People of Grapevine, what are your views on buying property?
Toying with the idea lately. Most people recommend against it because of the poor yields in India and also enough cases of appreciation not being good (vs other investments)
My purpose is to buy for my family, so there will be emotional value involved. But is that overstated?
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Long-term growth in value of real estate: 6% Rental yield: 3.5-4%.
Interest rates: 8%
What you're left with: 2%.
(This is a gross simplification, but it's fairly accurate.)
Those who think they'll spend money on EMI, instead of rent, because rent is an "expense". Well, so is interest. You'll be worse off than if you paid rent, invested (EMI - rent) in mutual funds. The money you pull out of mutual funds to pay toward DP, would have become > value of house.
Taking on debt to purchase real estate is stupid. Those who think having a roof over your head is peace of mind: guess what, you don't actually own the house till the loan is paid off. It is no peace, it is a sword hanging over your head.
Want to take a break or leave a job that's sucks? Start a business because a great idea came up? Can't, because EMI and no liquid savings - all your networth is locked in an illiquid asset you acquired with enormous debt.
It is much better to rent for the 10-15 years, save enough to buy a home upfront. Then live in it you want to. At that point, you're merely moving a portion of your savings that was earning say 12-14% to something that will earn only 6-7%. But much better than to stay poor, chained to your EMIs and ending up with an asset that grew only 2% for 20 years, while you slogged for an illusion of peace.
P.S. there will be those who earn great returns in real estate - but they're those who bought at at a very good time, they're lucky, or they're sophisticated investors.
Else, it makes no sense to take big, hard liabilities that you'd choke on pills rather than default on. You won't get 15-20% return in real estate, unless you invest in something highly speculative - which simply doesn't make sense. Why tie up most of your balance sheet in a single, risky bet, that too acquired with debt? It's an entirely another thing if you've got ₹100 Cr and you're merely allocating across different asset classes. But it makes no sense if you just got out of middle class.
If you take a loan at 8% for business and your ROCE is >20% it makes sense.
If you take a loan at 8%, and that asset doesn't even grow at 7%, it's called the biggest scam of modern life: a home loan.
There's no emotional value: remember, you don't own it till you have paid off the loan. The ownership title is merely symbolic. The bank owns your house, your balls and your life.
That EMI chain makes sense. Also explains why folks put up with what they put up with at work.
Not everything in life is ROI... Having a home to go to, and a roof on your head during bad times (which will eventually come), that is priceless. One home for emotional reasons, to establish roots, and rest houses for financial investment reasons. Look at it this way, once you earn enough money (salary, stocks, MF), you need to retain / hold on to it.. First earn then conserve. From that lens, real estate investments will make sense (be it a home or a house)
So my parents never had a home either - have always rented Hence I’ve never felt different about being at a rented house, that has made me not need it as much
But now it just feels like something people are doing
@AlphaGrindset don't rented homes come with lot of restrictions.. Dont drill here.. Dont paint here.. Dont modify.. Etc etc
Having bought my own apartment, I would suggest people to opt out of it during their early career stages, and suggest 2 options.
- Buy plots(plots are easy to sell, compared to apartments). Plots’ delta appreciation is higher than apartments. Had checked plots in North Bengaluru in 2020(was getting 40*30 plot for 36 lakhs which now has gone to 76 lakhs - almost double in just 2.5 years). I really regret the decision of not investing in 2020
- Buy apartments if you are looking from an investment POV. Otherwise buy apartments when you are in your early 50s, since you would know where you may retire.
- If you want to stash your unaccounted money, then real estate is the best way to do it.
I am paying 13k/qtr in maintenance plus 10k property cost every year. Only benefit we are getting is 4 lakhs non taxable income(me and my wife).
I would have rather opted for rented apartment. I would have had so much in savings.
I am definitely not buying any apartments in the future.
Good advice. To add to it - I'd suggest OP to look at commercial properties. Performs better than residential properties and is generally a better investment.
But from an apartment, you get the land appreciation benefit as well as the rental income. Depending on the luck, one can recoup the higher cost of apartment over plot in a few years and then it's a steady source of income
Ek Mahal ho sapno ka!
With emotional value involved, don’t second think it
I have been planning to buy 3bhk apartment in blr. Haven't been able to find single society which is value for money. 3bhk starts are 1.2cr in decent society that too 2025-27 possession. Now looking to buy property in my hometown
Buy in tier-2 cities with potential like Indore Baroda
I am from nagpur. So would go with the same. But I agree, tier 2 cities are offering better standard of living since last few years.
I’m at that point in my life that I know what the next 10 years are somewhat gonna be like and I see myself in the same city for that amount of time. I’d rather pay the EMI and get out the rental circle rather than pay the same amount as rent and listen to cribbing landlords.
This Makes sense when you are pretty sure of the next decade or two.
Yeah buying a house is a very personal decision and a huge monetary one as well. Some people prefer renting as it gives them the flexibility. But for someone like me, I prefer the peace of mind. One should evaluate all these parameters before investing as for a salaried class individual, buying a house means easy 10-15 years of EMI.
If you are buying for family then it is not an investment and I think you shouldn't worry about the yield. Just make sure you are getting a good deal for the money spent.
Maybe you are upgrading the house or moving from a rented home. Whatever the case, having a primary home of which you are an owner definitely gives you more control and a piece of mind that there is a place to always return to. Also, one taken, it is likely that you won't be selling it anytime soon or probably never in your life unless you decide to totally relocate to somewhere else permanently. You can still generate some income by giving some portion of the house for commercial purposes like rental shops or to tenants.
A property can be considered an investment if you are not going to live there permanently. Yield may not be enough and can depend on various factors. For eg. If the area doesn't have a metro, prices can shoot up if a metro gets built nearby. You will have to research the area and take risks if such development plans that may happen in the future. On the other hand, if it is used for commercial purposes, it can give you a recurring source of income.
That’s a great message @ObviousEve19
Ideally an up and coming area in a big city, would make sense I guess
