Comments on The Money Quest: What is the right time to buy a home?

Trisha, You’re right…it lacks 360 degree analysis...

2011-01-16T16:21:17.805+05:30

Trisha,

You’re right…it lacks 360 degree analysis, but it was not required in this particular discussion. Anyhow, buying a house vs paying rent is a very controversial topic…I’ll come up with a detailed case study on excel…wait for some time.

Hi Fisher, This is a good article. However I feel...

2011-01-16T11:28:40.282+05:30

Hi Fisher,

This is a good article. However I feel still it might be lacking a thorough 360 degrees analysis. Buying house involves lot of other things than pure math. I felt it would have been good if you had also given some calculative examples or perhaps some excel based few examples.

Amanda's question was really interesting on what would be best course of action here. Wether to take loan and loose interest on saved money plus interest payment to bank. An excel based full proof consideration/calculation of the two approaches(whether to buy house/keep paying rent) would have been extremely valuable.

Keep up the good work!
Cheers

Hi, i want to buy a house which costs 50L in 2...

2010-05-22T15:35:47.385+05:30

Hi,
i want to buy a house which costs 50L in 2 years , i need a minimum down payment of 10L , please suggest me how can i achieve that.

thanks
MP

Hi Fisher, Do you think real estate stocks are a ...

2010-05-14T09:43:41.182+05:30

Hi Fisher,

Do you think real estate stocks are a 'proxy' for real estate prices?

don't you think it is easier to invest in a stable real estate stock and pull out /re-invest along with the trend,Instead of locking yourself with a house.

also ,can you please add the 'property tax' ,maintenance charges as well ,to existing house prices ,like what %age of tax should be paid for a new house..

I suggest wait for 2-3 years to buy a house, as th...

2010-05-07T16:49:16.146+05:30

I suggest wait for 2-3 years to buy a house, as the recovery is still fragile - there is a problem with Eurozone economies, also UK and US. If a major economy defaults it will send the markets into a tailspin whcih will make the Lehman Brothers fall of 2008 look like a fairy tale.

all the best
Murali

@sophronia , what's the urgency in buying a ...

2010-04-24T08:07:19.269+05:30

@sophronia ,
what's the urgency in buying a house if you do not have any cash or investment for a down payment.
It will be better if you can save for a year for the down payment and then think about purchasing .

-debashish

Hi, I want to buy flat of 30 Lacs in mumbai wester...

2010-04-20T11:00:36.007+05:30

Hi,
I want to buy flat of 30 Lacs in mumbai western suburbs (andheri-dhaisar).
I have a Housing loan Sanction of 80Lacs.
How much cash should i have in hand? (as most builders want me to do the 80:20 ratio i.e 80% loan and 20% cash).
Banks have stopped giving Personal loan now, in the last 6 months i hv not been able to fetch a PL.
I dont have any cash or any investments now?
What should i do?
I need to buy a house in the next 2 months atleast.

Plese suggest.

Sophie

Hi Fisher, Thanks for all your valuable suggestio...

2010-03-23T20:38:25.418+05:30

Hi Fisher,

Thanks for all your valuable suggestions; I am sure this will clear everyone’s conceptions as it did mine.

I am planning to purchase a house very soon but that time duration could go to a year or more, in the meanwhile I have around 10L laying in my saving account. Any advice to use it wisely, I have already invested in generally most of fund like PPF, Bonds, FD, ELSS etc..

Thanks,
Vinod

Very nice analysis and really practical.Can u pls ...

2010-03-01T11:46:19.704+05:30

Very nice analysis and really practical.Can u pls comment on buying vacant land with existing savings say around 10L,without any loan in a remote place expecting appreciation in future say after 8-10 years.Is it a wise decision?Thanks and regards

Amanda, You are trying to say that the rent you p...

2010-02-27T21:46:28.101+05:30

Amanda,

You are trying to say that the rent you pay is a waste of money. Right? Okay, let’s say that current market value of your leased apartment is 50 lakh and you decide to purchase it from your own funds to save on the rent of 23K per month you’re currently paying.

Now, tell me where this money will come from? You’ll have to liquidate your existing investments to finance the house purchase. And, therefore you’ll lose out on the return you’re currently earning on those investments. Suppose your average rate of return on your current investments is 10%. So, to save an annual rental of 2.76 lakh, you would like to forgo an annual return of 5 lakh on your investments.

Please note that this is a very crude example just to put the point across and make you realize about the opportunity cost of owing a house. There are many other variables which need consideration e.g., other associated costs which comes bundled with house ownership, expected increase in property value over a period of time, the tax impact etc.

I hope you got the point!!

I read your answers to the dilemma faced by someon...

2010-02-26T15:24:52.494+05:30

I read your answers to the dilemma faced by someone over whether to buy or not to buy property. All very helpful insight. And honestly those are the very reasons why my husband and i have still not plunged into the bandwaggon. The truth is a loan as big as 80% of the property value, puts such high liability on a family and specially the working individual (despite the fact taht we both work) that i have seen very senior people also in proffessions doing yes man ship and not being able to leave a job not so good, because they have such huge loans.

Its scary to put away all the money one has into a house and then also have 80% of the loan pending. Our parents and grandparents never bought property with loans. they did it with the liquid money they had in excess. This credit system has completely skewed people's thinking.

Having said that, i still have one query. We are lawyers and stay in a rented house paying 23k per month as rent. As the family grows we will be forced to spend more on rent. we cant move very away from office since we are from small towns and still havent been able to settle into the bombay long distances travelling despite having lived here for 5 years now. But this money is only going waste is it? the place we live is closer to south mumbai though its central line, so its a lil cheaper.

