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POSTED BY ON June 4, 2014 10:13 am COMMENTS (2)
A buyer already has a property for which s/he is paying 1/3 of her/his monthly income as EMI. Also, another 1/3 goes for house expense, and the other 1/3 goes for investment. Buyer’s spouse is also working professional (spouse’s income goes ONLY to investment), and the couple wants to buy a 2nd property now.
What are the factors to be considered to buy the 2nd property? Can you provide some logical and calculative decision criteria?
For example:
Pros:
1. Real estate investment in tangible growth market?
2. Long term plan to have multiple properties in metro city? Hence, ROI is high.
3. Having multiple real estate properties in early years of professional life.
Cons:
1. Expense to Income ratio?
2. Property ROI in upcoming years?
3. Property rental income opportunity?
4. Risk factors – in case the expense to income ratio is marginally overloaded?
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2 more factors:
1. Need to pay wealth tax, if valuation exceeds 30 Lakhs
2. Need to pay tax on rent on 2nd house, even if house is not actually given for rent.
Cons:
1. Transacting property means dealing with some government office for paper-work. Inevitable corruption.
2. Selling property is difficult and hassleprone.
3. A property needs maintenance like association-fees, property-tax, insurance. This complicates the RoI.
4. It is never possible to know a property’s current market value unless once choses to sell it. Of course, in informal discussions people just throw any number on square-feet rate (depending on whether they are a prospective buyer or seller) but there is no proper ‘exchange’ for property market. Magicbricks.com publishes an index but it does not have much sanctity.
You still want to buy property with your surplus cash? Why not try equity mutual funds?