[hothatchaway]

Originally Posted by casnov

Hello guys,
I need some advice on a conundrum I am facing and I can’t think of asking anyone but this esteemed group.

I own an apartment in Whitefield which is given on rent,I don’t intend to live here, ever. I live in north Bangalore on rent. The rent I am getting on the flat in Whitefield is paying off the EMI. Rent is 48k and my EMI for it is also 48K. The existing loan is for another 10 years

I want to buy an apartment in the same society where I currently stay on rent.

The dilemma is :

1. Should I sell the existing apartment, and buy a new apartment?
   
   check the capital appreciation of this flat and what the annualized return % you have got ie current market value of the flat - (purchase price of flat + interest paid on home loan) Evaluate the ROI (annualized) If the return outstrips any other mode of investment by a handsome margin, you could consider selling.
   
2. Keep the existing flat and take a fresh loan to buy the new flat?
   
   Related to the point above, regarding borrowing to buy another property, you have to consider current prices, the cost of borrowing and what is the purpose of buying another flat. Do you plan on living in it?
   
3. If I keep the current flat, then I have to put another 40 lakhs for the downpayment of the new flat and the EMI for 12 years will be around 1.8lakhs.
   
   did I read this right? Is it 1.8 lakh EMI/month? The total cost of purchase is then 3 crores for a 12 year loan. At an interest rate of 9%, you will be paying close to 1 crore in interest alone! Compare this against the rent you are paying currently (I am assuming it is the same North Bangalore locality you are talking about) If the rent is anything less than 60k/month, reconsider borrowing to buy.
   
4. The current owned flat is paying for itself. Does it make sense to sell it?
   
   Depends on the current market value of this flat. Subtract the rent earned from the interest you are paying and if they are close, then keep it if you think the value is likely to keep going up. Take into account the rent you are paying in North Bangalore. If that is higher than the rent earned in Whitefield, then I would take that into account.
   
5. If I invest 40 lakhs required for the downpayment, at a conservative rate of return of 11%, it will be 1.13Cr in 10 years.

Unless you are some investment guru, an overall ROI of 11% is not conservative at all at current valuations across categories. We tend to overestimate our investment capabilities

Any advice on this dilemma?

Please see answers above.

[ninjatalli]

Originally Posted by casnov

Hello guys,
I need some advice on a conundrum I am facing and I can’t think of asking anyone but this esteemed group.

Honestly, I think you are mixing up two problems into one.
Investment Problem 1: Do I retain the Whitefield apartment or do I sell it?
Residency Problem 2: Do I continue living in the rental setup or do I purchase a new flat to move in?

The common linkage is the potential funds coming from the sale of the existing flat that would help in some of the loan payout of the new flat.

Folks have shared useful inputs for both problems; suggest considering each problem separately and then take a decision.

The rent I am getting on the flat in Whitefield is paying off the EMI. Rent is 48k and my EMI for it is also 48K. The existing loan is for another 10 years

On a side note, I believe you aren't considering the recurring costs (society maintenance, etc.) that would be over the EMI. Unless of course your renter is paying for that too. Do keep that in consideration when you do your analysis.

[am1m]

Originally Posted by hothatchaway

Please see answers above.

Don't have anything useful to add, just wanted to say brilliant, well-considered responses, fact/numbers-based! Very useful even for people like me who aren't considering a house purchase, but want to learn how to evaluate decisions like this based on numbers. Thank you!

[androdev]

Originally Posted by casnov

Any advice on this dilemma?

Well, it depends.

Are you financially savvy? In that case you can generate better returns than what an apartment can give. This assumes that you are really disciplined about saving and investing it in SIP, etc. Such people are better served by a single self-occupied house and investing their surplus in stocks and stuff.

If you are like me, whose hands keep itching as soon as there is some surplus cash, you are better served by locking yourself with home loan EMIs. Forget about optimising returns, you just need to stop the money from disappearing magically. Mind you, I'm not a wasteful spender - somehow sensible and noble causes pop up that justify the spend. You can't spend what you don't have.

I personally don't like the idea of owning multiple apartments. For one, they don't give great capital returns and for the other, I am too lazy to look after them. I just prefer one self-occupied house/apartment and the rest to be vacant lands that are safe from title/encroachment risks. Good vacant lands are not likely to be accessible to salaried folks - not EMI friendly if you know what I mean. You can use apartments as a stepping stone - buy apartments, pre-close the loans and then sell to buy lands with those proceeds. Or sell current apartment to enable you to buy a bigger apartment - always a good idea to own a premium property for self occupied use. Obviously one should not commit to excess EMIs if one is not too confident/bullish about their career prospects.

