Types of Real Estate Incomes In Pakistan

Introduction

Real estate investments allow investors to earn revenues in a variety of ways, any strategy can be devised using the following ways to achieve personal investment goals.

Real estate investors earn through the following ways:

Capital Appreciation

The increase in value of the amount invested by the purchaser in a real estate asset with time (usually calculated annually) due to infrastructure or local development (increase in population, amenities, etc.), supply and demand, Govt. Policy changes or economic factors.

Supply & Demand:

Sellers tend to sell properties at a higher price when the demand for properties is high and the availability of properties is less. When buyers agree to those demands the real estate value starts appreciating and vice-versa.

Demographics:

During the retirement period, the people of that generation have more significant housing needs, increasing the demand for real estate and thus raising its prices.

Economic Factors:

The economy has a direct correlation with real estate prices. Whenever the economy grows, the value of real estate grows and vice-versa.

When a country suffers from high inflation, the prices of land and construction materials also increase. Investors who own properties expect to profit from the price appreciation of their properties.

Similarly, real estate also appreciates in value when the unemployment rate falls or purchasing power of individuals increase.

Govt. Policies:

Legislation can impact the demand and prices of real estate. If the government provides a subsidy to any industry for it to thrive, the employment rate rises. People tend to move closer to their work, which increases the value of real estate around it.

If the government exempts or lowers the tax on real estate transactions, it attracts more investors to invest in the real estate sector, thus giving rise to developments and real estate prices.

Infrastructure or Local Development:

A particular real estate location becomes more attractive to the general population when it has an infrastructure covering all the needs and luxuries of living and business.

A particular location with an ideal infrastructure vs. one without an ideal infrastructure will naturally show the difference in property prices.

That’s why owning properties in an area earmarked for better development projects is likely to fetch a higher market value in the future.

Cash-flow Income

Rental income is a regular income that can be received from a tenant from ready properties or as a rental discount from projects under development on a monthly basis.

This type of income is preferred by individuals that want a stable income to cover their monthly expenses.

Shops, houses, apartments & raw land can be purchased to generate regular cash-flow income.

Real Estate Related Income

Such an income is earned by realtors or real estate investors through providing real estate services i.e. commissions or rebates. Property management companies earn a portion of rent for managing the property’s operations.

Supplementary Real Estate Investment Income

These are mini-businesses that create cash flow within a building i.e. vending machines in office buildings, laundry rooms in apartment buildings or massaging chairs in hotels, etc.