individuals – You can also rent out your property to multiple individuals either on a per Room basis or per Bed basis. You will either have a direct agreement with each of these individuals or have an intermediary property management firm doing it on your behalf. Possible modes –
a. Do it yourself – Manage the transaction yourself from advertising to agreement. Sometimes few brokers can also provide tenant search help. You can increase the rental ask by providing fully furnished homes to individuals.
b. Hire a property management company to do it on your behalf- Most popular option here, you can get a property management/shared housing firm to manage the complete transaction yourself. Various financial options are in practice here from fixed rent to revenue sharing options.
Pros - Higher yield(4-5%)
Cons - Higher marketing efforts, Higher management, Can have higher capital investment to furnish the apartment, Might have issue with the apartment complex in some cases etc.
The mode of transaction you choose would depend on various personal and property level factors. Managing a residential use rental property demands a lot of time and effort from advertising, property maintenance and associated running around. We recommend hiring a property management firm which specialises in these types of transaction. The savings in time and effort is much more as compared to the cost of the service.
Unplan is a property maintenance and management services provider for rental property owners in Bangalore, India. We work with property owners in-
- Deciding on the best rental structure to maximise your rental yields
- Managing the complete property on behalf of the property owners
- Managing the complete tenancy lifecycle to ensure high occupancy levels
Reach out to us in case you have a property in Bangalore and looking to rent it out. We are just an email/call away :) Our contact coordinates –