Buying your First Property, One of the most essential requirements of the civilized man is a place of his own. Next only to food and clothes. This is not at all a matter to those who have a good income, savings, and realistic dreams. Desire to have property incommensurate with income and savings may imbalance the life.
A person with a moderate income, with least financial support from family and friends, with all other commitments – family, children’s education, peer pressure, etc.,
How would he buy the property?
The Person’s financial scenario maybe like this: Income maybe 50k, out of which he spends 12k for rent, gives 15k to his wife for household expenses, spends about 5k as weekend outings, entertainment, etc., fuel, transport, light socializing, etc., personal expenses of 5k, necessary other expenses such as school, children,etc., 5k, maybe 42 to 45 k would get spent in all. He saves about 5k per month.
Whereas the property price is 25 lakhs to 1 crore plus.
Actual juggling now! It’s quite natural that many people shy away from even thinking of buying any property. Popular adage comes to their rescue! “Fool builds a house, a wise man will stay in it”. But this can’t go forever. One has to grow from this stage to the next. Let us call this a “Non-eligible “ stage.
With 5k savings per month, some little savings is happening. With all his financial intelligence, he will reach the level of one sizeable chunk of liquidity – say 6 lakhs. This gives him the confidence to think of some property. Move to a leased house now! Liberate from rent, save 12k.! Savings increases to 17k per month. Now let us promote the person from “Non-eligible” to the “Pre-eligible” stage.
Few years may 3 – 4 years of savings (the lease period is normally three years, extendable by one more year) will give him a kitty of another more than 6 lakh. Plus his lease deposit is available. Now the person is in the “Eligible” stage. He doesn’t have to shy anymore! He goes to the builder with confidence, negotiates a property.
He has to keep realistic plans, buy property around minimum price! Yes, dream realizing stage is still away, EMI should be comfortable, savings must continue.
Few more years of savings may be an increase in income by now, which should enable him to buy a small commercial property. This must be tenanted, with rental income. Passive income is a must for everyone, as it insures him from vagaries of life, career, etc.,
Passive income along with savings will promote him from the “Eligible” to the “Comfortable” stage. He can plan and work on his “dreams” now! Again keeping it practical, commensurate with income and savings, is a must. He may be eligible for higher loans but that shouldn’t be the guiding factor.
In this discussion I haven’t considered external financial support one may be having – spouse or other family member working, other forms of income. Kept it plain, keeping in mind the common man. Despite several odds and constraints its quite thrilling to know that many such people have succeeded in creating wonderful real estate assets.
I would invite readers to share your adventurous first property buying stories, and subsequently how you bought the next ones. Explain the difficulties you had and how you could overcome them. Looking forward to having your replies.