Hello freinds
I have been watching the discussions here on zameen.Com for many years but never took any part in them. I am planning to come back to pakistan with family for semi-retirement. Just want to take it easy, invest, and work a bit. I already own a residential house in islamabad, but need something to invest in to generate some income. I have been going through the ads here on zameen, and noticed commercial property, a shop for 3.4 crores apparently producing rs.1,60,000/ monthly. Could this be a good investment? I want to discuss similar investment opportunities. Does anyone have any ideas/experience of this? Regards
In terms of investment commercial properties especially in Islamabad are the best source of return provided you do some business yourself rather than renting out. You cannot just take figures for granted than 3 crores worth property would generate 160,000 a month or 1 crore would generate this and that. Each market has established its own rental value which you need to be aware of and second that value is always a range. For instance a plaza where you would find different rentals ranging from say 30,000-120,000 a month. So you would now know that you would get something in this range if you opt to rent out. Why this range is there is for you to find out.
Now coming to the point as far as i know you would never get the rental of your choice unless you are too clever and smart. However, if you do business with least investment amount and give even little time you can earn as much as the rent you would receive very easily. If you give full time to the business than you would earn much much more than you can even think of.
For instance stationary business, mobiles & accessories business, laptops and computer business etc.
These businesses are both high end to low end businesses meaning that you can invest from 1 million to even 10 million. For instance the laptop and computers business. If you just invest in its accessories and kits and not the actual laptops or desktops you can do good business yet.
But in both cases you would likely earn more than if you rent it out.
Lastly once you rent it out it is almost impossible to increase rentals depending upon market conditions. Usually you would get 10% increment per annum per law but sometimes market pick pace and rentals increase like rockets but you would not be able to enjoy that ride unless you vacate your premises and look for a new tenant. Now vacating is another big headache and sometimes is a hell lot of a pain. Also if you are a man of principle or discipline than you would rather have to bear on this as rentals, most of the time, are never paid on time.
Now this is just what i think. Dont’t take it for granted.
Good one Arshad. Thanks for that comprehensive response. Well thought out and weighing all the pros and cons. So, for someone like me who is just looking for passive income, owning some shops in some plaza in F 10 or F 11 would not be such a great idea; perhaps I should look to houses or flats to rent. How about a Medical Center? Would that work? Say a specialist clinic?
Btw, as I had mentioned in my original post, I am looking for semi-retirement, so going into business like computer accessories would make me super busy! Wouldn’t it?
Even if you are looking for passive income setting up your own business is not an issue and does not need full time like you think. It is just that you will not earn much but atleast it will be better than the rental you would get.
Just think a shop having a rental of 160,000 a month. Do you think anyone is so naive to agree to give you 160,000 just like that. Remember income from business, normally, is roughly 5:1 against rentals or can be more. It means if a rental is 100,000 a month, you can expect anything from 100,000-500,000 a month by doing business instead.
Coming to your scenario i think all you need is someone reliable (a relative or friend). Hire him on salary and put him in your place to supervise. Rest you need experts in the field to start business and they will do all the working for you.
I will give you an example. Say in the case of accessories you can buy a small amount of accessories (your business should be in a place where you know u will get the targeted customers). Hire a close relative or friend to supervise your investment. Hire specialist employee/s to work for you (not on salary). It is easy to find one once you start looking for them.
you can set 50-50 profit sharing or fixed amount profit per month. This will keep you tension free but the drawback of this is you may not get what you truly deserve. For instance if you are not giving full time to your business and say you set an amount like 30,000 a month as fixed profit. Chances are that your employee may be making 100,000 and keeping 70,000 with himself but giving you 30,000 instead.
well these maybe the consequences if you are not present all the time. But still you will get atleast or more than the rentals and will escape all the troubles that you will face with tenants.
Also you must divide your business into small units to get max. Gains. For instance in the case of accessories. You can create 3-4 units for instance. One for accessories of laptops and desktops, second another setup for accessories of mobiles for instance, 3rd a small repair lab for both desktops, laptops and mobiles, 4th say easy load or easy paisa or sim cards sale and blah blah.
Medical centre are specialist business setups. If you do not have a medical background then stay away. In such circumstances go for businesses which anyone can do easily like stationary, mobiles, accessories, laptops, car service, garments etc.
By the way your option of renting out a residential property is also sound. Decision is yours what you want to go for
Excellent Arshad. You’ve really got me thinking. Lets stay in touch on this one…
@ TK…Sir another good option can be to circulate you money in plots in some good society through reputable and reliable dealer.This can also generate a good amount of money,even if your plots are not sold within your required time,whenever it will sell,it can give you good profits but there are some prerequisites for that…Society should be reputable with some solid dynamics.In this way you won’t need any setup but you will enjoy your capital appreciation.
Property rental is perfect if you are looking for passive income. In Pakistan i've noticed that annual return from rented property ranges between 4-5%.
In my honest opinion business and plot trading is not exactly easy or risk free and will require you to do quite some research.
@ Saadi: I have thought of that a lot, but seeing the sluggishness in the movement of plots, I thought the returns might be erratic, and rental would at least give some cash-flow. As you mentioned, another stumbling block is getting some honest and good dealer to guide you in this maze. I hope I can get in touch with you when I am there and you will guide me!
@ Ahmed: You are right there. To succeed at any business needs thorough preparation. They say 4 out of 5 businesses fail within the first 5 years. That may not be the case in Pakistan; Arshad's formula sounds interesting. Since salaries are low, one can easily get highly qualified people to take care of things on a small salary that would not eat into one's profits.
I have been browsing the ads on Zameen.com again today looking at commercial in F 8, F10, F 11 etc. But the warning from Arshad about non payment of rents on time by the tenants have put me off somewhat.
