Having more than one property in Bangladesh is undoubtedly a blessing. However, maintaining the property is a bit of a challenge, right? Especially when you are indecisive about the profitability and the property price. True, it is an asset but how can one maximize the benefit? There is a popular debate on whether you should rent out your property or sell it as soon as you see a capital gain. Both options will bear a stream of cash into your bank account but how will you decide which one to choose? Therefore, to find a middle ground and help you decide, Bproperty brings you particular criteria that you should follow before renting or put up your property for sale.
First, Check The Cash Flow
With basic maths, you can figure out the if you have a positive cash flow or not. Just add up all your inflows and then deduct the outflows. For example, if you rent out your property, you will receive monthly payments. That is your inflow. Now subtract the cost that might occur such as utility bills, loan payments or mortgages (if any), taxes, repairs, etc. If all these generate a positive result, then consider renting it. Otherwise, you should sell it.
Alternatively, if you want to be a step ahead, then try using the time value of money concept. With the current interest rate, you can distinguish between these two options by finding the future value of your asset for a specific period.
Calculate Yearly Yield Before you rent out your property
Another method to apply to evaluate the options is by finding your net yearly yield. It means, how much will you get in return if you are to invest a particular portion of your money or asset in an investment tool. For example, if you invest BDT 1 Lac and get an annual payment of BDT 10,000, then your yield return is 10%. In this case, your property is your investment. Now, due to economic or other factors, if the price of your apartment rises in future, then you better hold on to the property and meanwhile enjoy the rent it will be generating. On the other hand, if you have options to invest the money somewhere else or buy a new apartment and get a better return, then sell it!
Can You Handle The Taxes?
As it will generate profit, it is considered as an income. So, there are taxes no matter if you rent or sell your property in Bangladesh. The catch is the tax bracket. Both rental income and transfer of property has their tax rate. In our country, it varies with RAJUK zones and few other criteria. ( You can find the detailed tax rate in the government’s NBR website).
Once you find your tax rate for both the options, you should look at the after-tax income for comparison. Again, it is simple math as well.
After-tax income = Before tax income ( 1 – tax rate)
Look For Development Indicators
Of course, you want to sell your property at a higher price right? The question is, how will you know if the price is going to increase or not. Without doing intensive research, you can find out if that is going to take place in the future. Look for whether there is any infrastructure development going on or not, how can they impact on your property value, etc. For example, the recent construction of Metro Rail is going to impact property price of Uttara, Mirpur, Shyamoli and other adjacent areas as public commute will be much easier. Like this, you can figure out other development indicators if you follow the news!
These parameters will vary based on your property type, area, years in possession, the accuracy of the value of your property in Bangladesh, etc. So, to take a firm decision, contact a property agent so that you can use the professional’s help to make the best out of your investment.
