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Pune 1 BHK Apartments Sell or Wait

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Pune 1 BHK Apartments Sell or Wait

Last updated: July 23 2015
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  • Pune 1 BHK Apartments Sell or Wait

    Hi Guys,

    I am in a dilemma and need your help and thoughts which will help me in making the decision.
    You guys always helped me with rich insights and thoughts so expecting the same from you this time as well.

    Sorry for too lengthy post but this should give you better idea of the dilemma.

    Me and my bro bought 1bhk each on the same floor (top floor) in Rahatani in a project which comprises of 3 buildings (7 storied each with 4 flats per floor) and basic amenities such as intercom, generator backup for lifts, common areas, garden with play equipments for kids and a senior citizen sit out (builder can show at least 20 amenities in same garden space which I found difficult to locate such as news paper stand etc etc).
    The project is main road touch on rahatani kalewadi link road with easy accessibility to all the required and not required day to day needs such as markets, PS (only 1km from shivar garden), ATMs, schools, hospitals, public transport and so on..
    These were our parameters when we decided to buy here.

    Why 1bhks? At that time we had limited budget so we went for a 1bhk each and joined them - 1 entry is closed, 1 kitchen is converted to guest bed and baths got attached to two beds with 1 common bath and 1 common indian toilet.
    But we have separate agreements and electricity connections as well as society's separate two units for all practical purposes and we can separate the units at any time.

    We booked these flats in July 2009 when we were just coming out of recession and got possession in 2011.

    As time passed, me and my bro progressed in our careers and decided to go for something bigger and then my bro bought a 3bhk.
    Since then we are living in this new spacious 3bhk and recently I locked a deal of a 2bhk nearby our existing residence.

    We kept 1bhks locked for few months and then decided to rent out - so we locked up our goods which we left there in 1 bed and rented this flat as a 2bhk 8 months backs for 13k per month.

    These two flats (as a 1 unit currently) have only 1 big parking which is on the corner of building which we selected as it can accommodate 2 cars but mentioned in only 1 agreement.

    Main Question -
    1. Shall we separate them and keep renting them out as 1bhks which can fetch 9 -10k per month each?
    2. Shall we separate them and sell one unit to recover some money which may help in existing new loan?
    3. Shall we sell it as it is - joined?
    4. Shall we separate them and sell both and invest somewhere else?
    5. or Keep renting as 2 or 3 bhk in current state?

    My bro says that we should sell these both flats (after separating them) which will help us minimizing our current loans. I am of the opinion that instead of again spending in separating these, we should sell them as it is even if we get 2L less or we should keep renting it as it is (as a 2bhk currently). It never takes much time to find tenant here because of good location and basic amenities of the society.

    What's your take on this?

    To add to financial angle, we bought these for 18L each and now we can see that current market prices are around 35-40L for 1bhks.

    If we should sell these, shall we reinvest it somewhere in RE or pay off our current loans?
    10
    Wait / Hold
    30.00%
    3
    Sell / Book profit
    70.00%
    7
    Can't say
    0.00%
    0

    The poll is expired.

    Last edited July 23 2014, 03:13 PM.
  • #2

    #2

    Re : Pune 1 BHK Apartments Sell or Wait

    What's the current rent you are getting on the property? Do you have any reason to lessen your burden of EMIs (spouse leaving job, kids costing higher etc)?

    If I were in your place, I wouldn't have sold if the rental is good and smooth - as you say finding renters is very easy.
    If you want to sell - when did you buy your current 2BHK/brother bought his 3BHK? If it is in last one year, then you can save your capital gains tax as you can show the profit from sale of those 1bhks adjusted in the purchase of these properties.
    For selling, 2 combined will be less than 2 separate flats. But it will be doubly time consuming. How far are these 2 1bhks from your place? Do you have to travel far to reach them?

    The way I calculate is, assets is something that gives you money. Real estate is thus an asset, that pays you back the rent every month. If you want to sale your assets, make sure you put your saved money into another asset (not just RE, but gold/stocks/fd whatever you believe in), and not blow up the sudden savings in EMIs on cars and hoteling etc. They are important, but not on the cost of sacrificing assets.

    EDIT:
    If you decide to sell, sell the flat with no parking allotted first. Selling it afterwards will be very tough. (however it depends on whose name it is!)

    Comment

    • #3

      #3

      Re : Pune 1 BHK Apartments Sell or Wait

      Originally posted by TheTruth View Post
      What's the current rent you are getting on the property? Do you have any reason to lessen your burden of EMIs (spouse leaving job, kids costing higher etc)?

