Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Ramalingam

Ramalingam Kalirajan  |7758 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Jun 20, 2024Hindi
Money

Hi , Is it advisable to buy a 10 years old independent house in Bangalore which generates around 80,000 rent per month with cost of 1.75Cr or better to invest in plots in upcoming area which will have appreciation? can you please explain which suits better for 45 years old with out loans and having steady passive income of 1.75 lakhs already and single salary income of around 1.5 lakhs . Thank you .

Ans: let’s dive into this important decision of choosing between buying an independent house or investing in plots. Given your circumstances, we'll evaluate the pros and cons of each option, considering your steady passive income and single salary income.

Understanding Your Current Financial Situation
You’re 45 years old with no loans, a steady passive income of Rs 1.75 lakhs per month, and a single salary income of around Rs 1.5 lakhs per month. This provides a strong financial base.

Considering Real Estate as an Investment Option
Real estate investments can be lucrative but require careful consideration. We’ll compare the two options: buying an independent house and investing in plots.

Buying an Independent House
An independent house can generate rental income and potential appreciation. Let’s break down the advantages and disadvantages.

Advantages of Buying an Independent House
Stable Rental Income: Generates Rs 80,000 per month, providing a steady income stream.

Appreciation Potential: Property values in Bangalore generally appreciate over time.

Tangible Asset: An independent house is a tangible asset you can use or sell.

Tax Benefits: Rental income offers tax benefits, including deductions on property tax and maintenance expenses.

Disadvantages of Buying an Independent House
High Initial Cost: Rs 1.75 crores is a significant investment.

Maintenance Costs: Ongoing maintenance can be expensive and time-consuming.

Property Management: Managing tenants and property upkeep can be challenging.

Liquidity Issues: Real estate is not easily liquidated if you need quick cash.

Investing in Plots
Investing in plots in upcoming areas can offer significant appreciation potential. Let’s explore the pros and cons.

Advantages of Investing in Plots
Potential for High Appreciation: Plots in upcoming areas can appreciate significantly as infrastructure develops.

Lower Maintenance Costs: Plots generally have lower maintenance costs compared to buildings.

Flexibility: You can hold the plot for appreciation or develop it later.

No Tenant Management: No need to manage tenants or property upkeep.

Disadvantages of Investing in Plots
No Immediate Income: Unlike a house, plots don’t generate rental income.

Market Risk: Appreciation depends on market conditions and development in the area.

Long-Term Investment: Plots typically require a longer investment horizon for significant appreciation.

Property Taxes: You still need to pay property taxes, even without rental income.

Evaluating Your Financial Goals
Your financial goals and risk tolerance play a crucial role in this decision. Let’s evaluate which option aligns better with your goals.

Short-Term Goals
If your goal is to generate immediate income, buying an independent house is more suitable. The rental income can supplement your passive income.

Long-Term Goals
If you’re looking for long-term appreciation, investing in plots may offer higher returns. However, this requires patience and a long-term perspective.

Considering Market Conditions
Market conditions in Bangalore also influence your decision. Here’s what you should consider:

Real Estate Market in Bangalore
Demand for Rental Properties: High demand for rental properties in Bangalore can ensure consistent rental income from an independent house.

Appreciation Trends: Research the appreciation trends in both established and upcoming areas.

Infrastructure Development: Upcoming areas with planned infrastructure development have high appreciation potential.

Risk Tolerance and Investment Horizon
Your risk tolerance and investment horizon are crucial factors. Let’s analyze them:

Risk Tolerance
Low Risk Tolerance: If you prefer low-risk investments, an independent house with stable rental income is better.

High Risk Tolerance: If you can tolerate higher risk for potentially higher returns, investing in plots is suitable.

Investment Horizon
Short to Medium Term: For short to medium-term investments, an independent house is ideal due to immediate rental income.

Long Term: For long-term investments, plots offer higher appreciation potential.

Diversifying Your Investment Portfolio
Diversification reduces risk and optimizes returns. Here’s how you can diversify your investment portfolio:

Combining Both Options
Consider a mix of both options. Allocate a portion of your funds to an independent house for rental income and another portion to plots for long-term appreciation.

