Sunday, August 28, 2011

Property Tax Returns

Every individual earning a monthly income in excess of Rs 5,000 is required to file an Income Tax Return on September 30, every year. The filing process is fairly simple whether you do it yourself or use the services of an accountant. Either way, you are required to fill in an Income Tax Return Form, in which you have to declare your income and assets, such as property you own
Here are some points property owners should keep in mind when filing their Income Tax Returns:
1. Individuals who own immovable property (such as a house or a plot) measuring over 250 square yards, or an apartment. measuring 2,000 square feet or more, should declare the property in their Income Tax Return. However, no tax is applicable on property owners if they are not renting out their property.
2. Owners who are renting out their property must declare their assets as well as the income derived from the property.
3. Costs incurred due to renovation or remodeling of a property can be included as an expense in the Income Tax Returns. If the amount exceeds your annual income, a tax benefit can be claimed.
Tax Rates on rental income derived from a residential property:
Gross Annual Income                           Tax Applicable
Less than Rs 150,000                            No Tax Applicable
Rs 150,000-400,000                             5% of gross amount
Rs 400,000-1,000,000                          Rs 12,500 + 7.5$ of gross amount
More than Rs 1 million                           Rs 57,500 + 10% of gross amount

Investing in the Outskirts

Real estate purchases made with the intent of earning high ROI (Return on Investment)through rental and resale are usually concentrated in urban centers where the value of such properties is significantly high. It is, however, becoming increasingly popular to invest in property located on the outskirts of the metropolitan cities.

Sunday, August 7, 2011

Preventing Illegal Property Occupation

Due to an increase in the illegal occupation of properties in Pakistan, investment in real estate, especially by Pakistanis living overseas, has decreased significantly.
Illegal occupation primarily takes place when properties are either left untended (such as plots) or when tenants (in the case of houses and apartments) refuse to vacate the premises, and in extreme cases, illegally transfer the property in their own name.
If you have an empty plot, or are thinking of purchasing one, take the following measures to minimize the chances of it being occupied illegally:
  • Never leave the plot vacant or unattended; have a boundary wall constructed and hire a security guard to look after the plot at all times.
  • Do not buy cheaper plots on the outskirts of a city or a remote area for a long term investment. Properties in such areas are more likely to be taken over by land grabbers.
  • Never give unconcerned and unreliable individuals access to original or even photocopied title documents of the plot.
To prevent the illegal occupation of your home or apartment by your tenants, take the following measures:
  • Always meet prospective tenants in person and run background checks before signing a Tenancy/Lease Agreement: hold on to these documents for later use.
  • Check the tenant's financial standing and past financial records in order to determine whether or not he/she will be able to pay the rent.
If you are not residing in Pakistan, or are planning to leave the country for an extended period, appoint an attrney to keep an eye on the property and collect the rent on your behalf.
If your property is occupied illegally despite these measures, you will need to obtain an eviction notice from the city court to recover it. In some cases this process takes months, or even years.

Tuesday, August 2, 2011

Negotiating Renovations: Renovate Your Property

Your floors are scruffed, the paint is peeling and the kitchen cabinets are hanging by a hair. Rental property, especially if it is an older one, periodically requires serious renovations. However, sue to lack of communication between landlords and tenants, they are usually delayed.
Negotiations are key when it comes to getting the renovations done. That is why it is best for the landlord and tenant to dettle on ters regarding renovations and upgrades before the deal is sealed.
However, in most cases this problem is tackled only when the need arises and almost always results in altercations.
To prevent this, here are some tips to consider:
1. The rental contract should clearly state the extent of renovation work that can be carried out and also the roles and responsibilities of the tenant and landlord.
2. Send your request for renovation to the landlord via certified mail and ask for a receipt; keep a record of your correspondence as it may come in handy in case of any legal action.
3. If you don't hear back from your landlord, ask an objective third party, such as your real estate agent, to assess the situation.
Alternatively, you can refer to the lease agreement and seek legal aid. If the contract has a renovation clause, deduct the cost of permanent renovations from the rent and save the receipts as proof.
4. Landlords are more willing to pay for practical renovations such as paint jobs, plumbing and electrical work, and security installations such as barbed wires; cosmetic upgrades are less likely to be sanctioned by property owners.
5. A major concern for landlords with renovation requests is time investment; they will be more willing if you offer to do the leg work, which includes finding a contractor and supervising the job yourself.
6. In case the landlords requests the tenant to pay for the renovations, with the understanding that he/she will be reimbursed later, the tenant should invest only 50% of the total amount which can then be deducted from the rent.