Dear TK bhai.
Please share how much you are willing to invest.
First you need to establish how much minimum you need to survive according to your family and circumstances.
Then look for other opportunities to increase your income.
Lets say you can invest 5k. Then buy or build a plaza and rent out to banks or brands in DHA . Or bahria.
Buy flats and rent out.
Remember
earning money is hard . One has to work for it.
No one else will earn for you.
Now. Renting out property of any kind. Ur capital is safe and will grow with time.
Now business once you invest your money is gone out of your pocket. You will have to work hard to get it back. And then make profit.
Both have pros and cons
My personal opinion is to rent out properties.
TK, if the salaries are low so is the overall buying power of people.
You should not have problem with rent issues if you buy in these posh sectors. In case something happens you can easily evict non paying party provided you have a proper contract with them Always have a proper contract.
In my opinion instead of putting all of your 3 crore in one shop, you should buy a couple of small houses (4/5 marla) in G sectors and a flat in F-10/11. This way you can diversify your investment plus residential renters are easy to deal with too.
Some guidelines may it help you.
1= Yes you do need some research before starting a business but you would do the same research in looking for the right tenants or location to buy a property where you would get good rentals.
2= I don't know what you mean by most businesses fail but the only reason a business may fail can be if you are not giving any time to it (like visiting your business once a month and you don't really know what you are doing). Even if you go to your shop or business everyday for just 1-2 hours your business will never fail. Just you will earn pretty less.
3= When we say a business fails it usually refers to specialist businesses like for example a restaurant. Your business won't survive without a professional cook and if you can't find one yes you will fail. But you don't need a specialist in selling mobiles or laptops or stationary items or garments. U just need someone who has some decent selling skills.
4= Most of the time when people say failing business also refers to earnings against rentals. Suppose rental is 100,000 and earnings are also 100,000 so yes business is at loss because you are neither in profit nor loss. But if you don't have to pay rent then it is not an issue. It is a concern for someone who has to pay rent.
5= yes rentals are an issue especially when it comes to collection. I am not saying someone will run away with your rentals but it may be a headache because some businesses are seasonal for instance so there are good days and bad days and during bad days it may be possible you may not get rent at all. Depends upon your understanding with the tenant.
6= You have the option to try out different businesses if you think one is not profitable. I will give you a clear example as i know it from a friend. Suppose you invest 500,000 in some accessories of say laptops or desktops. You would buy in bulk from a wholesaler. You keep selling customers and buying accessories from retailers to replenish your stock for say 1 year and earning returns. Now you just got moody and want to change the business to something else like garments. And your have say 300,000 worth of stock in your shop. You can sell it all in one go at cost to any wholesaler of that business. The only drawback is you will not get the profit but there will literally be no loss at all.
7= Agreement or stamp papers from these local vendors or those sitting in kachari have no value in Pakistan. Following a legal case like a rent matter have improved and may take 3-5 years (before 2001 it could easily take 10 years in getting possession from a tenant) regardless of the fact your agreement is strong or not. Do you know a single appeal could alone take 6 months to 1 year. I hope you know what appeals are!!!
8= If you want to make an official agreement you have to buy different stamps from kachari and get them attested by alteast a class 2 magistrate. For this you will have to take you original allotment letter along with the tenant but this process is too costly in terms of money.
9= Ahmed is also right in terms of investing in residential property but the returns are not high than from a commercial. Even commercial rentals are higher than residential rentals.
The real headache is in finding a good location to start your setup. A place where you know you will get customers everyday. If you fail in that then it can be an issue in terms of failed business. For example if you open car repairing shop in front of an area which is famous for clothing then yes you will fail and it will be your fault for doing it.
By the way Saadi bhai is 100% right. Among all type of investments i think the most easiest and liquid investment there can be are plots. Buy them, forget them and sell them for profit. The only research you need is to find a good place or location to invest.
This business vs rental debate is like comparing oranges and apples. In short, business will eat up lot of your free time and you will make more money while in case of rental, once everything is set you will get fix amount each month without doing or worrying about anything. The return is obviously very low.
I think OP is looking for monthly cash flow so plot trading is not very suitable.
Sir ladies garments shop is the best business. Every season mein itnay kapray khareednay hotay Hein kay bus kucch na poocho. Not only rich ladies but also middle class, lower middle class and lower class. Ladies keep buying clothes like there is no tomorrow and they have to spend everything today. Agar koi lady na khareeday to usko doosri ladies jeenay nai daiti.
This is sure shot successful business if you ask me.
@ Pardesi: very very valid point... No argument in this regard.
@ TK:
The return from business in obviously more as compared to rental value but it requires your time and skills...
Rental value from residential property will be less as compared to rent from commercial property, but in my view the residential rental will be easy to manage...
I would suggest to buy few small houses and rent them out... It will be good for constant cash flow with reasonable return. Similarly, the value of property will increase with time.
Regards
They say when confronted with a problem many heads are always better than one. I have always followed this principle, and one can see the beauty of this from all the great input by all of you wonderful people. I am so grateful for that. The power of many brains is so much greater than one.
@ Khan, I feel your option is the best one.
If I decide to go into business, then @pardesi it will be ladies clothes!
@ Tamim bhai..... It will be just be and the wife, because the children are all grown and have flown the coop! Do you mean to say I can have a plaza in DHA or Bahria in 5K? I presume you mean 5 crores by 5K?
@ TK for steady income, a plaza in dha 2 can be worth investing as rentals are very lucrative here..You can grab a good commercial plot in dha 2 and construct a plaza on it and it will you good returns if you are just focusing on rental income.For rental income house may not be as lucrative as plaza.
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