Hi, I am 40 years old. Is it advisable to buy a flat worth 2cr with 80% bank loan and give it for rent. Expected rent is 60k per month. Or should I build a corpus of 2cr. For my retirement life.

Ans: At 40 years old, you have an important decision to make regarding your financial future. Let's explore the advantages of setting up a Systematic Withdrawal Plan (SWP) in mutual funds compared to buying a flat for rental income.

Setting up an SWP in Mutual Funds
Advantages:
Flexible Withdrawals:

With an SWP, you have the flexibility to withdraw a fixed amount at regular intervals, providing a steady stream of income to support your financial needs, including retirement planning.
Diversification Benefits:

Mutual funds offer diversification across various asset classes, reducing concentration risk and potentially enhancing long-term returns compared to investing solely in real estate.
Professional Management:

Mutual funds are managed by professional fund managers who actively monitor and adjust the portfolio based on market conditions, aiming to optimize returns while managing risk.
Tax Efficiency:

SWP withdrawals from mutual funds may enjoy tax benefits, especially if held for the long term, with certain equity funds qualifying for capital gains tax exemption after a holding period of one year.
Buying a Flat for Rental Income
Advantages:
Stable Rental Income:

Renting out a flat can provide a stable source of income, which may be attractive for covering ongoing expenses or supplementing other sources of income.
Tangible Asset:

Owning real estate provides tangible asset ownership, offering potential capital appreciation over time and serving as a hedge against inflation.
Portfolio Diversification:

Real estate investments add diversification to your overall portfolio, reducing risk by spreading investments across different asset classes.
Disadvantages:
Liquidity Constraints:

Real estate investments are relatively illiquid, making it challenging to access funds quickly if needed, especially during emergencies or market downturns.
High Initial Investment:

Buying a flat requires a significant upfront investment, typically financed through a substantial bank loan, which may strain your finances and limit investment diversification.
Maintenance Costs:

As a landlord, you'll be responsible for ongoing maintenance, repairs, and other associated costs, which can erode rental income and impact overall returns.
Conclusion
Given the advantages of SWP in mutual funds, such as flexibility, diversification, professional management, and potential tax benefits, it may be a more suitable option for generating regular income and building a retirement corpus. However, it's essential to assess your risk tolerance, investment goals, and financial situation carefully before making a decision. Consider consulting with a Certified Financial Planner to develop a personalized financial plan aligned with your objectives and aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You are 35 years old. Your take-home income is Rs 75,000 per month.
You already have a debt of Rs 10 lakhs.
There is no savings in hand right now.
These three points are very important.

Let us understand them one by one:

Rs 10 lakhs debt means you are already repaying an EMI.

With Rs 75,000 monthly income, your cash flow is limited.

Having no savings makes your situation vulnerable to emergencies.

In this situation, buying a new property worth Rs 1.4 crore is a big step.
Let us assess the implications of this move from a 360-degree view.

Monthly Cash Flow Stress

Let us estimate how much EMI you might need to pay.

For a 1.4 crore loan with 20 years term, EMI will be around Rs 1.2–1.3 lakhs.

But your take-home salary is Rs 75,000.

You may expect rental income of Rs 50,000.

Still, EMI exceeds your monthly inflow.
This creates a negative cash flow of Rs 45,000 to 55,000 per month.
You are already repaying for the Rs 10 lakh loan.
This adds further strain on your cash flow.

You may depend on personal loans or credit cards in future.
This may lead to a debt trap.

Risk of Vacancy or Rental Delay

Real estate income is not guaranteed monthly.
Tenants may delay payments or vacate anytime.
You may lose 1 to 3 months rent per year during vacancy.

During those months, you will pay the EMI from your pocket.
This will create more financial pressure.
With no emergency fund, it becomes risky.

You Have No Emergency Buffer

You mentioned zero savings.
That is a very critical concern.

Any health issue can disturb your finances.

Job loss or income cut can cause heavy damage.

If tenants vacate suddenly, EMI burden will be yours alone.

A Certified Financial Planner always advises to build an emergency fund first.
3 to 6 months of expenses should be saved in liquid form.
That should be your first financial priority.

Buying Property on Loan: Costly in Long Term

Let us assess this step from a long-term view:

A 1.4 crore loan for 20 years can cost over Rs 2.8 crores total with interest.

