14 Jun 2009

How risks can get you a home!

Life is a risky business, but when business itself becomes risky - what becomes of life? However, if there were no risk, there would be no fun in life at all. I have made some plans which ought to work, with calculated risks in it. I love the beauty of the synchronization in the plan, hope they do work and dont collapse on me! There were multiple options for the same plan, i will mention one simple plan to make you realize its risky yet simplicity.

1) Buying a home
With multiple research results of my friends who already decided on buying a home, i base my plans on that foundation, with some risk that it work out as they have anticipated. I am thinking of buying a home in Thane now, like my friends. House are of two types - one with ready possession and another with later possession

Ready possession (tentative figures*)
1 BHK - 650 sq ft with carpet area of 516 sq ft @ Rs 3000 per sq ft available at 24 lacs
2 BHK- 950 sq f with carpet area 780 sq ft @ Rs 3000 per sq ft available at 30 lacs

Possession by year end or two (tentative figures*)
1 BHK - 550 sq ft with carpet area of 450 sq ft @ Rs 2400-2500 per sq ft available at 17 lacs
2 BHK- 800 sq ft with carpet area of 616 sq ft @ Rs 2400-2500 per sq ft avaliable at 22 lacs

2) Financing the home with Home loan
With all loans taken into consideration (home loan, personal loan etc) the EMI will come to around 15-18k per* month for 20 years (or maybe 20 years**)

Now comes the risky and fun part. Since i would not like to have a major impact on my salary, i have come up with a little adjustment. I need to invest in short term investment plans which can relive me of my EMI. To be able to do that, i have thought of investing in land or real estates whose project is going on. I cannot provide the exact details of the investment, but the returns will pay off the EMI without affecting the salary. Without mentioning about the investment, let me elaborate more on the financing of home loan EMI

3) Financing the home loan with another investment
With adequate returns on the other investment, i am going to create a diversion. Here is a small diagram to make it understand better

Step 1: Accumulate 1/3rd of salary for an optimal amount of time to enable investment that will yield return more than EMI amount
Step 2: Invest in some plan that provides returns for 5 years
Step 3: Give the EMI from the returns for the next 5 years
Step 4: Till the time EMI is taken care for the next 5 years, you can come down from 1/3 of the salary to say 10% of the salary amount and accumulate it for 4 years
Step 5: Invest the accumulated amount in the said investment which gve years returns
Step 6: Enjoy EMI free life for the next 5 years

This will go on until the EMI is over. And for all the risks you have taken so far, the return is even more pleasing - a home in your own name.

Don't go by the looks, think of it. Don't go by the title of the post, read it correctly.
Now i bet, you might have got the idea how all the three ingredients are necessary . Do expect your comments and opinions

* The figures provided on land area, rates and place may differ from actual figures
* Calculations and information on home rates are research results of my friends and not mine
* You need to calculate your risk taking capability first
** Loan term for 20 years will have lower EMI but end up paying more


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