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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    Originally posted by manzb View Post
    It's a good idea.. but it seldom happens.. EMI is a forced saving (plus some tax benefits).. most others are not..
    I know many people who take a loan for exactly this purpose. Buying something on a loan forces them to save every month which they wouldn't do otherwise. Also 'having a loan', means they have to hustle every few months to pay it off. So that way they get a asset, rent income and saving discipline too!

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      that is how big corporate works. They always have big sum at their disposal but they always loan from bank.

      Having loan sometims a smart decision not a bad idea

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      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Originally posted by Sj2013 View Post
        that is how big corporate works. They always have big sum at their disposal but they always loan from bank.

        Having loan sometims a smart decision not a bad idea
        Remember one thing there is lot of difference between individual and corporate entity.

        What may be good for company cannot be good for individual.
        Last edited by MANOJa; June 28 2016, 06:04 PM. Reason: Text formatting.

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        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Leverage is beneficial only if the cost of funds is lower then return on investment. A corporate which is capable of earning 20% ROI, will take a loan at 14% to buy assets even if they have loads of money. Similar for individuals. If your investment is giving higher returns then the cost of debt... go ahead and use that leverage.

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          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Originally posted by rembrants View Post
            Leverage is beneficial only if the cost of funds is lower then return on investment. A corporate which is capable of earning 20% ROI, will take a loan at 14% to buy assets even if they have loads of money. Similar for individuals. If your investment is giving higher returns then the cost of debt... go ahead and use that leverage.
            unfortunately, a lot of home buyers think on similar lines, which led to the mad rush for property in recent years.
            People try to maximize their loan amount as they pay 9.5% interest on mortgage amount, which, after deducting tax benefits comes down to 6.75-7.5. Consider a 5 to 15% annual appreciation of property. This has been the financial model for residential home purchase.

            Compare that with saving your own money in FDs, getting 8.5% interest and 6-7% post tax returns.

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            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Why is this non sticky?

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              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Originally posted by BaagadBilla View Post
                Why is this non sticky?
                Made a sticky .

                Looks like some software issue, many sticky threads seem to be getting unstuck .
                Download our Android App! | Please Read IREF Rules | FAQ's

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                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by MANOJa View Post
                  Made a sticky .

                  Looks like some software issue, many sticky threads seem to be getting unstuck .
                  Cool.
                  At least one thread about bubble burst needs to be sticky. Also there are some threads which are sticky but they should probably not be.

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                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by GlobeSon View Post
                    unfortunately, a lot of home buyers think on similar lines, which led to the mad rush for property in recent years.
                    People try to maximize their loan amount as they pay 9.5% interest on mortgage amount, which, after deducting tax benefits comes down to 6.75-7.5. Consider a 5 to 15% annual appreciation of property. This has been the financial model for residential home purchase.

                    Compare that with saving your own money in FDs, getting 8.5% interest and 6-7% post tax returns.
                    There is nothing unfortunate about it. As some one from middle class, I had a high 'loan fear', typical fear of going into debt. But the more I thought about it, the more it made sense.

                    These days an EMI of 10-20K a month is nothing compared to returns you get on land in outskirts in a city like Bangalore. The only thing is please just hustle and clear that loan in 2-2.5 years and go for a new loan and new property.

                    This way you save, invest and also get an asset. I don't see any logic sleeping on top of opportunities as they come and go by.

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                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      EMI of 10-20K a month

                      clear that loan in 2-2.5 years

                      u mean to say loan amount ~5 Lacs

                      This way you also get an asset.

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