Tuesday, March 22, 2011

Investment Options

What comes to your mind when one asks you options for investment? The most common that most of us would suggest, broadly are as follows – Equity, Bond, Gold, Real Estate. But I am sure rarely people will suggest you to invest into your goals – Short term / Medium term / Long term.

Let us see one investment option which if done with proper homework would not only turn out to be investment decision to cherish, but also can provide regular income. Many have tried the simpler product of the option – Real Estate. People buy land / constructed house / Flat and rent them. This is nice way of regular income and a good way of growing your wealth with the property value appreciating over medium to long term.

So if everyone is aware of it, why am I talking about it? Because there is one option that people have not explored – Holiday Home. There are lots of places within India, in and around us that have not been explored. So if you have got cash in hand (you can also look for 60% - 70% of the amount from Bank loan) and looking for investment options – Keep this in mind while evaluating other options.

Today people are looking for large space where they can go in groups with family / friends at affordable price. So if you have space at place with beautiful scenery, good space for outdoor spots, with all the amenities that one finds at his/her home. With the increase in the customer base of the likes Mahindra Holidays, Country Club; you should not be surprised if they pay handsome for your property.

With the increase in online purchase of holidays and the advent of website like snapdeal.com, dealsandyou.com, marketing the property has become much easier and less costly.

I am exploring more details and data on the topic, would update you all ASAP!!!

1 comment:

  1. Dear sampat,

    I too had this idea in my mind about Holiday homes and vacations and have given some thought about it. So here is my 2 cents worth.....

    Your concept is a good one. I assume you are referring to the specific instance of having an apartment / bungalow in some nice scenic / vacation place and then renting it out to people. In the developed contries, there are firms that take such homes from other people and rent them out to vacationers /renters, while paying the owners a fixed amount of money. Though not exactly called timeshares, the concept is similar. The closest description for the same is

    Quite a few trends are working in the favor of this idea. Firstly, more and more Indians, the young ones mostly, want to enjoy their life. And vacationing seems to be the most common activity of choice. Secondly, Indians are upwardly mobile - i.e. more cash in their hands and increased tendency to spend it rather than saving as our parents did. Thirdly, better infrastrucutre means a quicker way of getting around, followed by profileration of cars and other personal vehicles. All of these points out to a increased consumption especially on travel and vacations.

    But a few practical realities that I have experienced when I have been on homestays within in India. Firstly, if you are well off enough to have a house in a nice location like Alibaug or Mahableshwar, you are typically well off enough to maintain it and giving it off on rent is a sign of finanical distress. Secondly maintaining a remote place is headache - both finanically as well as mentally. We used to have a place in Talegaon, near Pune - a 1 BHK Flat. Sure enough, things were great for the first few years. We simply loved the place and tried to go there atleast once a month. But then problems started - leakage, equipment rust and broken, water problems, electricity problems etc. etc. For a sane and a middle class person buying a second home is a Pain in the Ass. While you may manage living ina slightly less than ideal place, because it your own, I'm not sure if the people renting it out to have a vacation will be so adjusting. They will want the best bang for their buck.

    Then again, if you have purchased a place, purely for the purpose of renting it out, then to maintain and run it you require a caretaker. Whether he will take care of the place or not properly is a secondary question, but is he trustworthy ...?? What is the guarantee that he will not rent out the place behind your back and pocket the money.? What is the guarantee that it will not be used for illicit activities ..?

    Then there is a question of your target audience - who is your customer...? Typically people with cars and their own means of transport are fairly well off to pay atleast Rs. 1500 per night. At this level, you get plenty of decent hotels. For anything below this amount, your customer profile goes into the lower strata of society, with all its related implications. Am I as a property owner comfortable in lending out my apartment / bungalow to such people ...? What

    My aim is not to discourage you, but to think on certain practical aspects which I have observed over the years in being the owner of a second home and in talking to other owners of second homes.

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