Buy house for self occupancy OR self occupancy + give for rent

POSTED BY Santhosh_S ON April 6, 2014 9:51 am COMMENTS (7)

I got two options, please help me to decide which is better one

Option 1: house price 150Lac (1200 sq) – we can stay in one floor (2bhk) and give other 2 floor rent (each floor has 3 1bhk house – total 6 1bhk to rent). Total monthly rental income – 54,000

Option 2: house price – 90 Lac (600 sq) – duplex house – we could stay in the house, no rental income

I have considered that excess amount I spend for option-1 (60Lac) – I could keep in debt instrument and get close to rental income (so avoid depreciation in building). So I prefer option-2. Please help me if I miss some aspect in my decision…

7 replies on this article “Buy house for self occupancy OR self occupancy + give for rent”

  1. ashalanshu says:

    Dear Santosh, if budget is same, the independent house ‘ll be available only on outskirts of city, which ‘ll increase your other expenses towards commuting, schooling for kids, marketing etc. If I’m in your place, I w’d prefer a house near to my office, no matter it’s an apartment or independent one.

    Thanks

    Ashal

  2. ashalanshu says:

    Dear Santosh, please purchase house only for your self consumption and invest the remaining amount in pure investment products like FDs, Bonds, MFs.

    Thanks

    Ashal

    1. Santhosh_S says:

      Thaks Ashalanshu, For self occupancy, from financial perceptive which is better flat or individual house (from non-finance perceptive i do agree there are + and – in both options). My main worry in going with apartment/flat is LAND will not be mine (very less apartment agree on considerable undivided area) – pls share your view on flat vs individual house purely from finance perceptive (consider I will not go for loan in both the cases and budget is mostly same).

  3. ashalanshu says:

    Dear Santosh, where is the interest outgo in both calculations for home loan?

    Thanks

    Ashal

    1. Santhosh_S says:

      Dear Ashalanshu,
      I earlier considered interest but considering last 2 years appreciation in real estate (15-20%) I thought it would get covered by appreciation. In options I can repay the loan in 12 years and for option-2 I can replay in 7 years, so after that I would get full appreciation(though building would depreciate – I believe I would get good return from land price appreciation).

      Also I explore option-3 as getting flat (as getting individiual house near to my office looks almost impossible – and mostly I was asked to pay money in black… sad to say but that is reality).

      I left out option of buying flat that land will not be mine and I will not get benefit from Land appreciation (undivided area flats given is around 30%).

      To reduce the complexity, let’s takeout the loan part (assuming I have money to pay) – please let me know which is better from finance perspective individual house (option 1 and 2) and flat (option3) [ I agree flat has higher security than individual house…].

      Thanks for your input in advance.

  4. ashalanshu says:

    Dear Santosh, are you planning to buy all out from your own money or any loan is involved?

    Thanks

    Ashal

    1. Santhosh_S says:

      Yes, I would need to go for loan (I plan to take 40-50% total cost as loan for both the options).

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