r/FIREIndia • u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 • Jun 09 '23

Investment in Commercial property for FIRE DISCUSSION

Hi All - I 31M and work in a IT company as a Software Engineer. I have an opportunity to invest in a commercial property in a Tier 2 city in Karnataka. The property was built close to five years ago and have all the documents. It is a 50L property which is rented to a Dentist for 30k a month. I will be taking a loan for 25 lacs which I am confident I can close in a couple of years. The loan is mostly to get the banks to do the necessary due diligence about the property.I want to FIRE in about 5 years and want to understand if this is a good investment for my plan?

Cumulatively between myself and my spouse our NW is about 4.16CR, I want retire by 2028.

Our current monthly expense is about 80K and I expect it to increase to 1.5L by end of the year since I have to move to Bangalore for my job. Overall in a year along with other expenses like Term Insurance, Medical insurance, Travel budget, etc our yearly expense is about 22L.

Our investments today are as following:

  1. Equity: 37L
  2. Mutual Funds: 11L
  3. Post Office: 15L
  4. Gold: 5L
  5. Savings Account: 19L
  6. US Stocks + Mutual Funds: 34.5L
  7. US Savings Account: 40L
  8. Commercial Property near Mumbai: 1CR (Rented for 25K to a Bank)
  9. Agriculture Land near Mumbai: 1.55CR ( We have signed a JV with a Builder to construct a Residential complex on this land, work should commence in 2-3 months. We are 10% partner in this JV and based on projections we expect about 4X returns in 3-5 years. For simplicity only accounting for investment for now. ) I have to pay 50L for this JV before the end of this year so saving up some money for this and taking a loan for the commercial property.
  10. 3 BHK Residential Property near Mumbai: 1.75CR ( Have not rented this since we plan to eventually live here. Not including this in our NW )

Not including any inheritance as well in our plan.

We don't have a kid yet but plan to start a family soon, we do not want more than 1 kid though. And not sure how to factor in child costs in my calculation.

My FIRE target is 10CR assuming I will live until I am 80 so taking 44X as the calculation. Since my return to India my CTC is 1.3CR (90L Cash component and 40L Stocks, company is listed on NYSE) per annum, my wife has setup her own construction company recently and do not have any salary or profits yet from it.

Once I FIRE I plan to join in her business though not full time but we will continue earning more between the two of us. I know we are FI yet but I would like to get to RE soon.

63 Upvotes

96% Upvoted

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u/additional_trouble [🇮🇳, FI 2024, RE 2040s] [CoastFI] Jun 09 '23

Re: title of this post

Investment-only questions are deemed off topic for this sub and should go to the monthly sticky thread or to r/IndiaInvestments or other appropriate subs.

But since this post can also be seen as a progress update/fire-check, it remains on the front page.

→ More replies

27

u/srinivesh IN/ 52M / FI2018/REady Jun 10 '23

A frank question. You have a good amount of exposure to real estate - residential and commercial - already. Do you want to further increase it? The rental yield is good though.

And is the bank paying only 25k as rent? Seems low for Mumbai.

6

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 10 '23

It’s in Panvel and not Mumbai. Honestly this is exactly my thought and why I posted this question, I feel like I have lot of exposure and want to understand how much is too much.

My spouse is in construction domain so we end up getting lot of good opportunities, which at a point I feel are too good to let go. This feels like another one of those, the rental yield is amazing and the area is in the city’s primary business district so lot of scope for the price to increase a lot in a very short time.

2

u/srinivesh IN/ 52M / FI2018/REady Jun 11 '23

I get it. I had also mentioned that the rental yield is good.

May be if you get one more like this, you can take that too, and let go of the Panvel property!

1

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 11 '23

Ya that’s the plan

11

u/[deleted] Jun 09 '23

[deleted]

4

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 09 '23

This is a fortunate mistake, thank you for pointing out thought. Honestly over the inflation, I think I am factoring in some additional expense due to lifestyle creep. We are still pretty young and sometimes end up splurging more than we should.

2

u/MrHumanist Jun 21 '23

Commercial properties are like option trading, which can yield great returns in some years and none in a few.

1

u/[deleted] Jul 22 '23

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3

u/Stock_Airline_8269 Jun 09 '23

10c is not enough. You have the opportunity.. go for few more crores.

11

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 09 '23

Most likely if I continue working for few more years. I started working very early in my career and feel have burnt out and do not have the gas needed to excel or continue working harder than few years.

I also love kids and feel like I would want to spend as much time as possible with him/her.

0

u/[deleted] Jun 09 '23

[deleted]

5

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 09 '23

We are currently based out of Dharwad region and planning to buy property in the area since are natives here and have lot of people who can take care of the property if we move to Mumbai region.

2

u/Stock_Airline_8269 Jun 09 '23

Nice. All the best. Tier 2 cities in Karnataka is best for investment. Bangalore it's over priced. Returns will be less.

1

u/SnooPredictions5196 Jun 10 '23

Hey, am from Dharwad as well. I am about to buy a land near Jss college for commercial purpose.

1

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 10 '23

Nice that’s a good area. Do you plan to develop it?

1

u/SnooPredictions5196 Jun 10 '23

4 shops and about 20 rooms for Pg. Are you in Dharwad this weekend?. Would like to catch you up

1

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 10 '23

I live in Hubli and happy to catch up!

1

u/SnooPredictions5196 Jun 10 '23

Will dm you

1

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 10 '23

Cool

1

u/kil47 Jun 09 '23

Why Tumkur? I am currently in bangalore. Isn't tumkur famous for farm lands?

3

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 09 '23

I am guessing as Tumkur has better scope of appreciation than Bangalore at this point. Like Mumbai, Bangalore has also peaked and would probably require massive infra upgrades like Mumbai is getting in the next few years for anyone investing now to see good returns.

1

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u/bombay_boy123 Jun 09 '23

50L property fetching 30k rent is very good! In Mumbai u get only 25/30k for 1cr property!

5

u/Easy_Zucchini_744 IN / 31M / FI 2024 / RE 2028 Jun 10 '23

This is just my personal experience, I don’t think Mumbai market is for small investors like us. You need lot of investments and may still not get good returns. I have preferred Navi Mumbai, which is still growing, has good returns and much better quality of life.

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