Although the properties I am about to mention were primary residences, and not really investments, I writing this in the hope that my story so far can demonstrate the following:
- 1.The power of appreciation in developing countries like India
- 2.The power of goal setting, positive thinking, and taking action
- 3.The importance of networking
It may come across as bragging but it’s not about how humble I can be. It’s about what the story means to YOU. Even if 9 out every 10 readers hate me and just 1 is inspired, my purpose is served. Are you that one?
It may also appear that I am sharing too much personal details. I am just trying to give the right background and context.
I grew up moving from one rented house to another, almost every 11 months if not more frequent than that. My family had never enough to own a house.
It was the beginning of 2004. This was the time when the culture in India was still that people usually moved out of the house only after getting married. There were some misunderstandings and tension between me and my family members but I had not expected what I saw that morning when I returned from my graveyard shift. Things were being packed and loaded into a truck. "We are moving out" my sister informed. "Well, I had no clue about it. Where are we moving to?" I asked. "'YOU' are not part of the 'WE' Sachin." Struggling to keep my eyes open from the fatigue of the night shift, I realised that I had about an hour or so to find an accommodation for myself. Something inside me was screaming “Take action... NOW!!!”
I contacted my real estate agent friends and managed to find a PG (paying guest) accommodation for myself within 30 minutes. Less than an hour later I received a call from my sister asking for help in arranging an accommodation for them as the place ‘they’ were moving to not ready when the truck reached there. Again my friends in the real estate industry came to the rescue. We found a new house, signed the contract in my name and moved, all in within an hour.
I asked my sister for a copy of the rental contract, which was in my name, so that I could use that as residence proof and apply for a home loan – something that was never thought of in the family. My request was outright declined because she couldn’t trust me. My sister is a lovely lady, and she and I love each other a lot. It was just some misunderstanding at that time.
Hurt and disappointed I walked out, promising myself that I will celebrate my birthday in my own house. I had less than 3 months to make it happen, no money, no credibility. All I had was a lot of determination and a supportive girl friend (whom I am married to for 10 years as of this writing).
One of the top banks in India gave me a pre-sanction letter that they will finance 80% of the property value or my eligibility amount, whichever is lower. This pre-sanction letter helped in negotiating with the sellers, as I came across as a serious buyer. We found a house and agreed on the price. It was 600 thousand rupees (almost 9 thousand USD). I used the following to make my down payment:
- a.Cash saved in the 2 or 3 months between my girl friend and me
- b.Personal loan from the bank at I think some 15% interest
- c.Cash from credit card – something I will never do again but I had no other choice at that time
11 days before my birthday I walked into my new house – my own house! It was an amazing feeling. I had achieved the target. Immediately, we set the next target which has nothing to do with real estate. So let’s move on.
3 years later, we managed to sell that house for 1.3 million rupees, and use the profit to clear the debts, and make the down payment for a bigger house in a better neighbourhood for 2.7 million rupees. We didn’t have to pay capital gain tax because we were selling after 3 years and we purchased another property. It’s somewhat similar to the 1031 exchange in the US.
In India the bank will only lend you if your income is more than twice the Equated Monthly Instalments (EMI), which is the term used for monthly mortgage payment. Although our income had grown and made us eligible for this new loan, the leap in the EMI was scary. I changed my job and increased my income to overcome that fear. You see we committed first and then figured out a way to make it happen.
4 years later, we were ready to do it again. At this time though, the market was stagnant. We could only sell the house for 4.5 million rupees – although profitable the gain was not as high as our previous one.
Again, we used the profit to close get out of debt so that we get into a bigger one. The house we decided on would cost us 9 million rupees all inclusive. 3 years later the property is worth 13 million rupees!
We then set another goal – to clear off the home loan by 2016. We have already achieved this a year in advance. This was a flat in an under construction tower. We had to pay in laps as the builder made progress. These payments could be made directly if we had the cash or ask the bank to pay a portion of our sanctioned loan. We had since moved to Dubai. So while our dream home was getting built in India we were saving as much as we could and paid directly to the builder. So we never really took all of the loan that was approved. Once the payment to the builder was completed we could divert the cash to paying the loan off.
