Rental property can be an attractive asset for generating a regular monthly income after your retirement. On the one hand, you can get the rental and on the other hand, you can get a decent capital appreciation. However, in some cases, there are chances of weak rental demand, lower rental and problems related to the disputes with the occupant. So, it’s better to plan very well before you put your property on rent. Here are a few important things that can help you when renting out your property after retirement.

Why Rent Out Your Property?

According to experts, renting out a property is a viable option for a retired person to generate a consistent income stream, thereby offering financial stability after retirement. Also, not to forget that properties tend to appreciate in value over time, potentially increasing the worth of the asset and providing long-term capital growth to the owner upon the eventual exit from it.

If you don’t have a plan to sell your property, renting it out can help you with its better maintenance and care. It has been noted that a property with the potential to generate a rental income has a chance of fetching a higher value compared to a property which has been left vacant.

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How Much Income You Can Get By Renting Out Your Property?

Santhosh Kumar, Vice Chairman of ANAROCK Group, explains, “The rental yield in India is remarkably low, ranging between a mere 2 per cent to 4 per cent, which is often further reduced after accounting for property taxes and the costs associated with property management. Standard rental escalations of 10-12 per cent per annum or on renewals improve the return as it can beat inflation as of the current time”.

The size of the rental income that your property can generate would also depend on factors such as the location of your property, how well you have maintained it, the physical infrastructure in the area where your property is located and the social infrastructure around the property.

What About Tax Obligations?

Assuming the landlord possesses additional sources of income, such as pension or interest income, they are obligated to pay taxes on their total income if it exceeds Rs 7 lakh, as per the new regime of the Income Tax Act. Therefore, it is essential to do a cost-benefit analysis before renting out a property.

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What Preparation Should You Do Before Renting Out Your Property?

Diligent planning and a holistic approach to property management can ensure financial security and successful navigation of the rental property landscape during retirement.

“While renting out a property, a retiree considering property rental as a source of income must evaluate the legal and long-term taxation ramifications associated with it. They must also judiciously determine whether to undertake self-management or engage the services of a professional property management company, depending on the time and cost involved. Allocating funds for maintenance and repairs is a prudent measure to safeguard the property’s condition”, adds Kumar.

Rigorous screening of prospective tenants is imperative to mitigate potential risks. A comprehensive review of insurance coverage is advisable to protect against unforeseen contingencies.

The author is an independent financial journalist.