

Good idea to buy a house for investment?
So I've gone through plenty of videos on buying vs renting a house but I don't have a definite conclusion at the moment. Parents say the earlier you buy the better it is. The YouTube gurus preach about renting all the way.
Let's talk about numbers. If someone wants to buy a flat for 80L, gets a loan of 60L and arranges the rest by themselves (parents, savings etc.) with a salary of 1.5L. The monthly EMI roughly would be around 60K. Is it worth it purely from an investment pov? Because property can give huge returns in the long run but liquidity is tough if something goes south. On the other hand, banks wouldn't really give loans for other investments (at least I'm not aware) that would potentially give such returns.
What are your thoughts? I would like to know from both the sides - pro renting vs pro buying when you can
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Let me share my thinking about this.
If you do not own a house or even your parents do not own a house and you folks are still living at a rented place then it is always better to buy a home. Atleast to have that moral stability in mind and also for your parents satisfaction and happiness.
But if your parents already have an owned house or flat, it is not a feasible option to invest money in a flat or even buy one on EMI. You mentioned that it will give better returns in the long run which is not true. Check the past data and also analyse the current trends. Investing that EMI money would be a much much better option.
Ask yourself are you comfortable in tieing yourself to a 15 or 20 years loan duration? Are you sure that you will have stable income over all these years? God forbid but what if something like covid happens and again that layoffs rigamarole starts happening? How would you pay up for the emi? Do you want to deal with all that stress?

My parents do have their own house which is where all the thought process is coming from. The emi was close to 8k which was a big portion of their salary 18 years ago. But a decade later it was not a big amount as their salaries increased many fold. And now the house is also worth close to 1cr which was initially bought for just 8L and can easily fetch 25k in rent.
I can see myself paying EMI for another 15 years by having a stable income for most of it. I know an unfortunate event can happen where I might lose my job but I think I'll have enough savings to survive 4-5 months at least and get a new job by then. I'll only plan to buy a house if I have enough coverage for a few months to get by. It's not an immediate decision for me at the moment. Something that might come up in the next year or so. Just evaluating the options right now. Thanks!

Good to see your confidence. But I would still advise for going for rent and buying a house upfront when you have the cash, since your sole goal is investment. Investing in mutual funds or stocks will give you many folds better returns than any real estate

If your in-hand is 1.5 lakhs, paying 60K is pretty high. We were paying less than 15% of our in-hand in EMI.
House Cost: Around 74 lakhs.
Registration and Stamp Duty: Around 6 lakhs.
Interior and all other miscellaneous stuff(painting, and all): Around 19 lakhs.
We took a loan of 50 lakhs, with the rest as upfront payment from our savings. Initially took for a term period of 22 years, but reduced it to 18 years and increased the EMI, when our salaries increased(still kept EMI below 15% of our in-hand).
Now, comes additional cost of 10k as property taxes every year plus around 14k per quarter as maintenance fees. Now, 66k every year will not give you any tax benefits. You will only get tax benefit on your principal under 80C and interest under section 24.
You can decide what you would want to do.
If you are able to close the loan within 10 years, you can go ahead and take the house. If not, it’s better to rent and use the EMI money for investments which then can be used later on to buy the flat.
We have around 42 lakhs principal remaining which we plan to close in another 5 years.

Hmm good insights. What was the reasoning behind buying one instead of continuing with rent? And you mentioned "our" in-hand so I'm assuming you and your spouse. So, was marriage an important factor in buying a house?

My wife works in a PSU. We were pretty sure that we would stay at Bangalore for another 10 years. Rent would increase by 10% every year. So, we would have ended up paying close to 40 lakhs during the full tenure. Plus, only one of us could claim HRA benefit(based on taxation, and would have been more beneficial for my wife to take it).
Why we took the decision:
- We aren’t getting back the 40 lakhs(from paying rent).
- 2 lakhs benefit on interest for both me and my wife, is a significant amount in terms of tax savings, giving us close to 23k in-hand extra every month.
- We had taken our property during COVID in North Bengaluru, so got good discount on the property(12%). Plus the high appreciation of both apartments and plotted development in near future. We got at psf of 4280 plus GST. Currently, prices are hovering at 7000 psf plus GST. Since, we already stayed at North Bengaluru, we were aware of which areas would be appreciating. For instance, rent has increased from around 18-20k for 2BHK to 30-35k for 2BHK.
We got married 8 years back. So, being married and taking the house wasn’t related. But, it does help if you have a co-owner. Helps save maximum taxes. For your case, you can probably take your dad or mom as Co-owner.

