This happens if you rent out your new apartment
There are two different home buyers in the city. (A) The one who wanted to own a house and live in it. (B) One who buys and rents his house while he lives on rent. Most of the buyers’ dream of living in their dream home for a long time and they achieve after so much effort. Buying a dream home is not only a financial matter, but is an emotional journey as well. On the flip side, there are buyers who prefer to rent their new house and continue living in rental apartments. Let’s dig deep to know the pros and cons of doing so.
In the metro cities, a huge number of people invest in residential properties developed in the suburbs and still they live on rent. Most of these people will put their apartments on rent. Such homeowners let out their properties for rent for various reasons.
(1) Buyers buy compact homes on the outskirts for a reasonable price with all basic amenities and live on rent in the central areas. I have noticed people living in the 2 BHK flats in OMR near to their workplace by letting out their new home for tenants.
(2) They would like to live as a nuclear family in a location where they have better infrastructure and connectivity.
(3) People continue to live on rents as their new flats might not have completely occupied all the units. The homeowners do not generally prefer less inhabited flats.
Besides all these reasons, homeowners should certainly understand the advantages and disadvantages of letting out their new apartments on rent.
The advantages of letting out your new property on rent
The one biggest advantage of having let out your apartment on rent is the additional income. The rental income is the main factor attracting so much of homeowners into renting out their newly bought apartments and Individual houses. For the most part, people buy Villas in interior areas and let out as a vacation property for tourists. Particularly, in Chennai, investors buy Apartments and let out on rent for the young career starters who work in the IT companies. They usually save this rental income for the post-retirement expenses after the deduction of tax from the net annual income.
The prices are unstable in the real estate market. There have been situations where prices went right down unexpectedly. However, the price of your property rises over time if you opt for the location where you could expect hikes. Sources say that the rise and fall of the properties are highly common in this real estate industry.
The disadvantages of renting out your new property
Besides the accumulation of additional income you earn through rents, there is yet a risk involved in letting out your apartments on rent. As the tenant continues to live in your apartment for more than 12 months, your property comes under income tax regulations.
How does this taxation work?
This tax implication has a direct financial benefit too. As there is a constantly standard deduction means likely to deduct about 30% of your net annual value. This means, the value if the result of annual rent minus tax paid. For example, consider your annual income from the individual house property is worth of Rs.8 Lakhs. Imagine if have paid a municipal tax of worth Rs.2 lakhs on the house. The total annual income will be Rs.6 Lakhs.
Besides the tax, homeowners have to safeguard and maintain their property. This comprises of making sure of your tenants are not causing any problems in the property. Make sure the tenants are not involved in rebellious and illegal activities by doing a proper background check as this might get you in a huge trouble unknowingly.