Pre-leased or Rented Properties are ones that are already rented out at the time of sale. As a result, they provide a low-risk investment choice that allows the investor to begin making money right away. When compared to alternative investment strategies, purchasing pre-leased commercial or retail space has a number of advantages:
- Low-Risk Investment
- The asset is in your name
- The principle amount is safe
- The market is not volatile (like in the case of Stock Market/Cryptomarket)
- Steady Monthly Income from Day 1
- Since the properties are already on rent
- Rental income starts from the very first day
- Zero Waiting period
- Inflation Hedge
- Returns generally higher compared with Fixed Deposits/Bonds/Residential Leased Properties
- This would beat the inflation
- Rental Escalation (every 3 to 5 years)
- Higher Capital Appreciation
- Capital Appreciation of Pre-Leased units is generally higher than vacant units
- Higher Liquidity
- As it’s easier to liquidate pre-leased units as opposed to vacant units.
- Loan Rental Discounting (LRDs)
- Getting loans easily at a discounted rate of interest
Investing in Pre-Leased v/s Assured Returns
Today, investments with “guaranteed returns or assured returns” are growing in popularity since they promise investors a high initial return up until the project’s completion and then sell them a high lease guarantee afterwards (please note that the initial high return is being offered without a property in place).
Even though it seems highly appealing, the investor should use caution and do their research before funding such projects.
If our investors have any further concerns or issues, our team would be more than delighted to help and respond to all of them.
- How is the developer paying a return without a property in place?
- How are the returns higher than normal market rates?
- What is the prevailing sqft market rate at the time of purchase in the neighbouring areas?
- What have been the average rentals for the past 5 years in the neighbouring areas?
- Will the property generate rentals equivalent to assured returns in the future post possession?
To bring more clarity, a comparison between assured return investments and pre-leased investments is given below:
| Assured Returns | Pre-Leased | |
|---|---|---|
| 12% to 15% (abnormally high returns) |
Returns | 6% to 9% (as per prevailing market trends) |
| Inflated Rates compared to the market rates | psft Rate | As per prevailing Market rates |
| No Guarantee of Lease | Post Assured Return Period | Not Applicable as the property is already Pre-Leased |
| No Guarantee of Tenant | Tenant | Already Present (All properties offered by us have reputable tenants) |
| Stagnation as the psft rate is already inflated | Appreciation | Capital Appreciation as per market trends |
| Stagnation in price or even Depreciation from assured return level possible as rates are already inflated | Rental Escalation | Generally, 15% every 3 to 5 years |
| Upon Project Completion (Average 3-5 years) |
Property Possession | Immediate |