I think this will be a very important aspect when you are investing for a return and there can be many costs that could incur in the beginning which might escape your mind when planning:
For instance, when buying an apartment
1. You have to add another 4% as stamp duty fee (Don’t even think about undervaluing now – too risky)
2. Standard lawyer fee is 1% (if you have a friend who could do the job for less, that would be great)
3. Management fees are covered by the owner, so that is a cost for you.
4. Apartments in Colombo are mostly given with furniture. Not forgetting the designing of the interior if it’s a fairly old apartment that may require some touch ups.
Optional but worth considering:
1. If you find a tenant through a real estate company, then there is a commission that you have to pay to the agent.
2. If the lease agreement is signed, then there is a legal fee (Small amount but again it’s a cost) which is split by you and the tenant.
So considering the above, I think the goal should be to get as close as you can to the 6% you are targeting as you might understand now that it requires meticulous planning in terms of the costing. There might be additional costs too which I might have missed. It’s also advisable to leave provision for contingency or unexpected costs that may incur, it might have to do with paperwork or the apartment itself and if you are able to allocate funds accordingly and be very careful or how and where each cent goes, then you might be able to enjoy good returns from your investment.
That is a brief overview of the expertise and experience that I have gathered from this industry.
Hope the above information is helpful. Write to me if you are in need of property advice. info.mistert@gmail.com
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