Based on my parents advice, I have consistently putting money on real estate. I have also taken loans and invested them in properties. Now i have two flats in Bangalore 60L and 80L with 35L and 39L loan over it, both occupied by me, one for family and for home office. I have two houses in home town Tiruvannamalai 1 Crore and 80L with 49L loan and 30L. I also get rentals of about 60k per month from both properties. Besides, I have commercial land 2 Crore, Farm land (2 acres) 90L and another residential plot for 30L. I have taken 50L personal loan. I wish to retire from corporate in 4 years. My current salary is 3.3L per month. EMI is 2.7L per month. Pls advice me. My monthly expense is less than a lakh rupees. I have two kids one is in college and one is 8th standard. I have to park about 3L per year for their college (addition to college expenses) and school fees for next 8 years. After retirement, me and my wife want to go for annual vacations (4 to 5L per year). Pls advice
Ans: Your portfolio has high real estate exposure. Loans create financial pressure with high EMIs. Current EMIs of Rs. 2.7 lakh against your income of Rs. 3.3 lakh reduce savings potential. Rental income of Rs. 60,000 offsets part of this.
Challenges in Your Financial Plan
Heavy dependence on real estate limits liquidity.
High EMIs consume a large portion of your income.
Personal loan of Rs. 50 lakh increases financial strain.
Children's education and vacation expenses need dedicated funding.
Optimising Real Estate Holdings
Consider partial liquidation of properties. Selling one property can reduce debt. This increases your monthly cash flow.
Focus on keeping assets generating rental income. Evaluate properties with poor returns or high maintenance costs.
Avoid new real estate purchases. Current exposure is already high.
Managing Existing Loans
Prioritise high-interest loans for prepayment. The personal loan should be your first target.
Consider selling underperforming assets to repay loans. For example, if the commercial land is not yielding income, evaluate its sale.
Aim to reduce EMI below Rs. 1.5 lakh per month within two years.
Diversification with Mutual Funds
Start investing monthly in mutual funds for retirement and education goals. Choose actively managed funds for long-term growth.
Invest through a Certified Financial Planner to benefit from professional expertise. Avoid direct mutual funds.
Set a monthly SIP amount to build a liquid corpus. This can act as a buffer post-retirement.
Children's Education Planning
Allocate Rs. 3 lakh annually for education separately. Use fixed deposits or short-term debt funds for secure returns.
Ensure you factor in inflation for future education costs.
Planning for Annual Vacations
Start a dedicated vacation fund now. Invest Rs. 20,000 monthly in balanced funds. This corpus can grow over the next four years.
Post-retirement, withdraw annually from this fund for vacations.
Retirement Readiness
Plan to clear all loans before retirement. High EMIs can stress your retirement years.
Build a retirement corpus to generate Rs. 1.5 lakh per month post-retirement. Include liquid investments for flexibility.
Invest surplus income into mutual funds now to grow your retirement corpus.
Health Insurance and Emergency Fund
Check health insurance coverage for your family. Increase it to Rs. 50 lakh if required.
Maintain an emergency fund covering 12 months' expenses. Use this for any unforeseen circumstances.
Final Insights
Your financial position is strong but needs balance. Reduce dependency on real estate. Focus on liquid investments for flexibility.
Debt management is critical before retiring. Use property liquidation to reduce liabilities.
Invest smartly in mutual funds for education, vacations, and retirement. Diversification will strengthen your portfolio.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment