How to determine an optimum rental amount for your apartment?

Many people invest in property to get a regular rental income from it. But what if you don’t get a proper rental income on your property? Below are the general guidelines which can be followed in order to achieve higher rental income.

It is often difficult for homeowners to assess the correct balance between the value of their property and its rental potential. “People frequently invest in real estate for their regular rental income. This can cause a problem in determining how much to charge for your property as you do not want the rent to be so high that your property does not have the renters. At the same time, the price quoted is too low; people may wonder if the property is wrong. Therefore, it is important, that you value your property accurately in order to attract tenants, without compromising on your investment returns.

Factors that determine the rent price of an apartment:

1) Size: Bigger the property area, higher would be the rent.

2) Structure: A 1 bhk of flat with 900 sqft would fetch lower rent than a 2 bhk of flat with same 900 sqft. This is because a 2bhk layout provides more independent space.

3) Amenities: A 1,000 sq ft apartment along with a gated community with an enclosed car parking, pool, clubhouse etc. would find a higher rental than a flat in a single building.

4) Furniture & Interior: Usually, a house with a modular kitchen, appliances, wall closets, storage, etc., will get a higher rent.

5) Location: The location part of the property, the proximity between the schools, the hospitals and transportation facilities, all of this contributes to the rental determination. The rent amount is also influenced by competitiveness in the form of the number of rental properties in that area and the rental demand in that area.

How to get a correct rental income?

Residential rental yields in most locations throughout the country range from about 2.5% to 3.5%. There are some exceptions in new or emerging suburbs, depending on the demand and supply for quality housing. Furthermore, the effective cost of a house after tax should be around 3.5%, because you receive a tax deduction from interest payments and principal repayment.

Follow these strategies to boost your rental yields:

1) Furnish your house. A further Rs 5 lakh investment in the interior of the house will provide an increased rent return of 0.5%.

2) Invest in smaller 3-BHK instead of a larger 2-BHK, since it will offer you the option of renting the house to three bachelor mates, for better income.

3)  Choose well-maintained housing societies with decent facilities so that there is no major demand for maintenance.

4) Consult with reputable local brokers to ensure that the vacancy time is minimum.

If you establish the right rents, your property will seldom be vacant. This implies ongoing income. Take a look at demand in the market. You can charge a higher rent when the demand is high. You might need to lower the rent to attract residents if the demand is muted.