Why Preleased ?
WHAT IS A PRELEASED PROPERTY?A pre-leased/pre-rented commercial property is a property which has already been rented out to a company/bank/retail brand/mnc etc, and is on sale now. As the name indicates, it is already leased to a tenant at the time of sale, and is deriving a fixed income. Such properties are sold at their rental yields. Rental Yield is essentially the regular return gained on investment, without considering the expected capital gain or loss from sale. The percentage return (rental yield) varies generally between 4 % and 10%.
WHY PRELEASED PROPERTY?There are a number of reasons as to why pre-leased commercial properties are the preferred choice of investors, especially HNIs (High Net Worth Individuals). they are:
Assured returns right from day 1Usually, people buy properties and rent it out later. This means that the buyer looks for the tenant himself and has to wait for return, after purchase, till the time the property is actually rented out, whereas in the case of a pre-leased commercial property, returns are assured right from day 1. This means there is a zero waiting period for Return on Investment (ROI). Fixed Monthly Returns: Since these properties are already occupied by tenants at the time of purchase, a lease agreement is already signed, security deposit collected, and lock-in period defined. Hence, a monthly return is fixed and assured. It is a very safe investment.
Rent EscalationRent escalation is pre-defined in the lease deed. Rent appreciation is usually 15% after every 3 years, in a 9 year lease.
A lock-in period is defined in the lease agreement. Lock-in period is the minimum time frame in which the tenant cannot vacate the property. The lock in period usually is 3 years for a lease of 9 years. High Capital Appreciation: Of course, the value of properties increases over time. But commercial properties witness higher capital appreciations. Not only do you benefit from the assured rents, but also from the value appreciation of your property.
Low risk factor
One, the property is already occupied for a specified duration, which means that returns are guaranteed atleast for the next few years and the required legal documentation has already been done. It is a safe long term investment. Two, such properties are rarely affected by economic slowdown or recession in the realty market. This is because the duration of stay of the tenant and rent terms are already specified. Current market factors do not affect it.
how safe is this investment?
with the changing economic scenario, increasing competitiveness and improved technology platform, this kind of assumption may not remain blindly true. banks are moving to restructuring and optimization of their resources which may lead to close down and consolidation of their branches. with technical advancements, the banking transactions are also moving closer to tech- enabled self-service model.
With our unique contemporary style and total passion for connecting people with property, we aspire to provide the ultimate real estate experience for today’s modern consumer. We are not confined by traditional real estate boundaries when it comes to buying, selling, renting or asset management, instead we are always finding new and innovative ways to satisfy our clients’ needs.