Experts,

I thought this is an interesting thought.

Say for an NRI who wants to work in US for next 20 years is it wise to move at least one property worth around 1.5crores to US and invest in commercial property.


Benefits:

1)Returns are more in US say for 15 years investment timeframe considering very low interest rates.

2)Diminishing or less returns if the indian property is in almost developed areas(like places where apts are going for 10,000 per square feet)

3) Positive cash flow that will help better lifestyle.

case in Point:
----------------

Assume an apartment(2 year old) worth 1.25 crores today in an area with 10,000 sq feet.
Returns expected in 10-15 years is say it might sell for 20,000 then values goes to 2.5crores

But in the new scenario the person moves money to US say he has around 220 K and he puts 30K more and buys a commercial property for $600,000K his load for 350K(15 years) will be around 2k and tax and maintenanace around 1K even if the rent is around 5K then 2k cash flow every month. so if 15 years he will get 375K + his property worth 250K + 350K + even assuming 1% appreciation avg he can make another say $100k

In India 1.25cr becomes 2.5crores
In US 250K becomes 650K + 360k( based on cash flow of 2K per month for 15 years)

Any thoughts guys. Also am I missing anything.

People like Rajagopal who have lived in US can add some more valid points.
Read more
Reply
12 Replies
Sort by :Filter by :
  • Are you saying Indian property will only double in 10-15 years?

    I find estimating returns of Indian property is very hard.
    Well, most city properties doubled in two years from 2010/11-2012/13. I myself have experienced in buying developed high rate areas and the rate going even higher.


    Also are you also implying US property will increase down the road?

    Well, we all know what happened.


    You are comparing leverage and buy/hold.
    US property is leveraged while Indian Apt is non-leveraged.
    CommentQuote
  • I am talking about apartments say a 9000 per sqft apartment in place like Velachery how much upward potential it will have after 10-12 years.

    A resale apartment in Andheri west(around 15 years old are available for 15,000 and in places like Greater Kailesh today 15 years old resale sells for around 18,000)
    CommentQuote
  • Originally Posted by k11


    Also are you also implying US property will increase down the road?

    Well, we all know what happened.


    You are comparing leverage and buy/hold.
    US property is leveraged while Indian Apt is non-leveraged.


    Yes using indian apartment value(say i am selling it) I can leverage a US property at current interest rates around 3.2% it is very attractive.
    CommentQuote
  • Did you ever think about leveraging in India itself.

    Try to sell the apt and book multiple apts under staggered payment
    or buying plots in far away places.


    Leveraging wins over buy/hold anytime when things are going well.
    No questions, where-ever it is.
    CommentQuote
  • Say for an NRI who wants to work in US for next 20 years is it wise to move at least one property worth around 1.5crores to US and invest in commercial property.

    Hi - Simple answer to this , leaving ecnomics behind is - Its best to invest where you plan to reside in future . All investments are geared towrds securing money , sothat you can live peaceful life during retiremnt .



    My friend who become a citizen in US is having tough time to sell properties he bought in india and bringing teh money to US , so that he can buy better home here .

    Also it goes other way around its toughtto sell a house worth 600k $, and transfer all of them to buy a property in india

    So it all depends on where you have decided to continue your life .. so since u have said 20 yrs in US and moving to india after that ..its better to create assets in india and manage tjem there itself
    CommentQuote
  • Most people do not move back to India.
    I think very few people after staying 20+ years might move to India soon.

    It is a good idea to look into property at your resident country (US, UK, etc.).

    There might be some good opportunities there itself and you might feel comfortable having property nearby than having 9,000 miles away.

