5) Costs associated with renting a Property
You will also need to budget for a number of necessary costs. It's worth highlighting what these costs are so you can budget for them. This is especially important as ultimately you must look at the net cash flow from the property.Furnishing Costs
If you plan to rent your house as a fully furnished apartment, it would costs anywhere between 3 to 6 Lacs in furnishing a 3BHK apartment. The incremental increase in rent tends to cover this expense in 2-3 years. Also, be prepared to re-decorate every 6-7 years.
Repair and Maintenance
Things break down and need to be maintained over time. You will need to allow a percentage of the rent to cover this. Allow 10% of the rent each year for maintenance. The type, age and condition of the property will obviously have an effect on repairs and maintenance of the property.
Incidental Expenses
Expenses for securing the rental of your property would involve registering the rental agreements. Cost associated for a 12 month rental agreement is approx. Rs. 6000/-, which includes registration fee, document scanning fee, stamp duty agent commission and stamp duty.
Broker Fee
Fees vary from agency to agency. Try and sign up with a firm that charges you on a monthly basis, and does not take fees upfront, in the assumption that the tenant will pay rent for the entire 12 months. What if the tenant is forced to relocate after 6 months?
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