Saturday, October 26, 2013

Prestige Lakeside - How to make 63 lacs profits by investing 38 lacs in 4 years


I had recommended a property investment in my last blog and quite a few people had reached out to me and few did go ahead with the investment. Many did not as they could not fathom the calculations on how the ROI is calculated.

So I have created an excel sheet that is formula driven –you can download it from drop box url here.
In the excel sheet, you can change the numbers and see for yourself.

Let me share the big picture.  

  • You are buying a 2000 sq ft flat at a cost of Rs 5000 per sq ft plus one car park (at Rs 3 lacs). So you commit Rs 103 lacs for the flat.
  • The flat is ready in 4 years – i.e. Quarter 4 of 2017
  • You pay 20% upfront right away (i.e.20.6 lacs Nov 2013) and take a home loan for the remaining 80% amount (Rs 82.4 lacs) that is paid over 12  equal instalments by the bank
  • The home loan rate is 10.5% and you pay the pre emi for the loan for the next 4 years every month. The pre emi that you have paid over four years totals to Rs 18 lacs.
  • You sell the flat at Rs. 9000 a sq ft – and get Rs 4 lacs for the car park – you get Rs 184 lacs by selling it in March 2018 (you may ask why Rs 9000 - well that is my forecast of the price of the property after 4 years)

You have paid Rs 20.6 lacs now and then paid a monthly pre emi totalling to Rs 18 lacs – so your total outflow has been 38 lacs.

By selling you get Rs 184 lacs – you repay the loan of Rs. 82.4 lacs – you are still left with Rs. 101.6 lacs

Remove the amount that you have invested i.e. Rs 38 lacs – you will be still be left with a profit of Rs. 63 lacs ( let us leave the change out of our discussion)
So you get Rs 63 lacs profit from this transaction  -
Will you be able to save Rs 63 lacs over four years through your salary? Most probably NO
This is one smart way to get rich and retire early
Even though this example is for a three bedroom flat and Rs 100 lacs investment, you can start with Rs. 60 lacs for a two bedroom flat in Prestige Lakeside   - and you can go up to a few crores - the mathematics will not change.
If you have any questions - please do come back to me.
If you want to go with the investment - please reach out to my ex student Varun - his number is 99459 50109 - he works for a good real estate advisory and will help you with all the documentation.
I also would like to have comments from my readers and people who have already invested in this property