Flat is a 30 Crore Lossy Investment!

September 11, 2020 By Futurecaps Advisor 0

Due to the Corona issues, lot & lot builders are selling Flats at discounts. Clearly this is a time to buy real estate like Plots. However, please note that if you are looking for Wealth Creation then a Flat can make you loose 100+ Crore in 20 years!

Rental Investment Calculation

Let us Calculate on a Flat purchased for Rental Purposes.

The Rental Yield would be 2% after deducting Maintenance & other Annual expenses. (Principle: Rental Yield of India is 3%)
The other Gain would be Appreciation of 5% – since Flat is mostly a building & less of land the Appreciation will be less (Principle: Land appreciates, Building depreciates)

So Total Gain is Just around 8% per annum!

Note: We are not Calculating the Loan on it. If the Investment is Loss without Loan, then definitely it will be Loss with Loan too.

Comparison

Now let us compare the 8% ROI with 20% of Mutual Funds and 30% of Stock Direct Investing for 20 Year Period.

So you can see the 1 Crore Flat would have been gaining ONLY 4.6 Crore at the end of 20 Years!

At the same time the Mutual Fund with ROI 20% will gain 38 Crores!

If you were doing Direct Stock Investment with ROI 30% then the gain would be 190 Crores!

Note: If you are a Stock Market Khiladi who Doubles Wealth on Bear Market then even 400-600 Crore is possible. This is how the Celebrity Riches like Dolly Khanna, Ramesh Damani, Rakesh Jhunjhunwala are made. However Stock Direct Investing requires Training | Master Mind Training

The Biggest Loss is Unseen Losses!

Reverse Calculation

Obviously you would think why the Returns are very low in Flats! The reason lies in the Builders & Banks. The building cost of a 1 Crore flat will be around Rs. 40 lakhs. They sell it 250% extra rate based on the Rental Yield calculation of India & Tie-up with Banks on Loan possibilities. There comes the Innocent Bhakra Investor who takes the Loan, Buy the Flat & Work life long for Banks!

Living Calculation

If you are purchasing Flat for Living & Saving Rent, then I would say still it will cause a 20 Crore Loss due to Opportunity Cost of Capital, Loss of Income by Sticking to One Place, Preventing you from becoming Financially Free etc. Yes, even with Tax Deductions!

However, If it is an Emotional Decision then make Sure you are Within Percentage Limits. (Principle: Middle Class should have House + Car less than 20% of Net Worth – Else their Generations will be Money Slaves)