77 Great Estates wanted to answer some FAQs many real estate investors who are interested in pre-leased property might have…
What is a Preleased Property?
Also known as pre-rented property, such real estate is one which has already been given on lease to a tenant/lessee and is generating a monthly income. The buyer of a pre-leased property is guaranteed a fixed Returns On Investmen (ROI) from day one, in the form of rental profit, as the Lease contract is also transferred to their name.
A preleased investment assures you of a 'zero' waiting period for the ROI. Preleased investment property provides not only a secure rental income and good profit, but also capital appreciation over a period of time.
Why is location so crucial?
Location, Location, Location: three famous, repetitive words which are at the forefront in every real estate agent and buyer's mind. If the property’s situated in an already well developed and prime Central Business District (CBD), it’s understood that all amenities and distances are ideal and convenient.
What’s more, the rental yield will be favourable and will attract top quality tenants who will occupy these premises. If the place is located in a less sought-after, while the rental yields may not match that of a property in a prime location, you can still rest assured that the capital appreciation will more than make up for it.
Quality and Grade
Apart from the affiliated infrastructural amenities, the quality of the building is another very important parameter. Good quality of design and construction are key aspects which help in capital appreciation. A real estate plus of high quality will be helped by excellent maintenance and additional amenities regarding parking facilities, convenience shops, cafés up and transport facilities.
How about the Brand Value of the Lessee/Tenant and the terms of the Lease?
The standing of the Lessee and their reputation in the market place influences the buyers' decision to invest in the said property. The terms of the lease, with reference to the duration of the lease, the lock-in term, the Refundable security deposit amount, the periodic enhancement in the License Fee (Rent), the outflow/expenses of corporation taxes, the maintenance charges, the service tax etc will fine tune the net ROI yielded by the property.
What are the Current Trends in the Local Market?
Property investment options provide an ROI dependent primarily on location. If a location is very much in demand from tenants but not in a sought-after site, the ROI can be anywhere between 5 and 10%. Nevertheless, if the property is for instance on a seafront, where the buying price is manegable (despite being in the same location), the rent will not double and hence the ROI shall go down to anywhere between 2.5 to 3.5-4%.
For up and coming areas like the 3 Cities, Swatar and Pieta, where property is still relatively "cheap" but very much in demand by tenants (because of students, doctors and nurses who wish to rent close to university and work respectively), the ROI will be much more attractive.
If one is looking on a more long-term and for a lower risk/greater stability with regard to their investment, property in prime locations however, tendto increase in value at higher rates when compared to non-prime sites. Hence, you ultimately need to decide on the type of investment you wish to make before deciding on which property (and location) to invest in.
As you can see, there are several parameters which play a vital role in establishing the appeal of a pre-leased property. If you’re interested in purchasing preleased property, then we suggest you contact 77 Great Estates for more information.
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