    I myself have bought property from NRI (non Indian citizens) who migrated to western country long time ago. Many do not have anyone in India and it is big hassle to rent/maintain them. So they keep it locked mostly. Some people do not even visit India regularly, so I do not see a point in holding RE in India.
    CommentQuote
  • Well it is better for US Nri to hold 30 or 40 % in US I am trying to analyze based on returns.
    US real estate investments are not bad considering leverage,interest rates and rental yields.
    CommentQuote
  • US is becoming very protectionist. They want to ensure people who are coming into the country contribute to the local economy and not act like parasites. The immigration bill thats tabled is aimed to tap into the savings of the Hispanics and other illegal immigrants. The relaxation proposed to allow spouse of H1B workers to accompany and work is to ensure people dont work in US and send money back home. We can expect more and more such restrictions to cut the flow of money outside US including taxation/fees. If Obama succeeds it will kick start the US economy and put it back on track. But it will create a challenge to all NRI's who have heavy investments in India and paying loan by remitting. If you ask me, for a person who is going to live in US for 20 years he should buy in US preferrably one residential and one farmland/commercial property..get a citizenship and get settled there. If the person is like a ABCD(American Born Confused Desi) with conflicted patriotism and attachment towards both India and American Culture.The person has to very carefully analyze their priority, discuss with family, explore employment opportunities and decide where they want to spend their life and grow their children and decide quickly within the next 2 years.
    CommentQuote
  • K11 - Ias rightly said 20 yrs no one will go back to indi .Incase if they go they will come back within 6 months being unable to cope up . thats the reality ..
    nabhiskek --R u talking abt the ABCD kids ..they may not be old wnugh to invest in RE .

    The fact is simple - if you have spent more years in US , invest there and keep your life happy there .

    Short term ( say less than 6 yrs ) - staying their for work purpose only and planning to lead life in india ..invest in india ..

    small example - i was impressed with scenic beatuy in kerala near kuttralam (place called aryangavu surronded by rainforest ) asked my friend whether i can buy a land there ( for summer recreation home like that ) , he said its not safe to buy land in kerala when u r current residence is in chennai .anytime u might see some communist flag there stating its their land .

    So the point there is no protection for property if u r not staying closer to it
    CommentQuote
  • Diversifcation

    I wanted to listen and understand different view points before answering this OP's question.

    The context was for NRI settled in US who wants to continue to be in US for 10-20 years is investing in a primary or an investment property a good option.
    The simple answer is YES.
    The complex answer is YES but you need to know what and where you are buying
    Primary homes in US, dont look at it as an investment its a community to live raise kids raise family go to quality public school ( FREE ) and put them through college.
    if it can give you good returns, yields then enjoy it
    If you have good returns in india say you had 2 grounds of land in mugappair, neelangarai, OMR, uthandi, rajkilpakkam etc where you picked up a grround for 10-20L and its worth now 1.25 to 2C you want to cash out and bring that money and do some diversification in US, the answer is yes, But the mechanics is complex
    You need to first get a vehicle to get the money into US, secondly as suggested by other members buying farmland or commercial may not be good, land yields slow returns and with property taxes levied yearly the roi will not be great.
    Its better to buy cheap 150 to 200K or 250K condo / town homes with rents around 1600 to 2200 range a month all USD . average rental yields should be 12 to 16 percent on an yearly basis
    Renting in US is not that simple as well, each state as different rent control laws, im from VA ( very republican ) so it protects landlords, if the tenant does not pay rent in 5 days of the month i can go change the locks of the front door and sell every thing inside the house in an effort to collect my rent , i cannot do this in MD or DC, so state laws dictate where you buy / rent
    You need to know you are renting into, what happens if they cause damages to the property, fixing it is not simple ?
    there are horror stories of renters and smooth stories as well

    Long story short, rental townhomes/condos in a good economy areas in US are good bets if you can make meaningful rental returns north of 10% atleast ( im sure there are going to be a lot of nay sayers, saying where can i get 10% - but beleive me there are and there is as high as 17% under my belt)

