FAQ on Rental properties in Pakistan / Passive income in real estate
Frequently Asked Questions – Pakistani Rental Properties / Passive Income
Earning a passive income from Rental properties in Pakistan is by far the safest and surest way to get rich. This FAQ will answer some of the basic questions you may have in mind.
Q-1 Rental properties are depreciating and therefore do not offer high yields.
Answer- The problem of depreciation only exists in houses, especially since they offer only 3 to 4% rental yield per year. Advertisements and shops can be like new after small renovations and some apartments offer up to 10% rent to offset any depreciation effect. As a general rule, rental real estate should give you an average of 15% earnings per year. In some value classes, rent can be more than capital gains and vice versa, but it’s good as much as you get 15% of the total earnings. In addition, the benefits you receive from your rental income will be value added over this 15% or will make up for any shortcomings.
At the end of the day, you have to be careful to find a rental property that gives you a nice return. That’s why you need an expert who can analyze and predict capital gains and expected rents for at least the next 5 to 6 years.
Q-2 Do rental properties need time to build and therefore cannot offer returns as shown?
Answer- When you buy a rental property in Pakistan, you need to look at both aspects of income which are capital gains and rental income. Normally, the already-built property will offer 6% rent per year. However, if you plan to build one or buy one that is still under development, what you lose in rentals during the time it is being built, you get capital gains. Those that need time to build, such as tall ones, are usually much cheaper while they are being built.
On average, a good high-growth project will add at least 60 to 80% in capital gains over the construction period, which lasts 3 to 4 years. This capital gain is usually more than 20% thus compensating for the lack of rental income during this period.
Q-3 In rental properties, can problems arise such as lower rents, which can decrease your ROI?
Answer- Like all investments, even rental property can change under certain circumstances. However, this change can be negative or it can also be positive. For research and analysis, target conditions must be ideal for both rental property investment and speculative business investment. Because the chances that speculative traders are wrong are much higher than the tenant investor losing a few months of the lease. Therefore, maintaining the ideal situation for both types of investors is important and is in fact more favorable to the speculative trader.
Q-4 Do houses or commercials give more capital gains than apartments?
Answer- Houses, commercials and apartments are three different asset classes and will not follow similar cycles. A gain in houses over time is due to a gain in plots, which calms down after the area matures, similarly, apartments will also slow down after the building matures. Later, many other factors will come into play to decide whether that property will grow further or not. Similarly, commercials have their own cycle to follow with their own risks because a very large number of commercials do not show much appreciation.
As long as you understand the different dynamics and act accordingly, all of this will yield very good capital gains. Therefore, capital gains will depend on many other factors than just the active class.
Q-5 Which is the best rental property among houses, apartments, commercials and shops?
Answer- Houses are not suitable for rentals, however, as for the other three, each property must be judged separately to identify who will give you optimal rental returns. It will be wrong to give any preference depending on the active class as such.
Ultimately, it all depends on your choice of individual property rather than its value class. A good housing project can outperform an average business in capital gains and conversely, a good commercial property can beat an average housing project easily.
Luxury serviced apartments in Gulberg Lahore for Air BnB rentals are a safer and safer bet than other types of real estate for rental purposes.
Q-5 ROI on rental income is slow, while plots can double their price in a very short period of time.
Answer- You must have heard the old saying. ” slow and steady wins the race“. Rental properties are that turtle that seems slow but never stops, thus giving you a more stable consistent income over the period.
The unpredictability in speculative trading is its biggest enemy. Although speculative trading gives an illusion of higher returns, the high failure rate balances it out. In addition, speculative trading is not suitable if you are an emigrant or a busy person who will not have time to look at the real estate markets constantly.
Our study has shown that both rental returns and successful speculative trading can make almost equal amounts of money in the long run. So renting property leads to being the safest and safest way to achieve your financial freedom goals.
Q-6 Rental properties usually only give 3 to 4% rental income per year.
Answer- That’s not true, only houses give 3% and we already consider them as lame wolf property. Apart from this, some commercial real estate does offer only 4% rental production, but this is usually because they are not yet fully mature and offer much more in terms of capital gains. So investors are happy with them considering that the combined gains are usually 15% or more.
Q-7 (Part 1) Suppose I invest 13 million in a 562 sq.Ft apartment. After 13 years will I get my capital back on 10% rent?
