Buying vs Renting a House
Considering the ongoing debate between renting and buying a flat, I've noticed many financial influencers suggesting renting and investing in mutual funds. However, there's a strong emotional aspect to owning a house, especially post-marriage and kids. What factors should one consider before purchasing a flat in metro cities like Hyderabad or Bangalore? Personally, I've contemplated buying multiple times, but after analyzing my finances, I've hesitated. I'm currently leaning towards ensuring my net worth covers at least 60% of the flat cost when making such a decision. In the long run, I believe the interest earned on my net worth could potentially cover EMIs during challenging times, like job loss or unforeseen circumstances. For instance, if I opt for a 2 Cr house, I'm considering a minimum net worth of 1.2 Cr across various asset classes like Mutual Funds, Stocks, PF, PPF, NPS, SGB, and more. What are your thoughts on this? #MiddleClass :-P
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One roof that one can call their own is absolutely a must.
No amount of return can justify not owning at least 1 own house.
Owning a house gives peace of mind.
And peace of mind > everything else.
Also, the way rents have skyrocketed in several areas, owning a house makes sense.
Does one roof at your hometown count!? I’ve always thought I’ll go stay with my parents in case I lose my job and this, at times, doesn’t make me feel that I would not have anything if I were to lose my rented flat or ability to pay the rents.
Considering you pay 50L down-payment and take 1.5cr loan at 9% interest, monthly EMI is around ~ 1.3L = 15.6L yearly.
Avg 11% return on 1.2cr is 13.2L yearly - taxes. Most MFs, Stocks don't have regular return so I would say it can get tight when market is down and you lose your job.
Also, always take insurance for your loan.
One thing we may need to consider is we don't lose the job or so immediately after buying the house. In that sense, the investments would have grown to certain X in Y years let's say.
True. Your salary would also increase due to yearly hikes if you don't lose your job.
So there are lots of variables here !
I did the same thing that you are trying to do. This looks good on paper but lots of negatives floating around in real.
I was lucky, got no non-sense landlord,allowed me to stay for longer period, rent did not increase much in my area(savings increased).
Currently I have inflows from investment much greater than my emi outflow.
Lots of pros if things go very well.
Don't have to worry about losing job.
Don't have to take L from toxic people
Family is secured
Mental peace
You can check about livability of area first hand by staying on rent where you are seeking to purchase home
Cons All problems related to staying on rent (landlord, rent increase,have to ignore naughty relatives taunting about not owning home) Need to get better increments for increase in savings
Don't leverage much though after accumulating assets
There should be a separate page on grapevine for people buying property in Bengaluru. I will be the first one to follow it.
You are approaching it right.
House vs rent is a simple sounding debate but is extremely nuanced.
For most, buying 1 home to live in makes sense provided:
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You have the capacity to pay 50-60% as down-payment. It's just having the assets to do this. Don't have to liquidate.
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You are married. Life changes post marriage, your partner preferences may vary.
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You know you are going to live there for atleast 10 years.
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You can buy a ready to move in house with the premium attached to it.
Buying a house is fraught with enormous risks which have bankrupted many families. We only talk about the success stories. But it's a necessary evil for most and hence prudent to approach it with caution.
PS: Both parents and I have been living on rent for most of our lives in spite of owning homes
For the last para, Is it because of long travel?
Get the perspective from other side:
-Buyers who have EMIs and lost their jobs. -Buyers who did not see income increase via increments -Buyers with under construction property, which got delayed, subvention period finished way earlier. These would have to pay EMIs and rents simultaneously. -Buyers who bought from 'reputed brand' builders but still faced issues with construction/leakage etc.
Buying a home is an emotional "expense", not an Investment. So treat it as any other expense. Don't pour more money into the emotional deal that can lead you to compromise on other aspects of your life. Stay within a budget.
If you can make 40-50% down payment, you should go ahead.
At the same time, you should think before buying a house that it will not tie you down to that locality/city.
One house for living purpose is a must. I don’t see how having crores in bank help if you don’t have peace of mind. Shifting rented houses every 1-2 yrs, increasing rent, not able to design the house your own way, etc will start irritating once you reach 30’s.
Obviously the builder should be good enough, down payment capability should be 30-35% of the total house cost, locality should be good enough, etc
There is only 1 factor. How much money you have?. If it is more than 75% of the house value, and it's your first home then yes.
If you already own a house in a city, then no.
Saying that you should rent a house instead of buying a house to save money is like saying you should live with whor*s instead of getting married.