Benefits of using rental property for retirement income. Experts explain
PremiumExperts explain why owning a rental property is one of the best retirement moves
The real estate sector has not lost its sheen and remains one of the hot favourite of investors. The importance of having a property increases manifold in cases one is nearing retirement. Experts explain how having a rental property will help you after your retirement.
Suren Goyal, Partner, RPS Group says that irrespective of the type of property, having real estate in one’s investment portfolio itself is a mark of intelligent investing. If it is a land tract, its value will appreciate with time and by the time you retire, you will have a high valued asset. Even after many years of rental income generation, it can be sold at a highly appreciated price.
He further added that although the selling prices will depend upon many factors such as the location, development of the area, type of land, and connectivity etc. Even if it is not generating rental income, it can be a solid asset during a rainy day.
In addition to being a sustained income source, the returns or rental income from the property will be inflation-adjusted, says Asma Javed, Vice President, in a Delhi-NCR real estate company.
As the rental agreement would make it clear that an annual increase of 10 percent will be applied, the returns will comfortably beat the inflation. Even if you are paying the EMIs for the property, the rental income will cover the EMIs and the balance would compound if invested further, she added.
For a long time, traditional investments have been into FD, Gold, or Real Estate in plots/flats mainly because they are the safest investments.
Jaikishan Challa, Founder & CEO, Curated Living Solutions said that annual increments in rental property are 5% and secondly, in addition to fixed rentals which is in the range of 5-6% of their investment (much higher than the industry bench mark of 2-3% of residential rental yields), there is also property appreciation which is another 5-8% together taking the returns to 10-12%.
According to real estate market experts unlike other investment instruments such as mutual funds and equity, where the returns are unpredictable and market controlled, the return in real estate is very predictable.