The rent versus buy debate has long dominated discussions in the real estate sector, but an equally important, yet less talked about, topic is the dilemma landlords face: to rent out or sell their property. In the current scenario, with rental yields improving and property prices appreciating, this decision has become even more complex.
Real estate can be your best investment choice provided it is done at the right time and the right place. This article aims to provide valuable insights to landlords navigating the complexities of property management and investment in today’s dynamic real estate landscape.
Also Read: 5 Sustainable Practices That Elevate Property Marketability and Investor Appeal
To get the best return on investment, there are quite a few things one must consider before making any decision.
The Current Real Estate Landscape
India’s real estate market is witnessing a significant shift. Rental yields have seen a marked improvement, providing landlords with a steady income stream. Simultaneously, property values have appreciated, presenting a lucrative opportunity for those looking to sell. However, the right decision ultimately hinges on individual goals and the specific nature of the property in question.
Prime Location and Modern Properties: The Case for Renting Out
For landlords with properties in prime locations, particularly newer apartments or those in gated societies, renting out can be a highly profitable option. These properties are in high demand due to their modern amenities, security, and convenient locations. By holding onto such properties, landlords can benefit from consistent rental income.
Real estate is a cyclical business and if the property is anywhere between 3-5 years old or younger than that, it would be prudent to first earn good rental income from it for a couple of years before selling it when there is an upcycle. Since they are relatively new, these properties also promise potential future appreciation in value. The growing trend of more people opting for apartments and villas over independent houses further bolsters the rental market for these types of properties.
Older Independent Houses: Weighing the Sell Option
There could be multiple reasons for you to be wanting to sell your property. Some of them could be the fact that it is a sellers’ market, or because you don’t want to be a landlord, or because the home needs lots of work before it will be rental ready and you anticipate excessive maintenance issues due to age or condition of the home or the fact that the neighbourhood is not enticing for renters. In these conditions, it is wise to dispose of the current rental property and use the capital to buy a more upbeat one that would fetch better returns.
Independent houses, that is the ones that are not situated within gated communities, may not fetch as attractive a rental yield. As these properties age, their value might not appreciate as robustly as modern apartments or villas.
Additionally, the maintenance costs associated with older independent houses can erode rental income. If you had bought this property as an investment option, then, selling the property could be a more prudent choice as they will fetch a good return coz of the value of the land. You can then consider reinvesting the proceeds into newer, more in-demand real estate or diversify your investment portfolio.
Gated Society Flats But Older
For landlords with apartments in gated societies that are older than 10 years, the current market presents a unique opportunity. The improved rental yields allow you to enjoy a steady income stream from these properties. However, considering the real estate market is already in an upcycle, properties older than a decade may not see significant price appreciation in the future. Therefore, selling these properties is also a viable option, enabling you to capitalise on the current market conditions and potentially reinvest in newer, high-demand real estate.
Individual Goals and Market Trends: Finding the Right Path
Ultimately, the decision to rent out or sell should align with the landlord’s individual goals and financial objectives. If the goal is to secure a steady income and the property is in a desirable location with high rental demand, renting out is the way to go. Conversely, if the property is ageing and requires significant upkeep, selling might offer a better return on investment.
Expert Advice and Market Insight
Navigating the rent-out versus sell debate requires a keen understanding of market trends and individual property potential. As real estate professionals, we encourage landlords to seek expert advice to evaluate their specific circumstances. Assessing factors such as location, property condition, rental demand, and long-term market forecasts can provide clarity and help landlords make informed decisions.
Conclusion
The decision to rent out or sell a property is a nuanced one, influenced by a myriad of factors unique to each landlord and property. By carefully considering the current market dynamics, property specifics, and individual financial goals, landlords can make decisions that optimise their investments and ensure long-term benefits. Whether opting for a steady income from rentals or capitalising on property appreciation through sales, the right choice can enhance the joys of property ownership and financial stability.
-The author is Co-founder and CEO of NoBroker.com. Views expressed are personal.
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