Renting your current property or buying a new property for the purpose of renting it out (Buy to let) can be a difficult process in Pakistan.
Buying a property to rent out offers the prospect of a rental income, plus the possibility of capital gains to unlock later if property values increase. In fact, the right investment can give you a gross return each year of between 5 and 10%. That is much better than what any savings account will currently give you, although with more risk attached. Furthermore, the rental income can potentially increase, with inflation, even if the property prices remain stable.
The recent drop in lending rates in Pakistan makes buying a property on mortgage more accessible. Furthermore the rental prices have also gone up significantly, with the high inflation rates making the buy-to-let option more feasible.
A property can be a great investment, but one shouldn’t underestimate the amount of work involved in becoming a landlord, even if you plan to use a 3rd party to manage your property. There are a number of important considerations to make before taking the decision. There are legal considerations, insurance responsibilities, property maintenance and even mortgage are all aspects which need to be considered.
Renting out a property in Pakistan can be tricky. To get the best possible renter and a maximum rental value out of the property one should follow certain rules.
Tidy up the property. Fresh paint job always helps. Clean carpets, clean floors and windows is a must.
Make all the repairs and ensure that all electric, gas and water outlets work properly. Fix leaky taps and cracks in the walls, replace broken or crooked tiles, replace burned-out light bulbs – make sure everything works especially the stove and geyser.
Make sure there is no damp, seepage and infestation.
Decorate if possible. Good quality fixtures and fittings add that extra oomph.
Remove any clutter in and around the property.
It may seem like a lot of work, but with time, energy and even a bit of money spent now, it could really make the difference to how quickly you let your property and how much rent you can charge.
More importantly these actions will provide you more control over who you rent it to, as this is even important than the rental amount. Finding the right tenant in the Pakistani market is a challenge. Follow some simple rules to ensure you find the right party.
Rent out to small families, preferably without pets.
Always ask for references or guarantors.
Deal with established estate agents with corporate contacts.
Make sure to demand at least 2-3 months deposit upfront, especially if you don’t know the tenants.
Rent agreement should not be a standardized document from the real-estate agent. Get some professional help to devise one with as much detail as possible.
Ensure regular communication during the tenancy with quarterly visits of the property.
If it all seems a bit much, you might consider engaging the services of a property management agent, who will take care of these matters for you for a fee.