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Real Estate

Should I buy a house or flat for investment?

Should I buy a house or flat for investment?
Should I buy a house or flat for investment?

Most of the people in the world just not Indians want to own a house. It always on the top on our to-do list for life to own a house or flat.

Is it wrong to buy a House or Flat? It’s never wrong to buy a house or a flat as an investment but owning something which does not really sense as an investment should never be an option.

I come from Hyderabad and I always had a dream to buy a flat or house in Hyderabad

My teacher’s prep talk while I was 12 years

When we turn 30 the real mess in our mind starts. We see people around us, our friends, relatives, neighbors and everyone talks about buying a real estate. Seeing all these folks we start scouting every weekend.

Let me tell you my story of this glitch which started in me while I was 23 years old. I did my schooling in a town 200kms away from Hyderabad. My English teacher was my favorite. You might be wondering if I was good at language. Hahahaha. Nope, I always used to like my teacher’s advice about the future. Those prep talks always fascinated me.

Every evening after school I used to spend 30 minutes with him and try to understand his talk. Again as I said, it a town culture and exposure towards future investment is minimal with his experience. At the age of 12 years, you really can’t make the right judgments on investments but it always feels nice and thinks of the future the way my teacher was projecting.

His advice was really simple

  1. Make sure you get good marks in 10+2 (In South India 10+2 is like a turning point for life. Someone who secures more marks can secure good seats in Engineering colleges)
  2. Get a seat in great Engineering college
  3. Secure a job with a great company
  4. You got to own a house before getting married.
  5. Have kids when you can afford anything on this earth (reasonable wants though)

Every point above has an age attached to this. I was a little early in securing all. Hahahhahah. Point 4 and 5 can wait until you are 28 to 30 years but I was in a hurry to complete my teacher’s advice and I secured everything by 26 years.

Was my teacher’s advice right?

I still have no doubts about his advice but the way I received it was wrong on Point 4.

Everyone wants to buy a flat or house in Hyderabad. I was 23 years old when I started scouting this. I landed up buying a 2 BHK flat in Hyderabad.

It was a Sunday and my friend Ananth and I went out scouting for houses. We landed up in Miyapur which is quite close to the IT hub in Hyderabad. There was a piece of land in which the builder will start to construct an apartment in the next few months. He offered us a great deal and asked me to pay a token advance. It was just INR 5000 but I don’t even have that in my bank. I drive was strong to own a flat but had no money. Finally, I took a hand loan from my friend and gave the builder advance to book my flat.

My dad was very much surprised when I shared this news. He said to me he owned a house at 30 and I started early. He was happy for me but he felt I started my liabilities so early in life. The time came in to apply for a housing loan but the Credit manager did not approve since I was less than 25 years of age. I got to know than anyone who is less than 25 years will not be offered a house loan. After a few negotiations, my Dad signed the documents and I secured a loan.

This is my Traditional investment of buying an apartment as everyone does. What do think about my investment? Is this a wise investment? or just bought to complete my point 4?

After 5 years, I felt my investment was just to fill my aspiration of owning a house. Why do I think so? My investment was more traditional and gave me a return of 10% for the next 5 years.

Whom do you think got benefited from this investment? The bank gave me the loan was in a profitable situation after 5 years.

Emotional attachment to your real estate investment

Most of us who bought our first house has an emotional connection to the property. Even though we know that we are making looses we still hold this.

I was not exceptional. I had emotionally connected with my first house knowing that I was bleeding and there is no point holding such kind of investment.

After 7 to 8 years I prepared and moved forward by selling the property for a loss overall. How much did I gain? 3 Lakhs INR vs the loan I paid was around 4.6 Lakhs INR. I made a loss of 1.6 lakhs on my first property.

Indians most often want to own anything. This could be a house, car or anything. The concept of lease does not work in the Indian context.

We should never have an emotional connection with any investment that we do. If we realize that its making losses, please look for an alternate plan.

My next challenge

I now sold two properties that were bleeding. I bought another one too which I did not mention earlier but both of them were of the same situation.

After selling off as usual family and friends always want to know where do I invest again. This question made me feel like “How are you fooling yourself next and which bank would you like to make rich?”

With all my past experiences I ignored everyone’s suggestion and started thinking of various options.

Here were my options

  1. Buy a plot, house or a flat again at a decent rate
  2. Invest the money in Mutual funds or stocks which can give you 12 to 15% Compounded annually
  3. Lend someone money at a decent interest
  4. Find some investment that is innovative.

I come from a finance background and I had a fair understanding of Mutual funds and stocks. I lost a good amount in stocks earlier and I gained my experience. hahahahha. Well, I believe and say people to lose money that they can so that they would learn better on stock market investment.

Days passed and pressure is getting mounted and I had no clue what to do next. I waited with patience and don’t want this time to hurry.

The best advice I received

A few days later while I was looking for investments, I happened to stop at a tea stall. There were a few guys who were talking about real estate investment. My first impression was like “welcome to the club”. Later when I started hearing about their conversation, I found something really interesting.

I wrote an article on this earlier. Read this to learn how I got my best advice

Conclusion

Everyone dreams about a house or flat but you have to check if your investment is right or wrong. Unless you can justify this fact you will end up the rest of your life paying the bank and worrying every month.

Nothing comes for free or cheap. You got to find one which suits you the best and feels it’s cheaper than what you wanted to afford with ZERO emotional attachment.

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