Behavioural lessons learned over 30 years of investing

[stefo]

@heliumskylark I do agree somewhat. But a house for many is also something they can pass on to their kids, and I have seen it to be the biggest investment that gets passed on. Primary Residence as an investment is certainly debatable. I don't like thinking of the primary residence purely as an investment choice, but a mix of personal and investment choices. It certainly makes more sense as an investment in countries where the interest rates are lower.

 

[resjudicata]

@stefo

It has value.

But it's not generating any cashflow, is it?

 

[nickel]

@rski Tax benefit from home loan >> tax benefit from HRA.

 

[rski]

@nickel Depends on your income , if you had a rent of 24 lakhs annually and an HRA of 22 Lakhs , your math would be very different

 

[nickel]

@rski Damn, 24 lakh rent is so out of range for me I didn't even think of that. Yeah at those levels my calculations would definitely fail.

 

[evag]

@rski I'm stealing your quote, btw I'm a real estate developer.

 

[nnorom]

@rski It depends upon person to person!!
Also,2500 is the annual rent..what happens when the rent gets increased year on year..you've also got to take inflation into account..overtime, you'll be having approx same income from interest but higher costs,so less savings!!after a certain point,you'll end in a loss. Having your own house gives you a sense of security and also,you can sell it if you want.

 

[esta]

@nnorom Technically, if inflation increases beyond RBI's upper targets, bond yields and FD interest rates increase too. So it's not a one way street.

 

[nnorom]

@esta I'm working on the assumptions that interest rates are fixed for FD. OP said to invest a lumpsum into 7% deposit and not invest in regular intervals!

 

[mfc0515]

@nnorom I would recommend watching this video:

 

[jeykishan]

@mfc0515 this is a wrong example. Rentals are typically 2% of the cost. In this example rental is 4.5%

 

[neal6]

@rski this logic would work much better with vehicles or luxury vehicles but a house most of the times is an appreciating asset and does provide a lot more safety.

 

[rski]

@neal6 Housing is an interesting market . The determinants are well known in the west , but are very different in India . My own understanding is limited to Mumbai .

For example , slums keep housing prices up in certain areas . When they are cleared , the prices of housing go flat as the cost of services rises .

The best example I can say is south Mumbai . Try hiring a driver / maid / Tution teacher / nurse or cook and your will find that you have to pay upto 3 x of what someone living in the suburbs pays . Real estate in south Mumbai is flat to negative on 10 yr returns.

Religion again plays a role . Pure Jain and pure veg complexes is Mumbai appreciate the fastest. But good luck if you are neither and want to buy .

A west facing property may be worth 25 percent more than an east facing one .

There is no shortage of idiosyncratic reasons in Indian real estate . And holding the assumption that it will always appreciate may not be correct

Adjusted for inflation housing is negative in south Mumbai over a 10 year period . And unless it doubles in the next 10 years , it will remain negative .

 

[dvina]

@rski Okay even for the sake of assumption, calculating annual rent as 2500 is preposterous. Which makes it 2500/12 = 208 rs per month rent. I can assure you that even if you go into smaller cities or villages, no one would rent out their home for 200 rs.

Now coming to the interest point, yes FD is a good option and you can also condiser it as emergency funds which you can consider as liquidity.

I have been personally living in rented apartment in a metro city since last 4 years and the rent situation is bad... More than that I hate the feeling of being constantly under radar of the Owner who treats the tenants as shit.

Self ownership is self respect.

 

[rski]

@dvina A 2.5 % rental yield on an illustration is not really inaccurate a house that cost 1L will rent for 2.5 to 3.5 % .

If you have a shitty landlord , it’s you who signed a contract with him . To classify all landlords in the same brush is overgeneralisation . Maybe you should be more discriminating about people you sign contracts with .

I have lived in rental houses in Mumbai for over 15 years and there has not been one single problem .

You are more than welcome to FD. In fact anyone is . But if you are in the 30 % plus surcharge bracket , the last thing you want is an FD.

 

[dvina]

@rski Agreed to your point. i am not making any stand for FD just felt it is about the 7% interest thing which u mentioned.

Yes it was my shitty luck but it is not so uncommon of Landlords being greedy assholes in metro cities.

Still my point is same... Self ownership gives a different feel than living in some rental where you cant even drill some holes without landlord blowing the horn.

And land will always appreciate in value unless you are gobbled by some shitty deal with disputed property.

 

[cehughes]

@rski Bad advice on so many levels. I'm not even going to counter it because this topic has been discussed extensively on this sub more than enough times.

 

[billclarke]

@rski This is absolutely NOT a great idea.

 

[waterfallwishes]

@billclarke Hey please include why it's bad instead of just labelling it as bad.

BTW guys check this out https://www.magicbricks.com/advice/buy-rent-calculator-financial-advice

 

[billclarke]

@waterfallwishes Bcoz it's better to pay EMI of you own house rather than paying the rent. Come on..this is common sense