Have you lately been thinking of investing in the commercial estate for higher rental income, yet not having 30-40 crores? After all, real estate like commercial property used to be a playground for the wealthy. It seems to be the end of the road for you, right? Your hopes of earning an 8% rental income return from a commercial property get squashed. Well, not just yet.
So, you are thinking of applying for a real estate loan for 30-40 lacs. Well, I can tell you that you do not have to. There are other affordable ways to invest in commercial property to earn that 8% rental income return every year with just 10 lacs. What a relief, right?
Investing in real estate is a great way to achieve much-desired financial independence. You should start investing in real estate if you want to start earning a consistent and reliable rental income. People struggle with trite questions like, “How do I start investing in commercial real estate if I don’t have Rs. 30-50 lacs?” or “Where can I get that “cash” to buy a commercial property?” This is the question that many people who want to invest in real estate but have never done so before have. However, there are many ways for you to invest in commercial property without having to pay crores. Investing in commercial real estate is a tried and true method of accumulating wealth. If you don’t plan on living in a condo, you should consider getting apartments for rent in Tampa.
Rental income from commercial property refers to money earned from renting out property that you own or have access to. You can own commercial property on your own or in collaboration with another person. Rental income gets generated by renting a home, apartment, room, office space, or immovable property. The amount of rent paid by renters to their landlords is referred to as rental income. It consists of the landlord’s charges for the rented space, furniture, and other expenses. Cleaning shared rooms, hot water, heating, and property maintenance are examples of such services. The rental income varies depending on the landlord and the rented property. The services provided, the size of each property, and the fact that some locations are hotter than others differ.
Is there tax on rental income from commercial property? Yes, there is income tax on rental income from commercial property in India. The rental income from commercial property is taxable under which head? Rental income from commercial property under income tax gets taxed under the Income from the House Property head.
Is there any GST on rental income from commercial property? Rental income from the commercial property will be subject to GST at the rate of 18% of the taxable value, and rent will get treated as a taxable supply of service.
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Investors are primarily attracted to invest in residential properties to generate rental income. However, historical ROI shows that rental income returns from residential properties are significantly lower than those from commercial properties. Rental income from residential properties gets expected to be around 2% per year on average. As an example, consider the following: A luxury 3 BHK flat in an upscale Gurgaon neighborhood worth Rs 2.5 crore is likely to command monthly rentals of Rs 40,000 to 42,000, or Rs 4,80,000 to Rs 5,04,000 lakh per year. Furthermore, the rate of appreciation gets heavily influenced by several factors like location, the presence of physical and social amenities, the city, and the connectivity quotient.
The rental income on commercial property is higher than the rental yield on residential property. Rental income returns on commercial real estate investments can get expected to exceed 8% per year. The commercial property requires an initial investment higher than residential property, the attractive rental returns more than compensate for the initial investment jitters. The 429 sq ft shop in Gurgaon priced at Rs 35,000 per sq ft will fetch a monthly rent of Rs 1,07,250, or more than Rs 12 lakh per annum if the rental returns get understood through an example.
Moreover, commercial real estate appreciates at a faster rate than residential properties. A high maintenance cost can be a detriment. It can cost between Rs 7 and 12 per sq ft per month. Commercial lease or rent agreements are typically long-term in nature, leaving little room for frequent tenant changes and rent negotiations. It provides a more consistent stream of rental income than residential investment.
Let us see how else we can affordably invest now that I have convinced you that commercial real estate generates higher than residential real estate.
Also Read: A Complete Investment Guide To Bring Your Game To The Next Level
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