Hi, I want to invest in at least 10 million but want back a monthly income of at least 1 lac a month please help where is the best place to invest.
Dear Zabak Hussein, 1lac rental against 10 million sounds quite ambitious. As per the little understanding I have the most you could get is 60 thousand and the least will be around 30 thousand and most likely case will be in between 40 to 50.
However over a period of one year value of property should increase in the range of 10% to 25%. This means your total return would be in the range of 15lacs minimum to 30 lacs maximum but rental of 1 lac looks ver stretched. This is only for houses not very sure how it works for commercial property.
Seniors can guide us better.
Thank you brother syyed where do you suggest I invest to gain maximum rental income
Syed - You might be suggesting rental on houses.
Zabak - Consider getting office space in Lahore Gulberg area. You will be able to get around 2000 Sq. Ft.(about 10 marla) In 10 Million (1 crore or +- 1 crore 20 lakh). Rental rate of office space is around between 60 to 150 per marla depending location, floor. Let us assume you get rate 90, still it will yield you what you need.
Dear Arif, you are right my suggestion was for houses not for commercial.
The numbers you have given are too good. 10 million will fetch 5000 sqft and at 90/sqft it will yield 450,000 per month with an annual return of 54%. If it's possible then nothing like it.
Could you please tell us more about how this, what is occupancy rate, does the resale work that is to say if a person intends to sell after a year or so, are there taxes or deduction involved.
Syed - Apologize I am from USA, so always make mistake in rupees and dollars. 10 marla (about 2000 sq ft.) of office will cost you around $100K to $120K. Rental price these days are aournd $60-$150 per marla. (check link below or zameen.com to get an idea)
Office space for buying
http://lahore.olx.com.pk/al-hafeez-heights-iid-625301102
Expected Rental income
This office 850 square foot 4th floor in hafeez center for rent only 80000 rent
http://lahore.olx.com.pk/hafeez-center-for-rent-iid-671472806
Syed Zabak - If you see 850 sqft is giving you around 80,000 rent, then you can calculate how much will 2000 sq ft will give you. Hope it helps you both!
Dear Zabak Hussein, if we talk of Islamabad, Zone I will have limited options where a house would be available in 10 million. Sector I9 and I10 old construction, G-13 25x40 houses and may be G-14 and G-15, G-10 has old construction 25x40 opposite to small water channel (nala), G11 25x40 will be well over 12.5m and if you do get one within 10m that will be cost of land only, would need reconstruction or major overhaul.
zone II has few societies where rental would be possible. D-17 has rental value of around 30k for pine villas which are being sold at +- 90 lacs not aware if there is any other sector that has active rental market.
Zone V should have quite a lot of options, Saadi bahi is expert of Zone V especially bahri and DHA, other seniors could also guide on all the zones.
1 lac with 10 million is simply impossible.Maximum you can fetch will be around 50 to 55 thousand and that would the best scenario.o get this return,you have to keep your money in circulation in property business.
Saadi Bhai what phase do you recommend in bahria?
And is there any potential in commercial in isb or Rawalpindi ?
I am willing to pay 10 million for just a plot even but I want it to be as close to blue area or in blue area if possible, does anyone know of any plots?
Saadi - What about commercial office space? Can’t you get 1 lac over 10 million there as well?
Agreed with you Arif sb,
Infact office space yields much better rental returns as compared to residential property with the plus of longer lease with tenants and less hassle of maintenance as the commercial space maintenance lies with the tenant not with the landlord.
Saadi what if he buys a few basement shops in DHA-2?
What will be the cost? I think the expected rental will keep rising as population grows in DHA-2.
Relationship between Rental Value and Sale Value of a house in Islamabad
http://realestateislamabad.blogspot.com/
There are various ways value of a house may be determined, one simple method is cost plus i.e. Market value of a plot on date of sale and construction cost with addition of a reasonable margin on date of sale. This method is more useful for new construction but would get trickier for a house that is not brand new. An easier method will be multiplies of rental value which has been described below.
The relationship, if any, between value of a house and the rental it fetches is an interesting one. It’s not rocket science to guess that value of a house is directly proportional to rental value however question remains if there is any way we could guess the value of a house based on the rental. The answer is yes and will be discussed in below line.
Value of a property could be measured as the numbers of years it takes to make value at the rate of current rental; this could also be called multiples of yearly rental and may be referred as Value to Rental Ratio (VRR). For Example current value of a house is 10 million and monthly rental is 50,000 then the rental will take 200 months or 19 years and 8 months (roughly 20 years) to generate 10 million. We could say that the value is 19 multiples of rental.
Having discussed multiples in above lines let’s see what factors determine the number of multiples a property is expected to have. The answer to this question depends on location, condition and demand for property at any point of time. Good location, nice condition and high demand would been top dollar whereas the value will start to decrease as the location and condition is bad and demand is low.
Ideal location, good condition and high demand could fetch as much lower range will be 25. Average location, condition and demand could be anywhere from 20 to 24 and then the value keeps going down. However very seldom the value will be lower than multiples of 15. Below is the summary in tabular form.
Location Condition Demand Value in multiples of Yearly Rental (VRR)
Excellent Y Y Y 25 to 30
Average Y Y Y 20 to 24
Low Y Y Y 15 to 19
In an example where monthly rental is 10,000, theoretical maximum value will be 3.6 million (10,0001230=3,600,000), minimum value will be 1.8 million (10,000x12x15 = 1,800,000) and likely value will be 2.4 million (10,000x12x20 = 2,400,000).
Let’s try to test above formula in real life scenario, G-13 has average monthly rental of 50k per month for a 30x60 house. The sector is newly constructed, has good location and tends to be high in demand; the value is expected to be towards the higher end of the spectrum. Multiple of 30 puts the value at 19.8million and at multiple of 25 value comes down to 16.5 million, these theoretical values are pretty close to the real values in the market.
I-10 is a relatively old sector and location (proximity to pirawadhi) among other things pushes the sector towards the lower end of value. Average rent of 25X40 or 25x50 house is 40 thousand. Value of houses is expected to be around 10 million which is equal to 20 years rental. However some of the houses have high rental due to better condition and others have lower rental due to poor location and old construction etc.; the result is that price of houses is some cases is as low as 8.5 to 9 million and in other cases it goes as high as 13 to 14 million.
Real value is determined by market as per market mechanism, above is just to add to understanding how rental and sale value interact with each other. This will be of no use without understanding of market.