Buy house or invest money?

rigardo2

Hey everyone!

I found this forum on google while searching for some financial advice. Well, I need some advice about making myself financially strong & take the right decision about buying house/investing in properties/business at this point of life.

I am 25 year old, just married, living with my joint family. I have my business thats self-sufficient and I draw around $2000 as salary every month (which is enough to live a good life in a country like India where I live).

I have been living in a rental house for 3 years paying $300/month. The contract is expiring next month which means I need to find another place to live. When I searched new rental houses, its gonna cost me around $500 to get a good one now.

I did not have enough money to buy house 3 years ago and I used to think (still think) that buying a house and living yourself in it is so stupid. You can never use that money because you are always living in the house. Its hard to leave/move/switch houses. And it doesnt matter whether its worth even millions. But as the rental is going to be increased, I am forced to think why not take some more loan and buy own house and pay the rental + some more money to payoff the installments.

At the same time, the other mind says to take it as a business and better invest in small lands/plots, get around 40-50% annual roi each year(as you knw one can easily get in booming country like India) and payoff all expenses with that. And keep living on rental.

I have around $20K in assets in my business & I draw 2k as salary. So, I dont need to worry much about it.

Other than that, I have saved around $10K for emergency funds. And another $2K as general savings.

I have around $40K which I could use for either doing a downpayment for a house or invest in properties. This is all liquid.

Talking about the expenses, I am paying $600 a month for my car debt (just bought) for 7 years (debt around $28K). I am paying $300 as rental (gonna go up to $500 if I go for rental house next month). $1000 personal/family expenses. Overall around $1900-$2200/month. $22,800-$26,400 annually.

Case 1) Buying house:

Buying a new house would cost me around $120K minimum by paying $40K down and getting a loan of $80K (paying $750/month for 23 years)

Pros n cons:
a) I would have to payoff $750 each month as installment for loan for 23 years.
b) Cant sale/liquidate easily.
c) Have own house, no rental to pay.
d) Cant get any more loans for biz/personal needs.
e) Cant do much hustling.
f) Great relief feeling.
g) Ofcourse its net worth would also increase with time. But I would never be able to use it.

Case 2) Investing in property:

Investment in many small lands/plots (ex. around 5 plots of 1000sqft each) would cost me around $8K for each plot and when I sell them after 1 year, I can make 50% ROI and make around $20K on an investment of $40K. So, I can payoff 'almost' ALL my annual expenses with this investment and live a peaceful life if I do it every year.

Pros n cons:

a) I can get more loans to buy more properties and make more money.
b) Need to pay $600 rent/month which I'll never get back.
c) Don't have own house.
d) I can liquidate all my money anytime/ not much hassle.
e) I like freedom, don't like debts much which I would get.
f) I can think of starting new businesses by getting capital from either bank/savings from ROIs of these investments.


My question: What do you think I should really do? How can I invest smartly? If you have any suggestions other than properties, I would be open.

I thank you all for reading it patiently and responding in advance! Your enlightening thoughts & experience can make my life much more beautiful. Thanks again!

Yorkie1

OP lives in India, but otherwise I agree with the above poster's reply.

00ec25

Allison_Haskins wrote: »

This is a British forum, so issues of capital gains tax relief, income tax allowances, build costs etc. won't be the same for you; I assume you are in USA as all pricing is in $

given that the OP twice mentions that he lives in India, coupled with the clunky English, I think we can safely say he is not in the USA and may just well be in ... India

OP - as Alison says this is a UK forum so not much point asking about investment advice based on Indian land values, how can any of us possibly say whether your numbers are viable or not ?

rigardo2

Hey Allison!

Thanks for replying! Well, I am based out of India & I do understand this is a British forum. Taxation, build costs etc won't be same. But from my understanding, the basic success principals of investing/properties would be same around the globe.

To be more specific, I would be able to get 100% tax relief from capital gains. I can work around with my CPA to get the best income tax relief, cutting it as short as 5%. And the building cost here is around $25/sqft.

I have mentioned pricing in $ to get helping advice from UK/around the globe to learn how other people take this issue and what advice they give. I am too young and open to learn from people's experience, doesnt matter what country they come from. I know, I would get the best of their life/expertise.

Please let me knw if you have any other question. Thanks!

rigardo2

00ec25 wrote: »

given that the OP twice mentions that he lives in India, coupled with the clunky English, I think we can safely say he is not in the USA and may just well be in ... India

OP - as Alison says this is a UK forum so not much point asking about investment advice based on Indian land values, how can any of us possibly say whether your numbers are viable or not ?

Hey,

Thanks for replying! First of all, sorry for my bad English! Its my second language and I am still learning it, do let me know where I made mistakes so that I can improve and not repeat them. :P

I understand there isn't much point asking in this forum but I would like to learn how you people think and make better decision overall.

About the the Indian land values, I can answer all your questions. So that you have some stand points and could show me the right direction. Please ask what would you like to know specifically.

Thanks again!

Thrugelmir

rigardo2 wrote: »

But from my understanding, the basic success principals of investing/properties would be same around the globe.

"Success" depends on when you jump on the wave in your local market.

rigardo2

Thrugelmir wrote: »

"Success" depends on when you jump on the wave in your local market.

Can you please explain your idea of success? Like how to identify a wave & exploit it? Thanks!

bluedrop

OP, which city do u live in?
For analysis sake, lets say hyderabad

Cost of buying a decent 3 bed flat = rs 50lakhs
Mortgage payment = appx rs 50000 per month (assuming 10% downpayment)

Renting a similar flat= rs 15k per month

If you have rs 50 lakhs cash, put it in a fixed deposit (paying appx 8.75%now)
You will make abt rs 40k a month in interest.

Its a no brainer decision really. If i were to move to hyd, id never buy a flat. Id invest in land on the outskirts for future potential.

bluedrop

If ur business allows you to work from anywhere, why not consider moving to tier2 cities or even to ooty or dargelling? Less pollution and relatively better standard of living...

The_Earl_of_Streatham

Your whole scheme seems to be based on borrowing money to buy assets which you hope to sell at a future date for more than they have cost you. Dress it up how you like, that's gambling. A huge amount of the world's so called economic activity seems to be based on it. It creates no new wealth, it produces nothing new of value. Land and houses will still be there at the end of your "business" just as they were at the beginning.

There is no secret, you take a punt, or several, some come off some don't. Call me old fashioned but I think borrowing money to do that is madness.

rigardo2

bluedrop wrote: »

OP, which city do u live in?

Hey,

Thanks for the help!

I live in Indore. Its a tier 2 city with good development. I see many opportunities here. Money can easily be doubled in 2 years. Lets say, If I buy a land at Rs.100/sqft near some coming up big project(ex. IIT, which is under development in Indore), I can easily double my money or may triple in just 2 years.

I can't move to other cities as my parents are working here and they cant get a transfer of job in other city.

Where are you based out of? Just curious..