You will repay more than double the principal.

You are expecting Rs 50,000 rent per month.

But there are other costs too.

Hidden costs include:

Property tax

Maintenance

Repairs and painting

Insurance

Brokerage for tenant

Legal issues if any

Your net rental yield may drop below 3% annually.
This is not a high return.

Alternatives Can Give Better Control

With Rs 75,000 income and Rs 10 lakh debt, here is what you can do:

Step 1 – Build Emergency Corpus First

Save at least Rs 1.5 lakhs in a savings or liquid fund.

This will act as cushion for any emergency.

It avoids borrowing at high interest.

Step 2 – Start Debt Repayment Plan

Pay off high interest debt first, if any.

Avoid minimum payments on credit cards.

Negotiate better terms with lenders if possible.

Step 3 – Start Small SIPs in Regular Mutual Funds

Start Rs 2,000 to Rs 3,000 monthly SIP in regular mutual funds.

Invest via a Certified Financial Planner.

Direct mutual funds give no advice or hand-holding.

Wrong fund choice can reduce your returns.

Regular mutual funds through MFD with CFP guidance give:

Professional fund selection

Rebalancing advice

Tax planning

Behavioural coaching in tough markets

Direct mutual funds have no such support.
You may choose the wrong fund and lose returns.
The so-called "savings" on commission can cost you much more.

Your Rental House Plan: Review Key Points

You plan to buy a Rs 1.4 crore property to earn Rs 50,000 rent.
Let us relook at key aspects:

1. Rental Yield:
Rent is Rs 6 lakhs per year.
On a Rs 1.4 crore property, that is just 4.3%.
After expenses, net yield is even lower.

2. Loan Repayment:
Total EMI outflow in 20 years is over Rs 2.8 crores.
Property value may not grow in the same proportion.

3. Illiquidity:
Property cannot be sold quickly.
If you face financial need, this becomes a major problem.

4. Leverage Risk:
You are trying to buy big with borrowed money.
This increases financial risk.
Your income cannot support the EMI even with rental inflow.

Better Alternative Plan: Step-by-Step Financial Building

• First 6 months:

Cut unnecessary expenses.

Build emergency fund of Rs 1.5 lakhs.

Clear part of your Rs 10 lakh debt.

• Next 6 to 12 months:

Start SIPs of Rs 3,000 to Rs 5,000 monthly.

Take help from Certified Financial Planner.

Avoid real estate and ULIPs at this stage.

• Year 2 onwards:

Increase SIP gradually as income improves.

Clear your existing debt completely.

Build goal-based investment plan.

• Future plans:

Once you have Rs 15–20 lakhs corpus, evaluate property.

But buy only if cash flow supports EMI.

Prefer loan EMI not exceeding 40% of income.

Rent alone should not be your support for EMI.

Investment vs Asset Ownership

A rental house gives you ownership feeling.
But from financial angle, your focus should be wealth creation.

Actively managed mutual funds through Certified Financial Planners offer:

Flexibility

Tax efficiency

Professional fund management

Goal tracking

Liquidity

Real estate gives none of these.
Liquidity is poor.
Rental yield is low.
Buying on heavy loan is very risky.

Your Financial Stability Is Priority

At this point, your priority is stability.
Avoid aggressive financial decisions.

Debt of Rs 10 lakhs plus Rs 1.4 crore more can collapse your future.
Instead, take small consistent steps.

Build:

Emergency fund

SIPs

Debt repayment

Insurance coverage

Tax plan

This path leads to financial freedom.
Rental property can come later.

Avoid These Mistakes

Don’t chase rental yield with 100% loan.

Don’t invest all earnings into one single illiquid asset.

Don’t ignore insurance and savings.

Don’t assume rent will come on time always.

Don’t take emotional decision in property buying.

Finally

Buying a rental house now is not advisable.
Your income cannot support it.
Your savings are nil.
Your debt is already Rs 10 lakhs.

Real estate is not a good investment for your case today.
It creates heavy EMI pressure.
Instead, build foundation first.

Start with small SIPs

Clear existing debts

Build emergency reserves

Set clear financial goals

Get guidance from Certified Financial Planner

Take slow and safe steps.
That will take you to long-term wealth.
Don’t stretch your income for big loans.
Financial peace matters more than property ownership.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment