"Change is the only constant thing in the world So why fear changing houses?

We completed 2 fun-filled years in our current home this September and being a sucker for change, started my hunt for a new house. Lot of you who know me, must be wondering why do I do live in a rented house, which I have to change every 2 years when I sell houses for a living and can afford to buy a home for personal use? 

Firstly, because obviously it’s fun to be able to redecorate a new home. A new house brings its new energy and its unique vibe with it. For me, houses are like a blank canvas where I get to unleash my creativity every few years. More importantly, it is financially more efficient than living in your own house for life.  

Confused? Let me explain the maths behind it. Let’s assume a couple Adam and Eve. They recently got married & they both work in Mumbai. Adam is a banker and works in BKC and Eve is an HR professional & works in Andheri. They earn 2 lakhs as monthly family income and have savings worth INR 30 lakhs. They are confused about whether they should buy a house and live happily ever after in their own house or live in a rented apartment. 

Eve contacted Square Yards and started exploring various options they can invest in, to buy a home where they can live permanently. They ideally wanted to live somewhere centrally which will be convenient for both of them. With their current monthly income, they can easily afford an EMI of INR 1 lakh and have a good comfortable lifestyle. On doing some research on squareyards.com they found, it will be difficult to own something in central Mumbai for 1- 1.5 crore wherein they can do 20% down payment and pay EMI’s of approx. 80k-1.3 lakhs a month, which could have been the best-case scenario. So now they have 2 options:- 

• Option A: Take a property worth 60 lakhs by paying 10 lakh down payment and pay monthly EMI of 50k on their mortgage, where they expect good capital appreciation in next 5-10 years in a suburb location in Mumbai and stay in a rented apartment worth 2-3 crore in Andheri by paying a rent of 60k per month and live closer to work. They can earn a monthly rent of approx. 20k on their suburb investment. So total monthly living expenses for Adam & Eve are (50k-20k+60K) INR 90k

• Option B: Take a property worth 1.25 crores in outer Mumbai, let’s say Kandiwali (In line with their budget) by paying a down payment of INR 25 lakhs and monthly EMI of 1 lakh on their mortgage, live in this house & spend 2 hours in traveling to work. Monthly living expenses, in this case, is INR 1 lakh as they do not pay rent.

As a thumb rule, If you live in your own house, you should always put a notional rent which you pay to yourself by living in it, say INR 40k in this case. Now compare whether living in Kandivali by paying INR 40k is more feasible or paying INR 60k and living in Andheri is a better option for you depending on your standard of living requirements. Keep your investment in property as a pure investment decision, purely based on expected returns (capital returns and rental yields) from that property. 

Return on investment in form of “capital appreciation” may be same or higher in above options as historically it has been observed that suburbs tend to have better ROI’s,  due to infrastructure development in that area, as compared to slightly more developed localities which are already selling at a premium. Indian real estate has negative rental yields which mean, rent you will get on your property will generally be lower than EMI you will pay on your mortgage. Which means you can afford better lifestyle by staying in a more expensive house at a better location by living in a “rented house” with almost the same amount of monthly outflow, compared to living in your own house. 

Another big benefit of doing smaller investments, instead of buying a house to live in, is the ability to diversify. Let’s assume Adam gets a raise and their family income increases to INR 3 lakhs per month. They can now have 2 small investments, another one in Pune to diversify their risk against market conditions instead of investing this entire amount to buy a small house in central Mumbai. 

Now whether our Adam & Eve choose A or B, it’s a matter of their personal preferences, there is no clear right or wrong here. Though I think they definitely chose Square Yards as their property advisor, who can assist them in both routes by handholding them through the entire process :-)) 

I personally prefer option A & have built a well-diversified, sizable portfolio of real estate assets over the years, while we continue to live in a rented house and keep upgrading our lifestyle in line with an increase in our monthly income. 

So what is this whole fuzz about living in your own house and cherishing memories built in every corner of the house, which lot of people including my own parents have? It took me years to convince them and explain this maths. I too believe in holding onto and cherishing all these memories, I just pack everything in a box and spread these in the new house wherever I move next. Thanks to technology, now we can click lots of pictures and have every “first” of my kids, neatly saved in my laptop, with a cloud backup. Although I may not be living right now in Singapore or Hong Kong where they did it, I can still feel it, whenever I want to. I can still remember those quiet walks on Tanjong Rhu Promenade in Singapore OR watching Aaliya and Aarav racing down with their scooters in Bel Air in Hong Kong OR jumping on our bed, in our Lakes bedroom in Dubai. I often see these pictures with my children and we relive all these memories experienced in various houses where we have lived around the world in last 12 years and we are all excited to build some new ones in our new house where we will move into soon. I am already smelling fresh paints, visualizing new crisp colors, feeling soft linen and imagining new decor... 

Follow me on Instagram to see my stories, on my new found passion of upgrading my old furniture which has traveled with me around the globe since last 12 years (Mumbai to Singapore to Hong Kong & now in Dubai).