rent vs buy emi vs rent home loan vs sip in telugu
rent or buy calculator
full payment or loan
home loans at low rate (just below 2% equals to inflation). tax benefits.
SIP vs Home loan
buying for rental income
1-2% monthly rent or 10% yearly 10 years property free.
1 cr 50K 6 lakhs 7% better yield.depends on area.(appreciation,inflation)
70 lakhs
rent 7k
1% 1.2% (70 lakhs 7-15% 10% 7oK)
appreciation is speculation 10-20% appreciation, property depreciation,
property tax, maintenance 1% home loan 3%.
20 years buying cost 83.lacks renting 40 lakhs
home loan vs sip
interest rate 10% 10% to 15%
14 lakhs as lump sum for 20 years.
46 lakhs as sip for 20 years
Mutual fund SWP vs home rent
Thumb Rule: unsecured job, no financial discipline or sudden money then go invest in house.
How do people make money by renting?
- foreclosed, house under market value with cash.
- Cash Flow (positive cashflow rent vs buy)
- Amortization (EMI goes down rent increases)
- Appreciation of property
- Tax Benefits
Investment vs speculation
the investment gives actual, speculating the return is not actual value. so use rent s buy for positive or negative cash flow instead of expecting returns on long term also aware of inflation.
Buying Home for self-occupation
expected growth property
expected growth rental income
expected growth expenses:
Variable factors:
inflation rates
bank interest rates
Returns
the property cost 1%
maintenance 1%
cost of capital debt >> 80% loan 3%, equity down payment >> stocks
stocks 5.2% after inflation real estate 1.3% (1.7% inflation)
stocks 3% higher = loan 3%
take home price multiply by 5, then divide by 12
if rent is low then renting good
taxes change the rule
Buying Home/Property for Rental Purposes
for renting
2% monthly rent of home value
1%(after deducting expenses)
2000/200000
$2000 monthly
50% rule
rent 2000/2
$1000 (taxes,insurance,utilities depends on area)
1000
Loan amount:
-600
+400 Cash Flow
wholesalers/flipping house
70% after repair value- repair cost
300000
210000
-50000
160000 (lawyer fees, closing fees, commission, registration charges)
85% or
buying home or rent
5% rules
1% of property taxes
1% maintenance
3% interest rate for the mortgage
(20% down payment may yield equal to 80% debt)
Price to (rent) Earning ratio
ex: stock price yield 10% bank fds 7%.
Loan rate 10%
Property value
50 lakhs rent 5-7 in outcuts
(no one pays 7K for renting outcuts)
6000/5000000=0.12%/m
1.44% annual (cap rate) income returned //inflation rate 5%
-3.66% // appreciation of property Not a legit way 10% you bought overpriced
if the rent 10% (2%monthly =24% high profit) yearly that’s the true actual value. because investment gives the same returns
Taxes
Maintenance
Loan EMI
while fd 7%, MF, stocks 10-24%.
The cap rate helps to bank
lending decisions on property
Capitalization Rate = (rent)Net Operating Income / Current Market Value
Capitalization Rate = Net Operating Income / Purchase Price
yearly
ex:
70000/1000000 =7% (cap rate)
for new properties
another comparison
price to rent ratio
15 buy
15-20
20+ rent
risk analysis or opportunity cost
rental increase 5-10%
property: 10-25%
stocks
large 13%
mid 21%
small cap 25% in the past 5 years*
cost-benefit analysis
tax
maintenance
registration(6%), broker charges(1-2%)
tax
home loan 1.5 lakh + 2 lakh
tax 80GG 5% of income 60K
financial worth
salary 1 lakh per month
loan 40-50
term 20 years
Downpayment 20% 1o L
registration,broker: 2 lakhs
reserve money: 5 lakhs
EMI 40k/m
60K for expenses
emi should not be more than 50% of monthly income.
income stability
unstable jobs
home loan dangerous for self-employed
Selling difficult we
preferences:
mobility
changing cities
fed up renting want to feel cool peace of mind
then buy.
land rate grows but not the house.
buy land outskirts when the price & popularity increase to build a home to rent or stay
Property price
Appreciation
Rent
Monthly income
loan
Down payment
10 lac
Loan Amount 40 lac
Loan Tenure
Interest rate
tax
The deductible amount in 80C
Tax slab (10, 20,-30%)
Annual savings
Rental Property vs. Mutual Funds (EMI VS SIP)
good rental yield for rental property is generally 8% or more. Anything below that, might not be sufficient to cover running costs and mortgage payments.
Mutual funds have historically returned 7- 9 %.
80% (40 lakhs) on the loan (EMI or Rent)
20% (10 lakhs) as a downpayment or (lumpsum investment in MF /ELSS or index funds)
50 lakhs home, 6K rent
20 Years Term
Principal: Rs. 40,00,000 (46.1%)
Interest Payable: Rs. 46,68,263 (53.9%)
Total Amount Payable: Rs. 86,68,263.8
Interest rate: 9.05pa (only for govt)
EMI: 36117.17 after 20 years 86,68,263.8
Rent: 6,000 (5% increase in evey years) after 20 years = 24,44,746.70
10 Lakhs at lumsump after 20 years at 10 CAGR* = 67,27,499.95
4-6% registration charges
EMI – Rent = 8668263.8-2444746.70 = 62,23,517.1
Total savings for rent (6223517.1+6727499.95= 1,29,51,017.1
Property appreciation at 5% (10%- 5%inflation rate) CAGR for 50 lakhs for 20, years = 1,3266,488.53
- Maintanence + property taxes = 1% of
- Proprtery taxes (15-30% of the annual rental value)
- Maintanence (0.25 to 0.25) of property value.
- loan EMI interest 10%
Property depreciation + Land appreciation
https://plots9.com/land-investment-pros-and-cons/
Value Investing In Real estate
understanding the difference between price and intrinsic value
PEGR>> Expected Growth rate based on fast & Future years.
Expecting people where the go // because of companies or jobs, facilities roads, train expansion, focus on developing area areas