Study asset lifecycles, in this case Real Estate.
One can enter at a probable correct time and make the most out if it. And also helps in deciding on own vs rent.
Ex: post covid real estate had clear upcycled indicators. No one would regret buying that time.
Buying in current time - is debatable. China's residential real estate fall and US commercial real estate fall.

Three is no set formulae for buy vs rent

In US:
40 continuous years of falling 30year mortgage rates. And now rates went up from 2% to 5-6% in last 2-3 years
home price index has peaked in 2022. And %age change in 2023 is 0 or less.
fixed housing affordability index is less than 100.
only positive: inventory is 1.1 i.e supply is 1.1 houses for each single buyer.
US is in rate risk. 5-6% is very high mortgage rate in US
In China: #1.4 billion population and 3 billion unoccupied homes.
This is a clear bubble.

Compare the projected property appreciation with a similar amount to the EMI invested in the stock market (or even an index fund) for a fair understanding of the investment side. Liquidity and timing is of course a bigger issue with property.
My personal sense is
- land is the real asset not flats. I have invested in/around my home town since land in metros is too expensive for now
- invest in property with savings, not a loan . The loan cost is huge over time.
- renting also gives flexibility (within/across cities) and the option to live in an actual new house every time you move. Emis are a bigger mental anxiety inducing instrument than renting (worst case/shit owner/water/other issues -> rent another house
Of course there is the emotional/stability aspect ingrained into our lives. My antidote has been land back in my home town that is affordable for me. Metro real estate prices are too high for me to even consider unless I can pay upfront cash

A few points on that
- yes, land is the real asset but you only get the value when you sell it. Flats give you a steady rental income as well.
- why use savings and not loan? does it not usually depend on what interest you're getting? Why not put the savings in a more liquid asset like MF?
- I might or might not stay in the flat I own. I can still be flexible by renting out my flat and staying on rent myself for flexibility.
Right now my decision is purely from a financial perspective and not other factors (emotional, parental pressure, marriage etc.). And can you explain a bit more on why buying land is a better alternative than a flat if you can afford a flat?

Housing as an investment has 2 Cons for me:
- Effort in involvement, maintenance, finding and evicting tenants. My family has faced tenants which were a headache. Finding long term good tenants is work. Okay to do it in my hometown where there are others to share burden of work
- Liquidity and size: Size alone doesn't let me diversify into other investments. Gold is lukewarm but I can chose a small allocation and be done. Mutual funds are painless,
Besides these, I feel that there is less steam left in Metro city flat prices. Amenities aren't super to let you retire, construction has boomed and cities (except Mumbai) can expand a lot, so there is not supply issue. The early 2000s boom was the last dream run which is improbable to repeat.

wariko has a good sheet for it, my observation is if you take less loan, and u see longer period of time, buy was coming smarter, it all will come down to amount of loan, time period of loan, percentage of ur investment growth vs property rise.
what i ended up doing was go with my heart and finally my opinion on this matter it is a emotional decision, itna +- does not really matter in life
count ur emotions in the calculations

I understand that most people here might be having a job in a tier 1 city where a lot would be inclined towards renting due to exorbitant prices in real estate but in cases of some tier 2-3 cities it will make a lot more sense buying if there is a lot of development happening there.
Just like personal finance, there is no given formula one can apply to consider buying vs renting. A lot depends on the person's mindset as well.

How come most of the comments are pro renting but the poll is in the favour of buying😐

Dad Bought a flat in Bhopal around 2015 for 32lkh, it's currently valued at 28lkh, another one in Ahmedabad bought for 15lkh in 2013 is valued at 35lkh currently.
These are budget segment 2bhk flats, both giving 7-10k monthly rent.
But just like selecting stocks, residential property is also a gamble/bet one can't paint a single colour to all the varieties on offer. Don't blindly follow yt influencezas do ground research ask elders, Uncontrolled factors like shopping mall coming up nearby or govt labour housing will peak or collapse the prices for the neighborhood. Each locality per city has different outcomes.
In t2 cities no one really gives a F to luxury housing societies for resale value, so decide on flat liveable area, don't weigh in value of extras that dealer might sell.


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