For example:
Hotel Apartment Sq.Ft: 562
Tariff (kv.Ft): 23000
Total Price: 12,926,000
10% Annual Income: 1,292,600
Annual Service Fees (Kv. Ft): 30 Rs * 562 = 202,320
Own tax: 50,000
Rent Tax: 60,000
Annual in Manluo: 980,280
Answer- The calculations we provide do not cover any taxes or liabilities, no matter if you are investing in speculative real estate or rental property in Pakistan. The impact of these taxes will be felt on both sides and will certainly affect ROI but is the bare minimum. For example, the service costs are not as high as 30 PKR and in some cases, they should not be paid by you but by the developer or tenant. In addition, after one or two years, a 10 to 20% increase in rentals will cover any debts without putting a big dent in your rentals.
Second, if the purpose of the question is to compare plots or files with wolf holdings, then similar duties apply to commercial plots as below:
a. Instead of annual service costs you pay a non-construction penalty on parcels and even sometimes development costs.
b. Property tax will be paid even if you also own land, so it is not only applicable to the wolf property.
c. You will pay capital gains instead of income tax because during trading you will sell plots mostly in less than 4 years.
Q-8 (Part 2) If rent is in between it can get my capital back in 11 to 12 years?
Answer- The mistake most investors make when it comes to this calculation is that they do not calculate the profit on rental income. In reality, it will take a maximum of 5 to 6 years for the repayment of capital investment, if you reinvest your rental income at 10% per annum. This could be even faster if you invest with Feeta.pk 1 crore challenge where we can get you up to 20% annual returns.
Take a look at the calculations below, based on a conservative analysis of the apartment in question. During the construction process, we expect 80% growth, then 12% for three years, and 10% later for capital gains. Similarly, the reinvestment of capital is only calculated at a conservative 10% per annum instead of 20%. You can clearly see that it will only take 6 years for the return of your capital after ownership.
Even if we calculate capital gains at 5% after the 3rd year, the value of your asset will still be close to Rs 4 crore. However, it can be said that the rent capital should grow by 15 to 20% rather than 10%, so realistic performance can vary and the calculations below are just to understand the concept of rental investment and the compounding effect.
Q-9 (Part 3) During this period If I want to sell my apartment to invest in some other area. I will be stuck in the apartment.
Liquidating Assets (housing) will be more difficult. You may be blocked for a longer period than plot Winding. Because Average Liquid Asset (plot/house) lasts 6-12 months on normal days.
Service Apartments are good for rental purposes. But for monetization, we may be stuck for a longer period of time. Because people prefer to book new apartments for a fee not 5-10-year-old apartments at full payment?
Answer- Selling a rented built property will take a little longer than a plot or file. However, rental property continues to give you cash every year, unlike a plot or file, which is in fact a liability because you will pay the non-construction penalty and other company charges as well as development costs in case of any plots and files.
So it all depends on how you define liquidity. a property that will sell out quickly or a property that will repay you 10% in cash each year and repay 100% capital in 5 to 6 years.
Ultimately, like any other property, how quickly your apartment will sell depends on the quality of the project rather than the value class. Not all projects will be the same and sales will vary depending on your choice today. Monotation is also much better in relation to wolf ownership because you will have full capital in 6 years which can be invested again in other places.
For more information on the real estate sector of the country, keep reading Feeta Blog.
FAQ on Rental properties in Pakistan / Passive income in real estate
Real Estate Strategies for beginners
Real Estate Strategies, Suppose you want to join the real estate investment community to grow your assets and plan your future to live on income. In that case, you must first evaluate the different alternatives to participate in the sector. Some require a more significant investment of time or money than others and experience or knowledge about the industry. In this blog, we bring you a list of real estate strategies for beginners that they can use to excel in the real estate industry of Pakistan.
To know more about these strategies, keep reading.
Vacant spaces:
Vacant spaces, including land, are among the few assets in the world whose price appreciates over time. This type of investment gives value to areas of your property that are not occupied or of little use, such as guest rooms, parking lots, basements and ceilings. It works for both seasonal and long-term leases. It is ideal for beginning investors unfamiliar with market values or the practice of leasing entire properties.
In short, one of the best strategies to increase your real estate portfolio is by investing in vacant land.
