What is preferable buying a house or investing in mutual funds? And the answer is- Buying a house.
Here is why-
Buying a house adds to your social status
Buying a housing property is a wonderful investment as well. As barring the exception, property prices keep rising in unabated.
Whether, economy is flourishing or dragging, it hardly has any impact on ever increasing prices of house property.
Unlike mutual funds, it has proved a one way walk up, up and away!
Preferably buy a stand alone house
Further, within the type of house properties, prices of stand alone houses register a better appreciation compared to apartments in multistory buildings.
However, if you intend to buy a house only for investment purpose and don’t intend to live in it in near future, then buying a plot of land is an even more profitable option.
Investing in Mutual Funds is only the second best option
However, the problem every investor feels in opting for buying a house is that it requires a lot of money in lump sum.
While you can start investing in mutual funds with a paltry sum.
But, investing in mutual funds is only the second best investment option while buying a house property remains at the top.
Furthermore, there are banks and financial institutions for your rescue if you don’t have a large amount of money needed to buy a house property.
Buy a house with the help of low cost bank loan
Only if you have an amount enough to provide for 10 percent of the cost of proposed house property, then Banks will finance remaining 90 percent at very reasonable rate of interest to you.
Buying a house also leads to a better tax planning
And icing on the cake will be the tax exemptions you will be getting on repayment of installments as well as interest on your housing loan.
So, if you have enough money to take care of minimum 10 percent margin money requirements, then go buy a house!
However, if you can’t even arrange the amount of margin for now.
Then start saving through some large corpus growth mutual fund and when you have enough savings to fund the required margin money for the proposed housing loan then take a housing loan for buying a house.
If you are still in doubt whether you should invest in house property or not then my suggestion is please go ahead and ask from a few people who have purchased a house property for last 10 or 20 years back and also from the people who could’nt while house property prices skyrocketed in between.
And let me know which group is regretting its decision?
You need a roof over your head
However please note-
- Assess your repaying capacity before taking a housing loan.
- Property prices are also subject to market conditions like any other investment.
- But more importantly, you need a roof over your head and in addition to an investment a housing property is also a necessity, so buy one. Sooner the better.
Note- This article is based on one of my answer to a question at Quora. Here is the link for that answer- https://www.quora.com/What-is-better-buying-a-house-or-investing-in-mutual-funds
Y K Gupta
Related article- Start investing at an early age