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- I would go for 1000 sq ft GF construction.
Aspects to consider
Once GF is built higher property taxes as it would be on rent.
Scope for expansion should be kept in mind while applying for initial sanction from Corporation.
Another important benefit would be vacation by tenant and property would be back in your hands for demolition.
Keeping old structure on rent has its won danger-in case some even partial collapse takes place.
Take minimum loan only.
Assess the possibility of getting more tenants and then only think of additional floors at present juncture.But definitely obtain building sanction for the total project you have in mind and then move step by step-first Gf,see result and financial benefits,then move to next step of more flats.CommentQuote0Flag
- Let's say 56L Lakhs of investment in construction gives you 2.8L in annual rental that is 5% today.
In 40 years, this investment will diminish to zero or worthless.
How much does 5% with an annual incremental rise of 5% in rental fetch in 40 years? Roughly 68 times the investment cost assuming the rental cash flow is invested at 12% elsewhere. This is too ideal. Maintenance cost, property taxes and your personal time in this ordeal are not factored.
What is the CAGR expected for the initial investment to match up to the 68 times return in 40 years - ~11% !!!
If one has avenue or have reasonable confidence to make 11%, why construct, deal with tenants and make much lesser than 11% at the end?
Moral: Spend as little as you can so as to prevent it from encroachment and try to make the returns via Capital Gains and you will come out ahead if rental cash flow is not expected to be used for personal expenditure.CommentQuote1Flag