Leases:
It is the most common earning mode. In this case, you buy a property to lease it, either in the short term (temporary or vacation) or long term (more than six months). You can focus on having multiple tenants for a property in different periods (winter or summer, vacations, holidays, AirBnB style) or opt for the traditional lease to a single person for a specified time.
Buying and selling:
In this strategy, your focus is on acquiring and reselling residential properties in areas of most significant demand, close to high-traffic public spaces (supermarkets, metro stations, bus stops). It requires you to study well the prospects before investing and the regulatory plans of the target zones.
Manage properties:
Under this strategy, you buy and lease properties and offer administration services, from paying everyday expenses to technical maintenance checks, such as plumbing and electricity.
Renewals:
In this strategy, you buy houses at a low price and need repairs; you completely renovate them and then sell them at a higher price. The challenge here is to manage knowledge and values of masonry, design and architecture work.
Real estate funds:
The investor invests in real estate indirectly through a private fund dedicated to buying or developing properties for sale or rent. The profits of the projects are distributed among the contributors of the fund as dividends. The industry initially began focusing on corporate buildings and offices, but later expanded into the housing sector.
Invest in auctions:
In this case, the investor acquires the real estate in an auction process with the sole purpose of reselling it later at a higher price. This type of investment is attractive because the property went through the bank first. Therefore the property’s papers and debts are up to date.
Keep in mind that all these investment alternatives have natural limitations, such as the location of the property, its accessibility, and current demand, as well as artificial ones, such as co-ownership agreements for office buildings and apartments and condominiums debts associated with real estate.
Be informed:
Although it is not necessary to have studies or a degree to dedicate yourself to investing in the real estate sector, it is essential that, when you are in the business, you know basic concepts of the industry, such as the price/cost differential, capital gains, generation value, the profile of the investor and the type of property. The fact that you do not master the vocabulary of the world in which your company operates can lead, at least, that people distrust you.
In this sense, a fundamental behavior to be more and more informed about the business is to listen carefully to people associated with the company. In this way, you will not only be able to access privileged information about your clients, but you will also gain more and more confidence in your expertise.
This same practice will affect your pricing method. Whether you are based on margins, target prices, demand, competition or the highest possible value, it will always be essential to be informed to define the amounts of your business most appropriately.
Have a plan:
Discipline always translates into success, and this habit has much more to do with being active and constant at work than being rigid and unable to react to changes. This is why, when we talk about having a plan and abiding by it, what you must understand is that before entering the real estate market you should take some time to design your business plan.
This plan will help you establish critical aspects, such as the vision and goals of your company. Still, it will also encourage you to protect your business with a series of rules that ensure the decisions you will make throughout your career as an entrepreneur in the field.
You will be able to establish specific things such as your target market, selection criteria and even the selection criteria of your properties. Put yourself before problems through a contingency plan that consider your investment’s risk analysis and the financial viability of a purchase or a sale.
Find allies:
The real estate business tends to be independent and lonely because it allows practitioners individual freedom and flexibility compared to other jobs. For the same reason, it is advisable to go to good allies to maintain a good network of contacts and grow in a highly competitive and agile market.
With allies, we mean reading books that teach methods to achieve financial “good health” or encourage the practice of habits to be effective in business, even attending courses and seminars designed especially for people who want to learn everything necessary to function. Successful in the world of real estate investment.
It is also advisable to interact with real estate agents and financial advisers to listen to their experiences and opinions, but above all to finish inserting themselves more and more into the beautiful and complex world of real estate.
Finally, a good idea to become a great real estate investor is to interact with ordinary people who are examples of success, either due to their personal experiences or economic fluctuations in business in general and within the field.
It is a type of inspiration that you can also find in opinion leaders with a good presence in social networks and participation in books, courses and seminars in the field.
So, these are some of the strategies that beginners should keep in mind while entering the real estate market. Make use of these strategies and excel in the real estate market of Pakistan.
Real Estate Strategies for beginners
Top Residential Schemes Near Raiwind Road Lahore
Lahore is a wonderful city with a distinct culture and personality. Anybody could be seduced by the city. In a nutshell, Lahore has something for everyone, which is why so many people want to relocate to the city. The need for houses in Lahore is growing in tandem with the city’s increasing population. Lahore is also attracting significantly fewer capitalists than before, due to the recent trend of investment in farmhouses. Everyone wants to be in an area that is not just safe but also links them to all of Lahore’s large cities. Raiwind is now at the top of the list. Raiwind is a prosperous community. The area is just outside of the main city. Despite this, the population of such an area keeps growing due to the availability of affordable new houses.
