India vs Canada- Real Estate Investment
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Hi,
My parents have inherited a property from my grand parents which they recently sold in India. My parents live in Mumbai and the property was in Chennai and now it has been sold. Would it be a good idea to invest the money again in India or bring it here in Canada and use it as a downpayment and buy a investement property here. The amount of money the property has fetched is 80K $ . It belongs to both me and my brother and both of live here in Canada (myself in TO and he in Ottawa). I was talking to my realtor today and he was suggesting that I am better off bringing that money and add another 20- 25 Kbetween me and my brother and get 20% down for a detatched house in Brampton area such as Mount Pleasant which would cost 450-500K. The rent would be around 1900-2200 depending on the house etc and the mortgage on 350K would be 1600+ 300$ property taxes which is around 1900$ cost. So in general it may not generate a lot of cash flow but definitely build some equity. On the other hand Mumbai offers some investment options such as Airport coming up but since we both are in Canada and would live here we are not sure on what to do. Both of us already own principal residence houses here. So this is purely an investment property.
If I were you, I consider the following:
1. I may make more on investments in India than in Canada but I will be spending significant amounts unknowingly to manage/secure those properties which in turn diminish the advantage more ROI.
2. Investments in Canada are more secured than India (undoubtedly)
3. Rest of my life will be in Canada and it would be easy for me to manage things here than in India
4. My children will not be able to get the fruits if the trees are planted some where else ... infact there is a very good chance that they may not get anything out of it once I am not there.
Quote:
Originally posted by vivek901
Hi,
My parents have inherited a property from my grand parents which they recently sold in India. My parents live in Mumbai and the property was in Chennai and now it has been sold. Would it be a good idea to invest the money again in India or bring it here in Canada and use it as a downpayment and buy a investement property here. The amount of money the property has fetched is 80K $ . It belongs to both me and my brother and both of live here in Canada (myself in TO and he in Ottawa). I was talking to my realtor today and he was suggesting that I am better off bringing that money and add another 20- 25 Kbetween me and my brother and get 20% down for a detatched house in Brampton area such as Mount Pleasant which would cost 450-500K. The rent would be around 1900-2200 depending on the house etc and the mortgage on 350K would be 1600+ 300$ property taxes which is around 1900$ cost. So in general it may not generate a lot of cash flow but definitely build some equity. On the other hand Mumbai offers some investment options such as Airport coming up but since we both are in Canada and would live here we are not sure on what to do. Both of us already own principal residence houses here. So this is purely an investment property.
Not much capital appreciation is going to take place in Canada anymore. The prices are going to remain same or a slight correction is going to take place.
Since 2000 for the last 15 yrs , RE prices have been going up in Canada, so they are at their peak now.
You will have to show your rental income to CRA , plus since its your second property , you will have to pay huge capital gains tax, when you sell it.
You will have better capital appreciation opportunities in India , plus you need not show the rent you get in India or sale of the house in India to CRA , unless you want to..there is NO way they can find out.
Also you can get 9 % - 10 % interest in India just on Fixed Deposit, you won't even get 2 % on a GIC over here. Just park the money there for the time being for the next 2-3 yrs...getting almost 10 %.
When the prices correct or go down in Canada, you can always bring it here later on..& buy your rental house. Buying a condo & renting it out will be better..less hassle, headache, less initial investment etc.
If your or your brother's current house is NOT paid off , just bring the money here & make a lump sum payment towards your existing MTG , that lump sum gets directly applied to your outstanding principle, you will save thousands of dollars in interest & take years off your amortization.
Usually they allow 10 % - 20 % lump prepayment towards your MTG , without ANY pre-payment penalty each year..depending on the MTG & bank.
India's economy is growing faster than Canada.
You are better off allocating capital into India which will fetch you more higher returns going forward.
Buying an overvalued asset House in Brampton isn't a smart strategy of wealth creation. If Real estate in India is a concern, then invest in India's top blue chip companies & watch is grow manyfold over the next few decades. And you can continue to receive dividends for the rest of your life, & to kids & future generations.
There are more RE options in India now than before. You can buy secure property(land) from reputed RE companies and they will manage the property(land) for you. You have to occasionally check the property when you come visiting to India.
There may be some extra costs involved like building a wall around your property and monthly maintenance fee. The returns even after factoring in these maintenance costs, currency devaluation, taxation etc. will be significantly higher than you would get in Canada.
Naturally, there will be more risks involved as you are not living in India, but honestly, how many times do you go and look around your property even when living in India? A couple of times a year? Instead, you would do it once an year. Of course, if you buy shady property with faulty title deed etc., you could get into trouble(which is why you should buy property from reputed realtors and in established housing societies as mentioned before). And legal recourse in India is extremely cumbersome/time-consuming if not expensive.
Location: God's own country
Posted on: 28-03-15 03:20:55
Agree with Elmer and with Adam too...
YOu can bring the money and pay off your mortgage. It is a safe bet. But with the interest rates at this low in Caanda, I would agree with Elmer.
See how the town is going to expand and buy land. Buying apartment in India does not get that much returns now (unless it is in specific areas / towns) but RE is the best bet.
Some realtors in India, are selling land with a number of trees planted in it. They will see that these trees are well maintained and that the fruits of the trees will also reach you. These are in the outskirts. They will also leave a portion of land for you in this so that one can build a house.
I like Elmer's option.
There is more one option as your broker is telling you.
Get a second property soley for rental purposes. (in canada). Make portions and rent it. If it is near a college / univ. rent it to students. It will get a good income.
I will just list the rental income that one of my friend in Toronto gets.
He bought a G+2 house (basement +ground +1 floor house) for $ 350 K (very old) in 2007.
Basement to a family - $ 900
Ground floor to a family - $ 1200
First floor (3 bed, 1 washroom + 1 kitchen)- rented to 3 bachelors for $ 400 each. Paid $ 100 to one guy to clean the kitchen and washroom)
Total income - $ 3200
Try this option.
Murali
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I am a Gents and not a Ladies.
Quote:
I will just list the rental income that one of my friend in Toronto gets.
He bought a G+2 house (basement +ground +1 floor house) for $ 350 K (very old) in 2007.
Basement to a family - $ 900
Ground floor to a family - $ 1200
First floor (3 bed, 1 washroom + 1 kitchen)- rented to 3 bachelors for $ 400 each. Paid $ 100 to one guy to clean the kitchen and washroom)
Total income - $ 3200
Try this option.
Murali
Lot of times the house becomes a $hit hole , when so many people are living there
. They make a big mess, especially desis ..they don't clean & maintaing the house very well , just because its NOT theirs and a rental
Hopefully utilities are charged extra ..as desis abuse utilities big time , when they don't have to pay.
