@washinigtoncounty2017 Thanks for your response and suggestions. I was trying to be conservative, for rental and for appreciation, both. At present, I have found properties being rented out at 38-40K per month in the same society. I have considered only 35K with 7.5% YoY increment (standard here in Bangalore is 10% every 11 months). Also, the property is expected to go to 15-20% in the next 2 years or so (based on the location & upcoming nearby under development projects)
@amyanne87 No, the cost of acquisition already had that added. I simply forgot to add the individual figure.
I plan to forego the LTCG by buying another property from the returns. Because right now, I do not own a home. I might make it a home at a later date, or continue using it for rentals, or sell it off to buy a new home.
@mayello You missed maintenance which will be atleast 60k per year. Then your assumption around taxation is impractical because new regime will supercede soom with no benefits on home loan
@jisu Thanks for your response and suggestions. Edited the post to include this information:
Society Maintenance is paid for the first 5 years in the cost
Subsequent years, gets paid by the tenant
I might lose the tax benefit, in case Old Regime is completely abolished. I will get about 50K once, post that 4.5L will be reduced from my Net Profit. But does the way to look at the Net Profit make sense?
You haven't factored inflation in your earnings. Check out the NPV of that 42 lacs that you make after X years, today!
Your rental yield seems quite high @ 7.5%.
Income tax benefits are uncertain with the way IT is moving into new tax regime.
Property appreciation @ 50% in 10 years means 5% a year (broadly) and inflation is usually 6% on wholesale level while it would be higher on your personal level...so in a way you're eroding wealth in terms of purchasing power parity.
LTCG will be almost zero after indexation. That itself tells you that you have made loss.
Having continuous tenants means economic progress of India which also means better returns from stock market (diversified Mutual fund).
In 10 years timeframe, real estate returns should match with stock market (discounting the possibility of timing the market rightly). RE and economy and stock market grow in tandem, so if stock market returns 12% CAGR, your returns from RE should also be close to that. Only difference being liquidity is much better in market and you can sell 5% of MF.
future is unpredictable. It is entirely possible that your RE investment will give much better returns.
Real estate is called so for a reason, so you won't go totally wrong.
5.5% returns are understated. Possibility of higher returns exist.
@mayello In the profit from property sale, you’ll have to pay taxes on gains, unless you re-invest in some other property. So consider that too.
Though I agree with others too that real estate is good only if you intend to live in it. If not, FDs and stock market shall give better returns with way lesser hassle.