The road has become a center of infrastructural and residential projects due to its association with a particular. Raiwind Road today houses some of Lahore’s most creative residential properties, which have been built at breakneck speed. These home projects were designed with world-class features and secure gated surroundings in order to provide an excellent attainable lifestyle to their inhabitants. In this blog, I am going to discuss each of the most frequent and important residential projects on Raiwind Road.
Residential Projects Near Raiwind Road That Are Worth Investing In
At Raiwind, a number of developers have created new and premium residential buildings. As a function of such a step, businesses seem to become increasingly interested in the area. So, if you’re looking for a home away from the bustling and bustle of the city even while remaining connected to it, look at housing projects on Raiwind Lahore.
The residential developments we’ll be discussing are some of the industry’s most successful real estate projects. Additionally, they have gained permission from all appropriate authorities, making them safe and profitable property investing decisions in Lahore.
Lv Heights
LV Heights is a beautifully designed vertical residential area that offers exquisite residences inside an upmarket and safe setting. In the excellent Lahore Villas district, which is immediately connected to the main Raiwind Road, the apartment building provides well-designed studio flats, 1- and 2-bedroom apartments.
With direct access to Raiwind Road, one of Lahore’s busiest thoroughfares, LV Heights too has a high value of the property and also provides inhabitants with exceptional navigational convenience. Adda Plot, Lahore Ring Road, Safari Zoo Park, Shaukat Khanum Hospital, and a number of great higher education institutions are within a near range.
LV Heights offers users a futuristic lifestyle it’s anything but ordinary as a high-end apartment complex. A 24/7 safety system, subsurface wiring, in-house gymnasium, laundry facilities, children’s play area, roof-top restaurant, devoted car parking, elevated lifts with achieving sustainability, and a swimming pool are some of the most notable factors that influence the development.
Tameer Developers, a well-known company in the development sector, is the mastermind behind this beautifully designed apartment complex. LV Heights is recognized as one of the top housing projects along Raiwind Road attributed to a combination of ground-breaking features. It will almost certainly lead to a great return on investment. Given the project’s wide scope, it offers amazingly low per-square-foot pricing, making it incredibly attractive to investors.
Icon Valley Phase 2
Icon Valley Phase II is Iconic Valley Developers’ flagship real estate development. Icon Valley Phase I, their previous development, was just a complete success. Icon Valley Phase II, per the developers, is set gonna take it to a whole other level. It really is a precisely constructed housing scheme that provides inhabitants with all the latest conveniences. This development enjoys a rather practical position as it is located upon the main Raiwind Road but is only a few minute’s drive away from numerous famous places and amenities like Lahore Ring Road, Safari Park, Shaukat Khanum, as well as the Lahore-Islamabad M2 Motorway, and others.
Icon Valley Phase II introduces relatively affordable yet fully-featured townhouses for the first time in Lahore’s property sector and is another key appeal of such an up-and-coming housing project. They are far less expensive than identical properties in many nearby housing projects. Considering their inexpensive cost, these townhouses offer access to those projects’ noteworthy facilities.
When you miss out on Icon Valley Phase I, it’s an even larger and greater chance. Real estate prices in the Raiwind Highway have increased by 40-50 percent in the last three years and are likely to go up more down the valley, increasing the housing scheme’s competitiveness. While Icon Valley Phase II is mainly a housing property, this has a lot to give to a wide range of business investors. The project’s real estate consists of retail stores, corporate offices, residential apartments, and, of course, townhouses. Property in just this project is moving rapidly as it’s been approved by the Development Authority (LDA) and provides flexible payment plans.
Al Hayat Residencia
If you are looking for a modern and comfortable apartment then consider Al Hayat Residencia. This vertical residential project’s remarkable characteristics, combined with its popular area, make it a fantastic addition to that same Lahore residential real estate market. Al Hayat Engineers and Developers, another of the industry’s most renowned names, is just the minds behind all these high-end apartment projects.