[Caffeinated]

One common tone in all the posts is that if there is a decent property available, time is of utmost importance and even 2-3 days delay can lead to opportunity loss.

This naturally means that in the quest of closing deal fast, we might not evaluate all pros and cons fully, and likely to discover more only after purchase is complete. In such a case, how easy is it to resell an apartment in short period ( <1 year) after purchasing, provided price appreciation is decent and only reason for sale is personal reasons? Are there any hidden complications/scrutiny/taxes etc which might come up in such a case?

[anoopGTkrish]

I have been looking for a good "Home" for the past 1.5 years in Bangalore. Wife is inclined towards high rise townships from Tier 1 builders for the comfort, safety and amenities while I am inclined towards a villa/ plotted development in the outer vicinity like Dommasandra in Sarajapura Road/ Budigere along old Madras road.

Since we both could never agree on options, we missed a lot of good deals that came on to the Market during CoVID times. Now we are looking at eye watering prices from the builders.

So we are focusing on resale properties across Whitefield, Bellandur, etc. Since we need a combination of space and society, we are following the criteria - Gated society, 1800sqft+, Car Parking. Marking. In the last 6 months of searching, this is what I have learned.

1. No one is selling at quoted prices: We have been scouting across Nobroker, Settlein, 99 acres etc. On an average, people are being quoted 15% to 25% less than the quoted prices. In most of the cases we experienced, the sellers were willing to come down. So you should feel free to contact properties that have quoted prices which are +25% of your budget and negotiate.

2. Tier 1 Sells: Demand for Sobha, Prestige and Brigade properties are really high. These are relatively safer to invest in as you can sell them fairly quickly as long as you price it right. Properties like Prestige tranquility sell out incredibly quickly while Tier 2 & Tier 3 builder properties could take up to a year to sell. Even Tier 3 builder properties adjacent to famous residential towers like prestige shantiniketan are lying in the market for well over a year without takers (Ittina Akkala & SLS properties are examples).

3. Location is key: If you do not have the budget for Tier 1, next safe bet would be a Tier 2 property but in a prime location like Bellandur, Whitefield main road, Manyata etc.

4. Villas are money traps: Villas are incredibly expensive to live in. Apart from the high initial property value, you would be paying a significantly higher maintenance as compared to an apartment. Most of the villas/ rowhouses are based on UDS and you are limited by community guidelines on what modifications you could do.

Market is slowly stabilizing at this point and we are hoping to grab a good deal within the next few months. Every stakeholder involved in the purchase decision must agree on the purchase criteria otherwise this process would get extremely frustrating and time consuming.

[Everlearner]

Need inputs from our esteemed forum members on below.

For small residential buildings with 4-5 houses, if the water supply from borewell and Cauvery is not enough and need to buy additional tankers, who bears the cost of the tankers? In general practice in Bangalore, is it the owner's responsibility or is the additional expense divided by tenants?

We had sufficient water till date, but recently facing severe water shortage and had to call for tankers.

[sagarpadaki]

Originally Posted by Everlearner

Need inputs from our esteemed forum members on below.

For small residential buildings with 4-5 houses, if the water supply from borewell and Cauvery is not enough and need to buy additional tankers, who bears the cost of the tankers? In general practice in Bangalore, is it the owner's responsibility or is the additional expense divided by tenants?

We had sufficient water till date, but recently facing severe water shortage and had to call for tankers.

If you are paying maintenance, then Owner should take care ideally. However, if the situation is like you need one or more tanker everyday it would be unfair to expect owner to pay for water. It is practical the cost of tanker be divided among tenants

[ashis89]

Originally Posted by Everlearner

Need inputs from our esteemed forum members on below.

For small residential buildings with 4-5 houses, if the water supply from borewell and Cauvery is not enough and need to buy additional tankers, who bears the cost of the tankers? In general practice in Bangalore, is it the owner's responsibility or is the additional expense divided by tenants?

We had sufficient water till date, but recently facing severe water shortage and had to call for tankers.

It is considered part of monthly maintenance which can vary. Tenant is expected to pay although one can try talking to landlord to split it.

