This article will focus on the most basic pros and cons of investing in a residential property, and how to know whether this is the best investment option for you.
Real estate investments are a Pakistani’s favorite type of investment. According to a report by the World Bank, nearly 60 –70% of the country’s total wealth is stored in real estate and land assets. Its popularity can be attributed to the fact that land value doesn’t fluctuate as quickly as foreign currency and you stand to gain massive returns on investment (ROIs).
When it comes to real estate investments, there are two major types everyone is privy to— commercial property and residential property. If you’re looking into buying an investment property in Pakistan, chances are that you’ll consider either of the two.
Today our experts at Makeen Marketing will be focusing on the pros and cons of investing in a residential property.
The Pros of Investment in a Residential Property
Since it’s such a popular investment property in Pakistan, surely residential property has its merits. If you ask us, we’d say that the pros outweigh the cons. At Makeen Marketing, we offer our clients a host of residential property investments in many different real estate projects. These come in a multitude of plot cuttings.
Tax Exemptions on Residential Property
The government of Pakistan has recently introduced some relaxation on property tax as far as residential property is concerned. This was done in a move to promote more investment into the Pakistani real estate market. Some of these exemptions are based on plot size, whether they are owned by widows, orphaned, or disabled persons, and how much rent is incurred on them. For more information on these huge tax exemptions on property tax, read below.
Read: Property Tax in Pakistan 2021 | All You Need to Know
Complete Ownership
Unlike investing in apartments/ flats or commercial properties, a residential property gives you a sense of security as you have complete ownership of that property. No one can come in and hand you an eviction notice. Moreover, one of the biggest things that hold you back as a tenant is that you cannot redecorate your living space since it’s not yours.
Investing in a residential property totally negates this— you don’t need anyone’s permission.
A Secure Long-term Investment
One of the biggest pluses of investing funds into residential property is that it will serve as an extremely reliable, and secure, long-term investment. Although, if you’re looking for short-term investments, this may not be the most ideal choice for you.
People who invest in residential properties are looking to cash in a couple of years from when they acquire ownership. Most invest so they have a place of their own where they can retire. The more time passes, the greater the value of your residential property becomes. This is known as capital appreciation.
Reliable Cash Flows
If you’re looking for a reliable and steady source of cash flow, then a residential property might be the solution you’re looking for. How? It’s simple, you can invest in this type of property and up it up for rent. That would allow you a steady, monthly income. You have full autonomy over how much money you demand rent.
This is one of the best ways of securing a monthly income in Pakistan.
Cons of Investment in a Residential Property
As we mentioned at the start of the article, there are more pros to residential properties than there are cons. However, most of these pros are case-specific meaning they might benefit some people and not be as useful to others. Below are a few reasons why investing in a residential property might not work for some people.
Time Consuming
We repeat— residential property investment is not a good idea if you’re looking for a short-term return. It takes a while to procure these properties. Most of the time people are able to pay in full and thus end up opting for installments; these can span over a couple of years. Once that’s done, you’ll have to build a home, incurring further construction costs.
Even if you opt to buy a ready-made home, renting it out will take a while to find a suitable tenant and for the home to go up for rent. Thus, you need to have a lot of patience and foresight when going down this route. If you’re unsure about whether this might be a good investment option for you, contact us for a free consultation.
Lower Profits
For the time it takes to mature this investment, it doesn’t reap the same profits as a commercial property might. Commercial properties have a high demand and are able to be rented out for a large price. Thus, people are quicker to opt for this if they want a short-term, high-yielding property.
Looking for investment property in Pakistan? Makeen Marketing deals in both commercial and residential properties. Get in touch with our highly skilled real estate consultants to find which investment option is the best match for you.
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