Real estate investments are known for the abundant returns they offer. While some investors prefer a lump sum return in the long run, a vast majority of them are keen on yielding consistent returns over a period of time, particularly through rental income. In one of its news reports, the Times of India shed light on the rental property profitability comparison:
“Regardless of economic downturns, real estate has always been a stable and reliable investment option, with rental properties proving to be a rental property profitability comparison class for investors.”
The rental market is certainly booming. In recent years, there has been a surge in the demand for rental homes. For instance, 51% of the millennial population is willing to spend more than 25% of their income on rental accommodation, according to a recent survey.
However, you might wonder what type of residential properties can yield better rental returns, flat or independent houses?
Flats Vs Independent House: Gauging the Profitability
Let us try to understand the profitability of rental flats as well as independent houses through different aspects.
Maintenance Costs
maintenance costs are an indispensable part of your rental income regardless of the property you choose to rent out. However, the degree of costs may significantly vary considering the vast difference in the size of both flats and independent houses.
Since flats are smaller compared to independent house, they often result in lower maintenance costs, thus increasing the return on your investment. You are only required to pay nominal costs as a contribution to the upkeep of the communal areas or common corridors so the housing society can efficiently handle it.
On the other hand, the upkeep of an independent house completely falls on the investor’s shoulders. Moreover, given that it has a considerably large area both indoors and outdoors, it can take a huge bite from your pocket.
Ease of Renting
Ordinarily, flats are quick and easy to rent out owing to their location, affordability, and appeal to a wide range of potential tenants, resulting in low vacancy rates and minimal tenant turnovers. This is especially beneficial during economic turmoils as they provide a more consistent income and aid in maintaining the investment’s profitability.
On the flip side, even though independent houses may take a while to rent, they offer larger revenue in the form of rental income. While they may face high tenant turnovers and greater vacancy rates, once occupied, they can make up for all the costs you bore during the lag period, and still leave you with a surplus amount.
Please note that the vacancies and turnovers for independent houses will heavily depend on how you rent your property – for residential purposes or as a vacation rental.
Market Opportunities
Both types of properties target a different pool of renters altogether.
Investing in luxury properties such as bungalows opens up unique market opportunities. For instance, they can be positioned as vacation rentals in popular tourist destinations, a rapidly growing segment. This provides an opportunity to generate substantial returns, particularly during peak tourist seasons.
Similarly, if you have a flat located in the city centre or popular neighbourhoods, it can yield high rents. With an increasing number of people opting to live in cities for work or education, you can expect a steady income stream from it.
Overall Rental Income
Flats usually have a standard rental price as per the industry standards. Besides, you don’t have much room for negotiating the price for a higher slab as the prospective tenants for this type of property usually belong to middle-income groups.
However, when you rent an independent house, tenants are often willing to pay premium prices for the additional benefits that the property offers, such as privacy, space, and exclusive amenities.
Final Thoughts
Whether you’re a young, first-time investor, or a retiree, rental income will prove to be one of the most promising and hassle-free sources of passive income.
The Sri Sai Ujaan Nagar is s township project based in Rajarhat, Newtown is your one-stop-shop investment destination, no matter whether you want to invest in a flat or an independent house.
It is an expansive residential project of over 100 acres and offers an array of residential plots with varying configurations, including 2, 2.5, 3, 4, and 5 Kathas. The project also encompasses a host of modern and attractive amenities to let the residents enjoy a luxurious stay. Contact us to learn more!