1. An honest, salaried earner (and others too) should not invest in real estate too early in life, as it is a long-term, big-ticket investment involving high transaction costs, giving minimal annual returns.
2. It is also an illiquid investment that does not allow partial redemption for your emergency needs that may arise unexpectedly.
3. It also ties you down to a big EMI and a specific location, preventing you from investing in other lucrative avenues.
4. If you miss the EMI, there is a double penalty for you – from the lender as well as your bank - in addition to impacting your credit score for other types of loans.
5. Buying a house makes sense if property prices are low but are expected to rise soon and capital (home loan) is cheap.
6. In fact, living in a rented flat is a better option if one doesn’t plan to stay in one location for 4-5 years.
7. If property prices continue to remain flat for some time, while the rent keeps increasing by 10%, renting a house will be cheaper for most of the term.
8. If property prices go down by 5% a year, while rent rises by 10%, renting will be a better option for the entire term.
9. If property prices increase by 5% a year and rent by 10%, the cost of renting will be higher from the second year.
10. Even for investment purpose, if the rental yield is below 4%, buying a house for rental income is not worthwhile, especially if the cost of capital (or opportunity cost due to real estate recession) is high.
11. What you then pay as loan interest (or opportunity loss) will neutralize any gain from resale of property.
12. Preferably, buy a house only when (and not before) and where you actually want to live or settle in it for at least ten years of your working or retirement period.
2. It is also an illiquid investment that does not allow partial redemption for your emergency needs that may arise unexpectedly.
3. It also ties you down to a big EMI and a specific location, preventing you from investing in other lucrative avenues.
4. If you miss the EMI, there is a double penalty for you – from the lender as well as your bank - in addition to impacting your credit score for other types of loans.
5. Buying a house makes sense if property prices are low but are expected to rise soon and capital (home loan) is cheap.
6. In fact, living in a rented flat is a better option if one doesn’t plan to stay in one location for 4-5 years.
7. If property prices continue to remain flat for some time, while the rent keeps increasing by 10%, renting a house will be cheaper for most of the term.
8. If property prices go down by 5% a year, while rent rises by 10%, renting will be a better option for the entire term.
9. If property prices increase by 5% a year and rent by 10%, the cost of renting will be higher from the second year.
10. Even for investment purpose, if the rental yield is below 4%, buying a house for rental income is not worthwhile, especially if the cost of capital (or opportunity cost due to real estate recession) is high.
11. What you then pay as loan interest (or opportunity loss) will neutralize any gain from resale of property.
12. Preferably, buy a house only when (and not before) and where you actually want to live or settle in it for at least ten years of your working or retirement period.