Other Investment Options
Apart from real estate, diversify into mutual funds, equities, and fixed-income instruments. This ensures a balanced and resilient portfolio.

Benefits of Actively Managed Funds
Actively managed funds can enhance your investment strategy. Let’s explore their advantages:

Professional Management
These funds are managed by experts who make informed decisions based on market conditions.

Potential for Higher Returns
Actively managed funds aim to outperform the market, offering higher returns compared to passive funds.

Flexibility
They can quickly adapt to market changes, capturing growth opportunities and mitigating risks.

Final Insights
Choosing between buying an independent house and investing in plots depends on your financial goals, risk tolerance, and market conditions. An independent house offers immediate rental income and stability, while plots offer higher appreciation potential but require a longer investment horizon.

Consider a balanced approach by diversifying your investments. Consult a Certified Financial Planner (CFP) for personalized advice and explore actively managed funds for potential higher returns.

Your decision should align with your overall financial plan, ensuring a secure and prosperous future for you and your family.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |7758 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 16, 2024

Asked by Anonymous - Jul 06, 2024Hindi
Listen
Money
Hi sir, I am aging 37 years. I have built house in my native and its present value is Rs 45 lakh. With housing loan of Rs 9 lakh and getting only 6k rent. As I am working in corporate company in Blore. And no plans to go back to my native for next 10 years. So plz guide me shall i sell this house and invest elsewhere. If yes. Plz guide me which is the best option for long term means for next 10 years investment. Thank u .
Ans: Current Situation Analysis

Your house in your native place is valued at Rs 45 lakh, with a housing loan of Rs 9 lakh. The rental income of Rs 6,000 per month may not be sufficient to justify holding the property if you are not planning to return in the next 10 years.

Evaluating the Options

Selling the House: Pros and Cons

Pros:

You can clear the housing loan of Rs 9 lakh.

You can invest the proceeds in higher-return assets.

Eliminates the hassle of managing a rental property.

Cons:

You may lose potential appreciation in property value.

Emotional attachment to the property.

Investment Options for Long Term

1. Mutual Funds:

Equity Mutual Funds: Suitable for long-term growth. Diversify across sectors and companies.

Hybrid Mutual Funds: Mix of equity and debt. Provides balanced growth with some stability.

2. Public Provident Fund (PPF):

Safe and tax-efficient.

Offers decent returns over the long term.

3. Systematic Investment Plans (SIPs):

Regular, disciplined investment in mutual funds.

Beneficial for averaging out market volatility.

4. Debt Mutual Funds:

For stability and regular income.

Less risky compared to equity mutual funds.

Final Insights

Selling the house and clearing the loan can free up capital for more productive investments. Diversifying into mutual funds, PPF, and SIPs can provide balanced growth and stability over the next 10 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Dr Nagarajan Jsk

Dr Nagarajan Jsk   |224 Answers  |Ask -

NEET, Medical, Pharmacy Careers - Answered on Feb 01, 2025

Listen
Career
I have completed my msc in biochemistry n now doing internship but I am confusing about my future because I see this field don't pay me inuff for life even for future... N don't have more jobs in Maharashtra. I don't like production jobs but in Pharma only production pay much so what can I do .. Can u suggest me which job is high payable after Msc biochemistry
Ans: Hi Nandu,

Greetings!

Could you please let me know which year you completed your course and whether you are currently doing an internship or apprenticeship? An internship is part of the curriculum, where students gain practical training, sometimes with a stipend and sometimes without. After completing your course, you can opt for an apprenticeship, which typically lasts one to one and a half years and includes a stipend, usually split 50%-50% between the industry and government.

If you are in the internship phase, please inform me about the specific field you are working in. Initially, you may not expect a high salary, but after gaining expertise in your field, your compensation will improve. Typically, this takes about three years, so it’s important to focus on skill acquisition for a better future.

If your internship aligns with your field of study, I encourage you to continue and consider starting a medical lab or exploring opportunities in medical devices related to biochemistry. However, pursuing a career in pharmaceutical production may not be suitable for you, as it is a different field, and you may find it challenging to grasp the processes involved since you are currently inexperienced in that area.

Please share the specific field of your internship, and I would be happy to provide more tailored advice.
with regards

Poocho. Life Change Karo!

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x