How should I invest Rs 1 crore in New Delhi to earn at least Rs.40-50K per month passively?
I have a different idea to surely double your money with lowest risk and monthly earning as well.
1. Put 80 Lakhs in two FDs which give 8-9% PA so you will earn atleast 640000/year about 53000 pm.
2. Now You have 20 Lakh Left
3. Now take two home loan against each FD. Assuming you will get 80% of FD value it will be 64 Lakh total
4. Now you have 84 lakhs in hand.
5. Buy 2 properties of around 42 lakh each which give you return of 20000/month each total 40000/month.
6. Now you have to pay 62000 emi for 20 years @10% home loan on 2 homes with earning of 40000/month
7. Your total earnings 53000 + 40000 = Rs. 93000
8. Your total expenses 62000
9. Your net earnings per month - 93000 - 62000 = 31000/pm Tax Free* Plus atleast 2 crore after 20 years (It can be 4 crore or more also if property value increases with time).
*Special Points
1. I recommend to have FD in the name of two persons one you and other some one else your wife or someone else legally fit to save tax.
2. Properties also in the name of 2 persons to gain tax benefit of 2.5 lakh for each total 5 Lakh/year,
Tweaking Points
1. I have said to invest 80 lakh in FD and keep 20 lakh for property purchase but you can do FD of whole 1 crore and negotiate easily with bank to give 90% loan against it which is 90 Lakh. And your return on FD will be 80000 then instead of 53000.
2. Some people had doubted 8% return by bank. I checked and found following banks are giving 8% or higher return - RBL Bank, Bandhan Bank, Lakshmi Villas Bank, Gruh Finance and J & K Bank.
3. In general it seems difficult to get 20000 rent on 42 lakh property. But if you really look for it there are several. The area I know where its possible is in South Delhi the residential area near by Govindpuri Metro station. You can also opt for commercial properties with high rental.
Why not buy 2 properties for 84 lakhs with downpayment? You get 10.5k per month as interest from the remaining 16 and 40k/month from your home. That's earnings of 50k instead of 31k."
"With all due respect sir, You have assumed so many things, but there are many flaws in your answer.
Thanks for pointing out that my answer had many assumptions but they are on practical approch not on hypothetical or optimistic. For example ROI on FD 8-9%, Loan Value on FD of 80% and Rental income on 20000/month on each. I have supported my assumption with practical by refering to bank who providing the that much interest on FD and the location where that much rental income possible.
About flaws in my answer. Although I am not able to find out any flaw in my answer yet. But as I am a simple human I don't find my self a perfect. So I may be agree on that. And I thanks to you and all for your comments and other answers as well so that we can have a perfect answer with discussions on quora.
Here is point to point further answer on your comments.
1. Put 80 Lakhs in two FDs which give 8-9% PA so you will earn atleast 640000/year about 53000 pm.
2. Now You have 20 Lakh Left
3. Now take two home loan against each FD. Assuming you will get 80% of FD value it will be 64 Lakh total
4. Now you have 84 lakhs in hand.
5. Buy 2 properties of around 42 lakh each which give you return of 20000/month each total 40000/month.
6. Now you have to pay 62000 emi for 20 years @10% home loan on 2 homes with earning of 40000/month
7. Your total earnings 53000 + 40000 = Rs. 93000
8. Your total expenses 62000
9. Your net earnings per month - 93000 - 62000 = 31000/pm Tax Free* Plus atleast 2 crore after 20 years (It can be 4 crore or more also if property value increases with time).
*Special Points
1. I recommend to have FD in the name of two persons one you and other some one else your wife or someone else legally fit to save tax.
2. Properties also in the name of 2 persons to gain tax benefit of 2.5 lakh for each total 5 Lakh/year,
Tweaking Points
1. I have said to invest 80 lakh in FD and keep 20 lakh for property purchase but you can do FD of whole 1 crore and negotiate easily with bank to give 90% loan against it which is 90 Lakh. And your return on FD will be 80000 then instead of 53000.
2. Some people had doubted 8% return by bank. I checked and found following banks are giving 8% or higher return - RBL Bank, Bandhan Bank, Lakshmi Villas Bank, Gruh Finance and J & K Bank.
3. In general it seems difficult to get 20000 rent on 42 lakh property. But if you really look for it there are several. The area I know where its possible is in South Delhi the residential area near by Govindpuri Metro station. You can also opt for commercial properties with high rental.
Update 1
In response to Mr. Vivek Verma's comment -"This answer makes no sense.Why not buy 2 properties for 84 lakhs with downpayment? You get 10.5k per month as interest from the remaining 16 and 40k/month from your home. That's earnings of 50k instead of 31k."
My Answer:
Yes you can do that but you will lose lot money in long run. Because if you take a home loan it will be over in 20 years and then your monthly earnings will increase to 93000/month (Interest on Fixed Deposit Plus Rental Income) and if you don't take home loan then you will have only rental income.Update 2
In response to Mr. Angad Katdare's comment -"With all due respect sir, You have assumed so many things, but there are many flaws in your answer.
- Interest rates are decreasing, 8% fd rate cannot sustain for long. What if it reduces to 5.5 or 6% like 2004.
- There is a slowdown in the real estate market and tier 1 cities (New Delhi is among top 3) are worst affected by the slowdown. 1 or 2 million flats are unsold with less or no buyers available.
- Property rates are falling hard. I know some builders and flat owners who are offering 20-30% discount and still not getting buyers.
- You are assuming Tenants for all 12 months. It's not so simple to get one, let alone to find a long term one. Commercial properties are risky too but compartively less risky than homes.
- Fixed deposit is a value destructor.
- In case of properties, there are maintenance charges to be considered. It's a hassle and if the person asking the question is a retired man, it's not feasible for him.
My Answer:
Dear Angad,Thanks for pointing out that my answer had many assumptions but they are on practical approch not on hypothetical or optimistic. For example ROI on FD 8-9%, Loan Value on FD of 80% and Rental income on 20000/month on each. I have supported my assumption with practical by refering to bank who providing the that much interest on FD and the location where that much rental income possible.
About flaws in my answer. Although I am not able to find out any flaw in my answer yet. But as I am a simple human I don't find my self a perfect. So I may be agree on that. And I thanks to you and all for your comments and other answers as well so that we can have a perfect answer with discussions on quora.
Here is point to point further answer on your comments.
- I agree Interest rates are decreasing and 8% FD rate cannot sustain for long but simultaneously home loan rates are also decreasing so this will not affect the overall situation in long run.
- Yes, there is slowdown in the real estate and its going down so its the right time to make a purchase. I am talking about the real properties where real rental income exist. The 99% of unsold 2 million flats are the result of over stock due to real estate boom in last decade. They are too overpriced and still not livable like in noida extension so its just like getting fooled to buy those properties at current situation and price.
- Answered in above point 2.
- I agree on that but if you act as active landlord with tricky tax rules information you will be able to easily adjust it in the tax payable.
- FD is value destructor but its safest investment option and my answer is totally meant for safe play.
- Maintenance Charges yes it has but if you look deeply into other options there is some charges so its just a matter of say ear will be pulled may be left or may right one. And if question asked by a retired man then my answer is not meant for them as just putting the funds in FD will give them enough with full relax.
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