By GUNAPRASATH BUPALAN

Last week’s issue of Real Reserve, we discussed (part 3) of this series, explaining the difference between purchasing a property by taking a bank loan vs. buying it outright with cash.

This week, in (part 4), the final part of this series, lets sink into what you should do with your property — sell or rent?

In order for you to decide whether you should rent out your property or sell it, you should carefully study some factors that could directly affect your decision.

First, you should consider if the property would be able to cover the expenses of long-term ownership, which is required for leasing out rental properties. This includes maintenance of the building as well as the fixing of any damaged or worn out facilities such as rotting ceilings and woodworks that may be attacked by termites. These are all issues that could cause tenants to move out if left untreated.

Aside from that, you will also have to bare the initial payment for the acquisition of the property. This will include the fees for your real estate agent, legal fees and stamp duties that will be needed for the transfer of ownership.

You will need to study beforehand what would be the income capacity of the property once you are done with the repairs and furnishings that you get done and include in the property. Will your potential rental income be able to cover the cost of maintenance as well as other expenses that may crop up?

If you are thinking of making higher profit by selling your property, you should always aim for a selling price that is higher than the price you purchased it at. Important questions to consider —Are there similar properties in the market that are being sold at your desired rates or higher? Or would the difference be merely a small margin?

On the other hand, if you choose to rent the property out, think of the monthly cash flow and the monthly payments that you would need to make. If there is only a small amount of margin between the income you could derive from rental after deducting the mortgage repayment, maintenance fees and maintaining expenses, you should think twice about renting the property. Selling it might be a better option.

You should also think in terms of the equity that you could receive from such rental income. Will you have an increasing owner’s equity as time passes by or will you be losing out a lot more?

Also make sure you carry our good research on the location of your property, the catchment areas and so on — what will the future hold for the area? Will the location be able to attract future tenants or would it be better off as a private property? These are things that you would have to consider before choosing to rent or sell your property.

Beware of the signs that you should sell your property

There are certain signs that will tell you if it’s already time to sell off your property. You should be wary of these signs in order to avoid overburdening yourself with the issue of holding on to a property that can’t be rented out or sold at a later time.

First, there is the gradual lessening of the amount of equity that you are deriving from the property. Are there a lot more repairs that you need to spend on which eats up majority of the rental income that your are receiving or is it even getting to the point where your capital is being used to pay maintenance costs?

If so, then you probably should consider selling the property.

Second, are you thinking of taking another direction in life in which the ownership of the property would not be quite in line with what you have in mind – such as retirement? Old age and a change of residence or occupation can all lead to a different path.

And third, but the most important of all, is if your property can now command a good price compared to your original purchase. If the property is at a good selling position then you should think about selling it off since buyers may get harder to find as competition increases.

These are all signs that your property should be put up for sale.

How to sell a property?

If you have finally decided to sell your property, there are some important areas that your should look into as the seller.

First and foremost, you should look at your target buyers – what type of owner should possess your property? Which real estate agent or agency should you use? Which publicity mediums should you use?

At what ceiling and floor prices are you considering? Once you have figured these questions out, it is very important to start with placing an advertisement.

Your advertisement should contain an appealing and attractive description of what the property is and its advantages. To connect with potential buyers, stay clear of simple boring advertisements as well as too flashy and loud ads. Being sombre yet creatively attractive always wins the second look. Also make sure to list down the various advantages of buying the property.

You can choose to sell directly to the buyer and not through agents. This will help attract more buyers as many buyers prefer dealing directly with the seller as they know that the price would not be padded with additional fees for the real estate agent. However, if you are a busy person or someone who travels fairly much, it is best to engage an agent so that potential buyers could view the unit at any given time despite your absence.

Renting out

By renting out a property instead of selling, this would bring you recurring income; therefore it will be best to treat this property more like a business rather than an asset.

First, you should know what type of tenants you would like to have. Do you want students, families or bachelors? Do you prefer people with stable jobs or are you fine with those who do not have steady income but can pay rent on time?

If you own a serviced strata, you will also have to think about what purpose will your unit be rented out for – commercial purposes such as offices spaces and warehouse units or would you prefer to rent it out as an apartment only?

Don’t forget, you should always

insist on a two-month deposit (two months rental) and a one month advance rental made payable before handing over the keys to your unit. This is to make sure that you secure your finances in the event that the tenant may not be able to pay rent any month within his or her tenancy. To avoid legal issues, it is also advisable to seek legal advice on the rights of a landlord and also study the legal rights that tenants have.

Also be aware that are a landlord; you can take advantage of the government’s tax deductions for owners of rental properties. This will help with your bank repayments, maintenance and operational costs or even give you additional money to invest in other ventures.

Summary

Property investment has stood the test of time. As many other investments have come and gone given profit to some but losses to many, real estate has always remained a winner. Whether you choose to sell your property or lease is out for recurring income, you could be rest assured that you will benefit in some way or the other.

Basically real estate presents you with an opportunity to own a secure investment portfolio. It is the type of investment that is not affected negatively by fluctuations in the market and appreciates over the longer term. Real estate investment presents you with many ways to earn profit. Investment is the correct step to higher returns and real estate may serve as your best bet for this to happen.