    Cap appreciation of 3 to 5% a year yoy on a good location / job economy and school system is some thing you can expect.
    Ofcourse crashes like 2008 can destroy such appreciations
    But many forum members wont beleive if i say that the area where we live is back to the 2006 peak level values of all our houses. yes hard to beleive but true and can be documented with proof / values In fact some communities have gone past the 2006 peak value as well.
    go figure. .. ( K11 made a comment of capital destruction in RE crash in US, what went down has come up - but not across US but in VA/MD metro - )


    now turning attention to Nabishek-s view point, im quite amazed and to be honest shocked to hear the views you have on Obama's plan or the current immigration bills motivations etc. actually im not a fan of O's tax policies, but regardless of what he can dream, think or try, such attempts will never pass in congress, i can gurantee you , even the immigration bill i will wait to see it to beleive it, since 2004 there has been 6 attempts to pass such bills nothing went beyond conference committees and clojure votes.
    even if it does pass, it cannot stop me or my right to send convert transfer my post tax paid USD to any country, currency asset i want
    what O wants is to make sure we declare all our assets and show profits on foreign investemnts and pay tax on that, and yes creative investements and accounting practises will follow to find loop holes.
    FYI i value nabishek's observations a lot and i have said that many times in this forum, hence my awe on your views on US protectionist plans.. which even though appears as such it is merely a politcal jargon/ stump speech nothing more, the capitalist system here will never allow any thing like that to happen
    CommentQuote
  • Originally Posted by SRajagopalan

    now turning attention to Nabishek-s view point, im quite amazed and to be honest shocked to hear the views you have on Obama's plan or the current immigration bills motivations etc. actually im not a fan of O's tax policies, but regardless of what he can dream, think or try, such attempts will never pass in congress, i can gurantee you , even the immigration bill i will wait to see it to beleive it, since 2004 there has been 6 attempts to pass such bills nothing went beyond conference committees and clojure votes.
    even if it does pass, it cannot stop me or my right to send convert transfer my post tax paid USD to any country, currency asset i want
    what O wants is to make sure we declare all our assets and show profits on foreign investemnts and pay tax on that, and yes creative investements and accounting practises will follow to find loop holes.
    FYI i value nabishek's observations a lot and i have said that many times in this forum, hence my awe on your views on US protectionist plans.. which even though appears as such it is merely a politcal jargon/ stump speech nothing more, the capitalist system here will never allow any thing like that to happen


    Thanks for your words SR. Regarding my interpretation, Its purely my personal view and I dont have any solid basis or know if there are any others who think like me. So yeah its my gut instinctive reading trying to understand the mind of US policy makers. My reading of Obamas strategy is stemmed from the fact that they have realized the Quantitative Easing is not working..To get people to invest in American economy there are two things that they can do..one is liquidify and sell assets in america or two..Open the gates to people all over the world and come to invest there. I believe this immigration bill is a clever and subtle way of them trying to balance both the strategy. Let me cite one condition they have put in the draft bill which is denying H1B employers placing their employees at client location..That is such a blow below the belt for IT companies. If at all it happens to become a law, companies like TCS,Wipro all will be forced to open their own offsite development centers/look for acquisitions in low-cost cities/suburbs of US and they will start campus hiring and giving training to US graduates. Indian IT companies will be fuelling a RE boom in US also like in India :) contributed by and bought by Indians :)

    Also as you said in US they have starting asking to declare everything including why you want to send money to India. From my NRI friends I understand that to apply for a loan in India and give power of attorney, now it requires to be apostilled by state department. Earlier I understand for home loan just visiting the embassy would suffice. You may please correct if I am wrong. This all seems to me as some signs of tough measures to come. The current bill is filled with so many such caveats which can be read between the lines. Yeah I may be reading too much into it too :)
    CommentQuote
  • True Rajagopal.
    In PA where we live it has come up to 2005 level. May be next year it will come back to 2006 peak. And again renting is ok in PA since rules favour landlord but NJ favours tenants and vacating is not an easy job there.
    CommentQuote