When people tell you I bought a house for Rs. 10,00,000 now it is worth Rs. 50,00,000 – it was such a risk free fantastic return, you should read between the lines. In news reading and while listening to people it is important to hear what they did not tell you. And they did not tell you the following:
- I paid Rs. 1L of my own money, and about Rs. 50,000 of stamp charges and Rs. 20,000 of brokerage
- I borrowed Rs. 9L from Hdfc and repaid Rs. 16,00,000 – i.e. about Rs. 7 L as interest
- The price move from 10L to 50L took about 20 years time
- I did not realize that 5 times in 20 years is just about 8% return and not something fantastic like I thought
- I used a RE calculator and after incorporating all my costs like brokerage, stamp duty, and interest, my IRR is ONLY 5%
After reading Subra’s blog I also realized that I GOT LUCKY (not skill) that during this period:
- I did not lose my job
- I did not have a bad job
- I did not have an illness/ disease which hurt my earnings
- I did not have a challenged kid, sibling or parent who had to be supported
- My company did not close down
- I got regular increments and bonuses – which helped me repay the loan a little faster
- Everything went to plan – my company did not post me in a far away place
I do realize that my house is a good asset, but some of my stocks have grown faster than my housing portfolio. I could have of course stayed in a rented house and invested more, but that would have given me LESS SATISFACTION but more money. I am mentally very happy about the decision which I took which may not be ‘economically’ correct.
However, having learnt my lesson, I sold off my second house (I had started a second journey for another house in another location) and invested that in a bunch of stocks (Not mutual funds, but direct stocks) and that bunch is doing well. My portfolio passed muster with Subra too!
So I am happy that I bought one house and I am living in it, but the shift from a 2 bhk to a 3 bhk (if at all) will happen differently. I will sell my house, and use the profits from my stocks portfolio and buy the house. I no longer wish to contribute to the profits of Hdfc. Actually I should be happy doing it – a small part of it is coming back as dividends to me!!
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