This is one of the most luxurious residential developments in Lahore, located on Raiwind Road. Al Hayat Residencia was designed to be a safe, gated community with all the conveniences of modernity. The apartment complex includes one-, two-, and three-bedroom units with modern architectural drawings and is well-designed.
A community center, an indoor cinema, a mall, a rooftop restaurant, a comprehensive gym, and a material removal social aspect will all be included in the vertical accommodation plan. One of the features of the Residency is the main courtyard of magnificence, Al-Hayat, which allows you to completely enjoy the community’s existence. It will be a wonderful location for family and friends to gather and play with children in a protected manner.
This new home development is being built on Safari Rd, which is a good spot. Al Hayat Residencia is the wonderful and best-located apartment building in Lahore, with Raiwind Road just a short distance away. Lahore Safari Zoo and Shaukat Khanum Memorial Hospital are two of the big features in the area. You can also enjoy easy access to Lahore’s well-known Ring Road if you live in this grand-scale apartment structure.
All other investing prospects are based on living accommodations. Investors in the project might expect financial gains of up to 80% over the next four years, according to local real estate specialists. A simple payment plan is an easy way to invest. Due to a number of intriguing characteristics, the project inventory is reaching completion. Time is running out, and you must work diligently to obtain an apartment in this sophisticated building.
Platinum Homes
Platinum Homes, one of its most anticipated residential developments on Raiwind Road in Lahore, and expected to elevate the standard for contemporary apartment living in the city. The gated community was designed with edge lifestyle facilities in mind, assuring that its members have the highest convenience and safety. For round security surveillance system, a constant energy supply, a state-of-the-art water filtration system, well-paved roads, and enough green spaces are just a few of the amenities provided by such an up-and-coming home plan on Railwind Road.
The project’s excellent location, which is directly linked to the main Raiwind Road, provides direct access to many major highways, landmarks, and facilities, including Adda Plot Junction here on Lahore Ring Road, the Lahore-Islamabad Motorway M2, Shaukat Khanum Hospital, or the Lahore Safari Park. Platinum Homes’ housing estate includes fully prepared three-marla houses with attractive interiors and exteriors. This residential development’s residences have a known and understood space of 1,482 square feet and three bedrooms, making them perfect for modest homes.
Platinum Homes, the brainchild of Platinum Construction Ltd, has received all necessary approvals. Feeta.pk, Pakistan’s most reliable property portal, is advertising it. As a result of all these factors, it’s among the safest property investment choices in Lahore.
Regardless of the fact that Platinum Homes is built with low features, this project’s property prices are surprisingly low. Furthermore, as an investment, you can buy a home within the project with easy 2-year payment plans, adding to your convenience. Check out our Platinum Homes project description to get extra information on this very well residential community.
J Heights
J Heights is envisioned to beautify Raiwind Road with its incredibly attractive exterior and outstanding property investment scope. That is a high-end project in Lahore that offers luxury apartments. The property is practically attached to the central Raiwind Road and is conveniently located close to numerous prominent monuments and amenities such as Emporium Mall, Orange Line Station and Motorway M2, etc.
J Heights is a new high-end housing property filled with all the delights and conveniences to let you have an unparalleled urban experience. A rooftop recreational area for major parties and fine dining with recipes by renowned chefs, housekeeping service, a prayer hall, a smart door system, protected parking areas with valet services, 24/7 security with CCTV surveillance, enclosed sports stadiums as well as the gym are just a few of the project’s top-of-the-line facilities and amenities.
If you’re searching for beautifully built luxury flats in Lahore that you can afford in monthly installments, J Heights is the place to go. It’s one of the primary reasons for the apartment complex’s astounding success since it’s presently one of Raiwind Cycleway’s more popular housing developments. You can choose between 1- and two-bedroom luxury apartments for investing in J Heights. The entire project’s interior has been equipped using high-end fittings and fixtures to create a sense of luxury.
J Heights is generating headlines not only for its high-end features but also for its excellent financial potential. Zameen.com, as a marketing and sales partner, has given it its seal of approval. The project has been carefully reviewed for any potential legal difficulties, and it is a completely risk-free investment. The property price on the Raiwind Main Road has increased significantly in recent years, implying that a rising project like J Heights inside the area will provide a good return and a strong rental return.
Meanwhile, if you want to read more such exciting lifestyle guides and informative property updates, stay tuned to Feeta Blog — Pakistan’s best real estate blog.