Request you to throw some light or give some analysis on this please.

Thanks and regards,
Amanda

thnx fisher, Ideally i would get (3*2=6) lakhs - t...

2010-02-23T17:47:36.759+05:30

thnx fisher,
Ideally i would get (3*2=6) lakhs - tax after 8.7 years
What would the amount be after deduting tax at maturity?

One more question, Is NSC better or KVP?

thnx,
Purab

Purab, Kisan Vikas Patra (KVP) is a good debt ins...

2010-02-22T11:36:32.212+05:30

Purab,

Kisan Vikas Patra (KVP) is a good debt instrument for medium term investing. Your money doubles in 8 years & 7 months which means a CAGR of 8.4% which is taxable.

For more details, just wait for some more time…let me write a separate post.

Som, Yes, of course it is possible to build a cor...

2010-02-22T11:33:33.929+05:30

Som,

Yes, of course it is possible to build a corpus of Rs 1.2 crore in just 10 years by saving & investing a regular amount of Rs 60,000 p.m. provided the average post-tax return on your investment corpus is 10% per annum which is not difficult to achieve if you’re willing to invest 70% in equity (either directly or through mutual funds).

Invest Rs 42,000 in equity [assuming 12% (tax-free) CAGR] and Rs 18000 in debt (assuming a post-tax yield of 5.5%). And, if the actual rate of return is higher than the assumed, your target is likely to be achieved much earlier.

Hi, I am 30 years old & want to buy a house i...

2010-02-20T16:29:12.765+05:30

Hi,

I am 30 years old & want to buy a house in another 10-12 years either in Pune or Bangalore that costs around 60 Lacs in today's market, which I assume would be around 1-1.2 crores in 10-12 from now. I want to build that corpus & buy the house without taking loan. I dont have any investments as of now. I can start investing now with a monthly amount of 60000. Do you think its possible & if yes then how do I build that?

Thanks.

Hi Fisher, I have 3 Lakhs to invest, how is Kisan...

2010-02-17T21:53:05.391+05:30

Hi Fisher,

I have 3 Lakhs to invest, how is Kisan vikas patra for mid/long term investment.

thnx,
Purab

Swayam, You’ll be getting a (risk-free) return of...

2010-02-16T23:24:08.498+05:30

Swayam,

You’ll be getting a (risk-free) return of 1% per month which in my opinion is good enough. The other alternative is to invest in equities (but it involves risk).

Hi Fisher, I have 20L and i plan to give this mon...

2010-02-16T15:53:06.215+05:30

Hi Fisher,

I have 20L and i plan to give this money to one of my relative (trustworthy) who will be give me an interest of Rs 20000 per month. Keeping risk aside, could you please tell at what percentage my money is growing and is there any better way to grow my money beyond this rate.

Regards,
Swayam

Raja, To achieve your target of Rs 30 lakh in 3 y...

2010-02-15T21:07:11.379+05:30

Raja,

To achieve your target of Rs 30 lakh in 3 years by savings Rs 60,000 p.m., you need to earn an average rate of return of 22.5%. This is not possible unless you take undue risk by investing entirely in equities.

It will be a lot better if you can wait for 4 years instead of 3 years. By the end of 4 years your investment corpus will be 36.75 lakh (ignoring tax) @ CAGR of 12.2% assuming you invest in equity & debt in the ratio of 60:40 and with a further assumption of return of 15% from equity and 8% from debt. This also provides enough margin of safety.

hi fisher,i plan to make 30 lakhs in three years t...

2010-02-15T01:02:01.662+05:30

hi fisher,i plan to make 30 lakhs in three years to buy a house in my town.i save 60000rs after expenses every month .iam 25 yrs old and willing to take mediumto high risk.i alredy have a ulip(45000/annum) which is for the long term(25yrs) and i have money put aside for it.can u suggest me .i have no other jobs or responsibilities.

waiting for ur reply

tks
raja

Shashaank, I have already listed the various inve...

2010-02-11T22:47:50.262+05:30

Shashaank,

I have already listed the various investment avenues in the above post. Further… all I can say is that please don’t make the mistake of investing 100% in either equity or debt. Keep a proper balance as suitable to you. Secondly, while investing in stocks, please don’t invest in one go. For more details, read the blog.

Thanks Fisher, All, I get your point which is def...

2010-02-11T16:51:46.648+05:30

Thanks Fisher, All,

I get your point which is definetly practical, all i wanted is to be safe as this fund belongs to Me, my mother and brother, and hence i thought buying property was the best decision.

Fisher, Could you please suggest a good breakup of this amount (15 to 18 lakh) for a long term investment where in my family gets benifited.

Note:- I have enough fund for emergencies and marraiges etc... so any immediate cash requirement should not be a problem. Please suggest accordingly.

U have taken loan of Rs20Lk for 20 years and u end...

2010-02-10T18:00:19.916+05:30

U have taken loan of Rs20Lk for 20 years and u end up paying 20lk as interest alone to bank. Instead of that you invest those 20Lk (principle amount ) and get close to 50 Lk in 20 years .. so decide on what your up to .. you want to 30 more lk in ur kitty or end up giving 20 lk as interest rate ?? - Amit P

One more think Shashaank should consider is marria...

2010-02-08T17:00:02.351+05:30

One more think Shashaank should consider is marriage ( I am assuming he is single from his age ) .Setting up a house after marriage is not cheap . He has a good amount of savings and he should keep a part of it for this .