[TheARUN]

Originally Posted by Everlearner

Need inputs from our esteemed forum members on below.

For small residential buildings with 4-5 houses, if the water supply from borewell and Cauvery is not enough and need to buy additional tankers, who bears the cost of the tankers? In general practice in Bangalore, is it the owner's responsibility or is the additional expense divided by tenants?

We had sufficient water till date, but recently facing severe water shortage and had to call for tankers.

This is a very difficult issue to resolve.

Once I put out an OLX Ad seeking tenants saying 24x7 water. It's a 3 house Building. Water was not an issue due to Corporation water and Borewell water, suddenly both stopped for a few months. The tenant said I have to provide water, there was a lot of negotiation and still I ended up paying for the water. It was Rs.400 for a load every week. Have been careful from then on with the Ads. Currently all the 3 tenants share the bill, it's usually 2 loads of Rs.400 per month. Still there are issues, the one on the top floor is a bachelor and he argues why he has to pay the same as the families. One family on the first floor keeps getting a lot of relatives and the other tenants complain

You all have to sit and thrash out an understanding of how much water you need and get a budget, all of you who live there irrespective of owner or tenant. Then check the rental agreements and whoever is taking the responsibility on the agreement pays, else whoever is staying there pays.

[Everlearner]

Originally Posted by sagarpadaki

If you are paying maintenance, then Owner should take care ideally. However, if the situation is like you need one or more tanker everyday it would be unfair to expect owner to pay for water. It is practical the cost of tanker be divided among tenants

Originally Posted by ashis89

It is considered part of monthly maintenance which can vary. Tenant is expected to pay although one can try talking to landlord to split it.

Originally Posted by TheARUN

This is a very difficult issue to resolve.

Once I put out an OLX Ad seeking tenants saying 24x7 water. It's a 3 house Building. Water was not an issue due to Corporation water and Borewell water, suddenly both stopped for a few months. The tenant said I have to provide water, there was a lot of negotiation and still I ended up paying for the water. It was Rs.400 for a load every week. Have been careful from then on with the Ads. Currently all the 3 tenants share the bill, it's usually 2 loads of Rs.400 per month. Still there are issues, the one on the top floor is a bachelor and he argues why he has to pay the same as the families. One family on the first floor keeps getting a lot of relatives and the other tenants complain

You all have to sit and thrash out an understanding of how much water you need and get a budget, all of you who live there irrespective of owner or tenant. Then check the rental agreements and whoever is taking the responsibility on the agreement pays, else whoever is staying there pays.

Thank you all for your inputs.

I'm the owner and all the tenants are staying there from last 2 years. There was sufficient water supply from borewell till recently when the water from borewell dried up(muddy water is coming) and BBMP supply is also very less.

Tenants were demanding that I have to pay for water tankers and there was a lot of back and forth. At the end, I had to take a strong stance and tell them that as an owner I have provided 2 sources of water and were also working fine for last 2 years. If there is scarcity of water due to lack of rains which is out of my control, there is nothing I can do and they should be prepared to bear the additional cost.

Also, any inputs on what can cause muddy water from borewell? Some people are saying that the borewell has not dried up, but may be dome mud is getting mixed with water. Has any one who faced this issue clarify what is the solution and how much it costs to fix this?

[sagarpadaki]

Originally Posted by Everlearner

Tenants were demanding that I have to pay for water tankers and there was a lot of back and forth. At the end, I had to take a strong stance and tell them that as an owner I have provided 2 sources of water and were also working fine for last 2 years. If there is scarcity of water due to lack of rains which is out of my control, there is nothing I can do and they should be prepared to bear the additional cost.

Also, any inputs on what can cause muddy water from borewell? Some people are saying that the borewell has not dried up, but may be dome mud is getting mixed with water. Has any one who faced this issue clarify what is the solution and how much it costs to fix this?

What I suggest is, calculate based on number of people in the building. Say you have 3 houses on rent; one tenant has 5 people and other has 4. Now, divide the total cost of the tanker by the sum of all the people in the building. This will give you cost per person. Then multiply the cost per person with the number of persons in a house and charge them accordingly. This way, a tenant with a smaller number of family members will not feel unfair. This is what we do in our home with tenants since day 1. Everyone is happy since the charge is per person and not per family. Children under 12 can be considered as 0.5

Example.
Monthly BWSSB Bill - Rs.1000
Tenant 1 - 3 family members
Tenant 2 - 4.5 family members
Tenant 3 - 2 family members

Per person cost = 1000/ (3+4.5+2) = ~105
Tenant 1 pays = 3x105 = 315
Tenant 2 pays = 4.5x105 = ~475
Tenant 3 pays = 2x105 = 210

Same logic can be applied to water tanker as well.