      If I were in your place, I wouldn't have sold if the rental is good and smooth - as you say finding renters is very easy.
      If you want to sell - when did you buy your current 2BHK/brother bought his 3BHK? If it is in last one year, then you can save your capital gains tax as you can show the profit from sale of those 1bhks adjusted in the purchase of these properties.
      For selling, 2 combined will be less than 2 separate flats. But it will be doubly time consuming. How far are these 2 1bhks from your place? Do you have to travel far to reach them?

      The way I calculate is, assets is something that gives you money. Real estate is thus an asset, that pays you back the rent every month. If you want to sale your assets, make sure you put your saved money into another asset (not just RE, but gold/stocks/fd whatever you believe in), and not blow up the sudden savings in EMIs on cars and hoteling etc. They are important, but not on the cost of sacrificing assets.

      EDIT:
      If you decide to sell, sell the flat with no parking allotted first. Selling it afterwards will be very tough. (however it depends on whose name it is!)
      Hi TheTruth, Thanks for detailed reply and queries.

      We have rented it as a 2bhk now by locking up one room and we are receiving 13k per month for it.

      We are planning to get a 4 or 5 bhk in near future, to fund that we thought that we should sell these two + recently booked 2bhk if we get a good deal for 4-5 bhk. No sudden need of money, only if-then kinda plans

      Just thinking wise it was - lesser the EMIs - more the savings.

      Yes finding tenant in that area is not that tough. We can rent it as it's rented currently or we can separate them out and then rent each individual 1bhk without any issue. As current tenant is going to vacate next month, we were thinking about above plans.

      I booked my 2bhk 2 weeks ago and builder quoted march 15 for possession. Bro's 3bhk is 2 years old now.

      These flats are in Rahatani, we stay in wakad - so they are not more than 3-4 km from our place.

      Do we need to pay capital gain tax of we sell it now? It's after 3 years of possession we'll be selling it. How much will it be?

      Will it not be good idea to reduce existing EMIs on bigger loans with the money we get from this sale?

      A broker, in a discussion, told me that buyers of 1bhk usually are not keen on parking and society has ample place to park their vehicles so it'll not be an issue but we need to lower the price a bit.
      Last edited July 23 2014, 05:37 PM.

      Comment

      • #4

        #4

        Re : Pune 1 BHK Apartments Sell or Wait

        What price you are quoting for it as a whole unit, someone in my friends is looking for compact 3bhk or a 2.5 bhk..
        can you post room sizes and floor plan of resulting 3bhk here?

        I think it's 3 years old now as you got possession in 2011, you can wait for next 3 years to see little more appreciation. I think after that point, appreciation will not be much and it depends on the project.

        Comment

        • #5

          #5

          Re : Pune 1 BHK Apartments Sell or Wait

          Originally posted by REinvest View Post
          What price you are quoting for it as a whole unit, someone in my friends is looking for compact 3bhk or a 2.5 bhk..
          can you post room sizes and floor plan of resulting 3bhk here?

          I think it's 3 years old now as you got possession in 2011, you can wait for next 3 years to see little more appreciation. I think after that point, appreciation will not be much and it depends on the project.
          I tried to put the changes in plan with original from builders site.
          Salable area for each 1bhk was 600 sqft at that time which included 20% loading and 50% balcony without loading.
          Attached Files

          Comment

          • #6

            #6

            Re : Pune 1 BHK Apartments Sell or Wait

            @investwest - This is a tricky situation. All the calculations from the financial point of view should be evaluated. In my opinion, first you can check the amount of NET money you are making in total on both the flats per month. You said you also have a loan, so subtracting the interest and the maintenance costs, what is the final amount you are making through rents per month. That is the first assessment you have to make. Now if you sell both the flats and put the total amount in Fixed Deposits (to be on safer side), how much interest would you earn per month? Then compare the interest income vs the rent income. If the rent income is significantly higher, keep the flats (but try to close the loan as soon as possible through other means if available). If the interest income turns out to be even little higher, then just sell them. It is always better to exit from the market when you think the prices are at its peak. Also the young generation mentality is such that they always want to go for newer flats now a days with new amenities and stuff. So if you keep your flat for long, your flat will start aging. Although Rahatani is a very good area now that is what it makes little tricky. It has a potential to grow but again I would make a safe exit now and then re-invest the funds in FD/Stocks. As of now, I believe that real estate is already running at its peak and it doesn't have that capability to return huge profits now. Market is stagnant for quite some time means prices are neither increasing nor decreasing. And one more thing to consider is loans, one should always close the loan if he has the money unless that money is invested somewhere and giving more returns than the loan interest rate.

