Pre-Leased Commercial Real Estate Properties are those, which already have tenants and ensure fixed income or assured returns.. Real estate investing, considered one of the most significant capital appreciation channels, has emerged as a secure, sensible, and profitable alternative for many, providing many types of diversification.
Commercial real estate may be regarded as a costly affair due to the significant investment required and is the best suited for UHNIs, or corporates. However, this is not the case. Property investing has grown in popularity and attracted the attention of professionals alike throughout the years, and this investment is now well within their grasp.
According to JLL India research, Pre-Leased Commercial Real Estate properties in the range of Rs.5-50 crore scattered throughout the country’s top 6 cities, followed by tier-2 towns, are on the radar of investors. Growing potential in pre-leased buildings is being viewed as an appealing asset class, particularly by high net-worth individuals (HNIs), who are pursuing a greater slice of the Indian real estate market, especially commercial real estate.
What are pre-leased commercial real estate properties?
Properties that have been pre-leased or pre-rented already have occupants and a set rental income. The primary advantages of these assets are consistent income, no waiting time, and increased capital appreciation. Pre-leased properties are those that are already rented out and earning rent from the tenant at the time of sale, and the investor proceeds with the lease to receive consistent returns.
The Perks of Pre-Leased Commercial Real Estate Property
- No waiting period for the investor: When an investor purchases a pre-rented commercial property, he acquires the prior owner’s rents and tenants. Investors in pre-leased property do not have to wait for a tenant because it is already rented, and they may begin receiving monthly rentals on the first day after the sale deed is transferred.
- Capital Appreciation: A pre-leased property has a good chance of capital appreciation over time since the value of pre-leased property often rises when compared to unoccupied properties.
- Liquidity is very high: Pre-leased property is a profitable alternative in terms of return on investment. So, while finding a potential buyer in the real estate market may be difficult, pre-leased commercial properties are simple to sell.
- Risk reduction; Purchasing a pre-rented home is always a secure investment because the property is rented for a certain period. Pre-leased properties provide fewer risks to investors since they provide assured rental income with high returns.
- Hike in Rent: Buyers of pre-rented houses do not have to be concerned about the rental increases. Renewal of lease agreements also ensures periodic rental rises. It the lease is for 9 years, the rent will usually be increased by 15% every three years.
- Loan based on Rental Income: Term loans against the rental revenue of a pre-leased property can help investors raise more money on the underlying value of their commercial property.
- Stability: Pre-rented commercial properties are the healthiest and most secure investment since they provide more stability and medium to the low risk to investors. Demand for pre-leased commercial buildings is also predicted to increase within the next year.
Some Safety Measures When Purchasing Pre-Leased Commercial Property
Before investing, the buyer should conduct the necessary due diligence to guarantee that the property and its tenant are safe to inherit. Before investing in any pre-leased property, investors should address a few problems.
- High Capital Value: The buyer must evaluate the vacant capital value of pre-leased property since the market value of the pre-leased property is always greater than the market value of the unoccupied property. The market value of the pre-rented property should ideally be no more than 15-20%.
- A Tenant’s Credibility: Before closing the transaction, the investor must examine the tenant’s credibility and creditworthiness. The main goal is to ensure that the tenant pays the rent on time and does not quit the leased premises before the contractual period expires.
- Lease Period: An investor should also look at the lease’s terms. It is essential to match the business lease period. Finding new renters after a contract expires is usually a time-consuming task.
Conclusion
An investment in a commercial real estate property is a safe and lucrative avenue providing multiple benefits, such as capital appreciation, regular income, secured property, and compliance information.
Asset Yantra is India’s premier and preeminent commercial real estate investment organization, with a presence in three cities. It provides a full range of tailored and end-to-end commercial investments. And advisory services to its clients, backed by its experience in real estate and market information.
Asset Yantra allows you to invest in commercial real estate via fractional ownership starting at Rs.25 lacs. IRRs range from 14 to 21%. To learn more about how we may assist you with your commercial real estate investing journey, please click the above link.
Pre-Leased Commercial Real Estate Property Investment is Trending Right Now – and the Best Investment FAQs
A pre-leased property was already rented out at the time of selling.
A lease agreement is entered into between a landlord and a potential renter to engage in a lease at a later period, subject to the fulfillment of specific criteria.