Muddy water in borewell most likely means the top layer of the soil is getting loose and is falling into the borewell. You may want to consult a geologist and get their expert opinion

[KL01toKA03]

Originally Posted by Everlearner

Need inputs from our esteemed forum members on below.

For small residential buildings with 4-5 houses, if the water supply from borewell and Cauvery is not enough and need to buy additional tankers, who bears the cost of the tankers? In general practice in Bangalore, is it the owner's responsibility or is the additional expense divided by tenants?

We had sufficient water till date, but recently facing severe water shortage and had to call for tankers.

I think it should be the responsibility of the tenants. I'm assuming that the tenants pay for electricity that they use. Similarly, they should pay for the water they use. Ideally, the owner should install meters for each house to track usage. Based on usage, the cost should be split among the tenants.

[ninjatalli]

Originally Posted by TheARUN

Then check the rental agreements and whoever is taking the responsibility on the agreement pays, else whoever is staying there pays.

+1 to the rental agreement point.

Originally Posted by Everlearner

Tenants were demanding that I have to pay for water tankers and there was a lot of back and forth. At the end, I had to take a strong stance and tell them that as an owner I have provided 2 sources of water and were also working fine for last 2 years. If there is scarcity of water due to lack of rains which is out of my control, there is nothing I can do and they should be prepared to bear the additional cost.

Sorry, but this is in your control. This is something that the rental agreement should drive. I live in an ~30 year old apartment which is basically a single large plot with apartments across multiple (4) floors . The owner lives on top floor and his tenants live on the floors below. The rental agreement I have is very clear - except electricity (and other utilities like gas, broadband in my name), the water, sewage, house maintenance, and the common amenities etc. is the owner's responsibility. My rent includes the maintenance (part) charges.

We have had one unique case for our apt and 3 common cases impacting all tenants
1. The lift stopped working (after having issues for over a year)
2. The water started seeping in through the walls on the portion where the terrace was above us (we live under the penthouse)
3. The rooftop tanks needed cleaning
4. One of the tenant was out of town but left one of the tap open. The tank(s) got empty overnight

For first 3 scenarios, the owner had to bear the cost. For the 4th, thankfully there was no additional cost; just we had to wait a day for the tanks to get filled up. For all repair work, he delayed it as much as he could, siting high costs and grumbling we weren't all paying for it. Yes, we all were using the lift so in a way we were responsible for the wear and tear. But the rental agreement dictated that. He took a hit of a few lakhs for all the repair work and got it done.

In this case, if your rental agreement didn't word it out who is responsible for the water expenses, ideally I would assume the primary ownership falls on you; but you have merit in then getting the tenants involved. If any of your tenants are a bunch of idiots who use water like crazy, it falls on you to monitor it (else everyone pays for it). In the 4th case above in my apartment, there was a stern discussion between the owner and those tenants (bachelors) but don't think there was any penalty/impact otherwise.

If you have good tenants, work it out amicably like others have suggested. Maybe your apartment is in a location which sees water shortage regularly (last 2 years were good across Bangalore); then it falls on you to preempt this via rental agreements or sorts; now and going forward.

[Everlearner]

Originally Posted by ninjatalli

+1 to the rental agreement point.

Sorry, but this is in your control. This is something that the rental agreement should drive.
If you have good tenants, work it out amicably like others have suggested. Maybe your apartment is in a location which sees water shortage regularly (last 2 years were good across Bangalore); then it falls on you to preempt this via rental agreements or sorts; now and going forward.

What I meant is that the availability of water is not in my control The response to the situation is definitely in my control and that's what I have done.

Thanks for pointers towards agreement.

It's a new house constructed in 2021 and these are the first set of tenants. Since there was enough water supply, there was never a need to explicitly mention regarding water shortage. The rent agreements are due for renewal next month and I will ensure to include this in the formal agreement.

Yes, I any day prefer a good tenant over a few hundred rupees. In fact, I'm charging less rent for a tenant compared to others since he takes active effort in maintenance like monitoring the cleaning maid etc.,