I am buying a liability
We all know that in order to be financially free, one needs to build assets but I am buying a liability. It is not a wise decision in any aspect but this is something I have wanted to do and so, I did it! No reason is above the satisfaction of owning a piece of real estate. Also a flex that I can say that I bought a property under the age of 25, lol.
This is actually a series of stories in which I will be sharing my experiences from scratch to end and the things that I took in hopes that my experience can help someone else who is planning to buy property in India.
I did all the calculations and compared staying at rent vs buying a house and other things like if I go for a loan then how much interest will I be paying and everything. It is not very well planned out right now but I am doing the planning of this timeline and how I will make this as easy as possible to smoothly sail through this whole process from selecting the land to finishing off the loan.
Why is this a liability?
In simple terms, I believe asset is something which puts money into my pocket and a liability is something which takes money out and this property purchase is for sure taking money out of my pocket. Now, it can be argued that if I were to stay in this property then it does not become a liability but I don’t have plans to stay in this property at least for the next couple of years. In fact, there are good chances that I might not spend more than 6 months in this property over the course of next decade and 6 months rent will be comparatively very cheap than the cost of this property. Therefore, I am considering this as a liability.
Why to buy now?
I have always wanted to have at least 1 property in every city that I work and I have been here for over 4 years now, so I was pretty serious about getting a property. I had saved enough to be able to give the down payment of the total property value (roughly 20%) and this property was pretty good, it was under construction which is generally cheaper than the properties which are already built. Yes, it is not ready to move in and there are good chances I won’t be moving into this property for the next couple of years at least, but I am okay with that. I was holding myself back on the calculation that staying at rent is cheaper than buying a property and paying it’s EMI, but this time what pulled the trigger that from the last calculation, I am already making more money to be able to easily pay the EMI and my rent without any difficulty and still have some cash to invest. I have a couple of side experiments running which actually make me money which is equal to the cost of the EMI. This means I have built enough assets to be able to cover up for this purchase.
Now, obviously that doesn’t mean that I will be paying my loan tenure regularly. My current plan is to pre pay as much as possible and try to close this loan as early as possible. (More on that in a different story as I haven’t decided the specs of that plan yet).
This property is a gated society being built by a reputable developer, so I was content about the part of honesty of the developers, but only time will tell the whole story of how this unfolds. From my research standpoint. I did a couple of things before finalizing, just to be sure that I have comparatively less chances of getting into trouble. (More about that in a separate story).
What about Financial Freedom?
Will this set back my timeline to become financially free? In one word, YES!. But will this give be content that I have a piece of real estate which I was able to clear under the age of 25? Also YES! So, for me it was more of a emotional factor than a logical factor. I know it is not wise but currently I am at the age to make mistake and if unfortunately things go south, I am sure I will have plenty of time to fix that. It’s also not that big of a property, I am not going out of my budget for this property. (To give an perspective, my loan amount is just 30% of the total eligibility I have from the banks, which primarily depends on my primary income, not considering my side hustles which will be covering my EMIs).
I am positive that at max, this will set me back a couple of years but if I don’t take this chance, I will have this thought throughout my whole life. What if? What if I had purchased?
The loan interests are at the lower end of spectrum these days (Anywhere between 7–9%) and it is good because if I am able to secure a fixed rate loan than that will be a cheap loan (considering the cost of inflation at 5.50%) and the tenure period of 30 years.
I am still very focused in becoming financially free and retiring early. AKA — 🔥
Do I have second thoughts?
I used to have a lot of second thoughts on whether I should buy a property or not and I have literally spent 2 years on this decision itself, because of which I have wasted the opportunity of getting subsidy from the government under the PMAY-U (Pradhan Mantri Awas Yojana — Urban). This could’ve helped me with the interest payment to the bank, but now this scheme is closed and I can no longer eligible to get any sort of subsidy from the government. But that is okay, better late than never. I am still confident that I will be able to make a plan which is both convenient and saves me money as well. So, to sum it up, I don’t have second thoughts about this anymore.
So, that was the my point of view in buying a liability. This by no way is any sort of advice. I am not a Financial Advisor, just a random guy on the internet. But, if you liked this story, show some love by applauding and if this intrigued your interest on how I plan my way to this purchase of liability, make sure to follow me as there will be more upcoming stories in this series. That’s it for this one. Share your experience and points that convinced you to buy your first property. See you in the next story.