            Comment

            • #7

              #7

              Re : Pune 1 BHK Apartments Sell or Wait

              @investwest - Regarding selling it separate or together, I think you can give both type of advertisements - together or individual. Capital gains tax is applicable if you have kept the property for 3 or more years. But it is waived if you buy another residential property (providing this is your second property, not the third or more) within 2 years after selling your flat or it is also waived if you have already bought a residential property within past 1 year of the date of sale. The capital gains is taxed at 20% of the the gains. For example you had bought the flat at 20 lakhs. Before calculating the gain, the acquisition cost of the asset is recalculated based on indexation, which factors inflation in its calculation by using the Cost Inflation Index. This means there will be some amount added in your purchase amount so your purchase amount will be for example 25 lakhs instead of 20 and thus your gain will be reduced to 15 lakhs instead of 20. After that the capital gains will be taxed at 20% on the net 15 lakhs amount.
              Last edited July 23 2014, 11:20 PM.

              Comment

              • #8

                #8

                Re : Pune 1 BHK Apartments Sell or Wait

                i would suggest you hold of till you buy 4-5Bhk house .... the two flats will be your hedge against price rise when you decide to buy the bigger one...offcource this is good if you can manage your homeloan ...you have picked up flats at lower cost so from a return perspective you are getting approx 5% rental yield which is good ...rental demand in good society is decent so you can expect higher rent later.... also if you split two flats a 1 bhk and 1roomkitchen (keeping one rroom locked) you can easily get rent of 9K+6K...

                Comment

                • #9

                  #9

                  Re : Pune 1 BHK Apartments Sell or Wait

                  I will only suggest one thing. Since you have a home loan on your second property and the first one is rented out, you will be enjoying good tax benefits on your second home loan. Home loan is not a bad loan to have. You should never be in a hurry to finish your home loan if the loan is taken for a property which you are using for self. Think of it this way, the property price is increasing, inflation is increasing, which means the cost of loan is going down gradually. The EMI of 40K may pinch you today, but maybe it wont seem much of an issue after few years. So if you are not in dire need of money, dont sell off simply to repay your loan. You should sell off if you can use that money for another potential investment.

                  Comment

                  • #10

                    #10

                    Re : Pune 1 BHK Apartments Sell or Wait

                    If I sell these two flats, I'll make at least 15L each. So considering 13k - current rent Vs interest of 30L - interest part is higher today.
                    So if I put that amount in FD or use it to minimize my existing loan still I'll be in benefit than renting it as it's rented now.

                    I think Rahatani is yet to see it's peak, what do you think?

                    Capital Gain Tax - ok, so if we manage to sell it this year, we can save capital gain tax on 1 flat and will need to pay for other one (my bros) - seems ok, not too bad. Cause in our case profit from 1 flat will be approx 15L and adjusting it for indexation will be even lower. We booked these in 2009 and got possession in 2011 so indexation will count from 2009 or 2011?

                    Hold till we buy 4-5 bhk - Will it be so easy to sell these off if we strike a good deal for 4 or 5 bhk? Or will it be better to have money in hand and then plan next?
                    I agree that as rates will go up, rates for these flats will also go up, even if not as per the rates of new property but still they'll grow.
                    This is a considerable point, that we'll have to only pay for hike in additional area than what we held now in these two flats. But this is all the confusion.

                    Splitting them involves cost - approx 1.5 L. (i.e. approx 1500 per month interest) so if I add this interest of 1.5L to existing rent of 13k - I end up in same amount.

                    Loan on second property -
                    Ohh I missed this completely, so I'll get full interest deducted for second property from next year (possession is in march or april 2015) which will be a significant saving.
                    Thanks to point this out - inflation increase will reduce the cost of loan and at the same time rent may also go up by at least 1k per year.

                    If we decide to sell, what will be more profitable investment of this money? FD seems better than rent at this point but I also agree that rent will surpass this but it'll take (long) time to do so.. Also, currently we need to pay the maintenance and taxes for these two flats which are around 50k (including everything for two flats) this year.
                    So 13X11 (considering 1 month to find new tenant) = 1,43,000 earning minus 50k expenditure for these flats = 93000 total earnings out of these two flats which comes to only 7700 per month so selling these and putting amount in FD makes more sense to me, any thoughts?

                    What rate (price of 1bhk) we'll get after 4-5 years in that area? or say, how much we can expect now and down the line 4-5 years?

                    Same about rent, we are getting 13k, how much it can go up in next 3-4 years?

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