How a small real estate investment can finance your child's higher education.

Green field projects are a great place to make such an investment today 

Its a strange world. When you have no money to spare, you get the most number of 'Sir we have the best investment scheme in the universe' phone calls. Frankly speaking, we could never really figure out where they invest that kind of money. Most of these calls come from insurance companies which have two known functions.

#1. Collect premium from you that insures you, your loved ones and your belongings and;

#2. Pay you back the promised amount in case you or your family reach a situation where that money is needed.

For anything else, like seeing your money multiply, why not deploy the money yourself? At your own terms and watch it grow steadily and safely. Sounds good, right? We have just the plan for you. And, its D-I-Y!

How to make a small real estate investment today and rest assured when it comes to your child's higher education

Step 1: Choose the property to invest in

# Say, your foresee an expenditure of Rs. 30 lacs for your child's higher education, 15 to 18 years from now. Great. You should then start looking for a property (stick to residential property type) which has a current price tag of about Rs. 10 to 12 lacs.
Note: Apply the one third rule. 60 lac expense would mean you invest in a property which is worth 20 to 25 lacs today.

# The idea is to treat this property purchase purely as a future investment plan. Do not worry about the locality, the distance from the city centre, futuristic nature of the location etc. Make a list of what is on offer.

# The property must have a lift, must be on a main/ arterial road in a futuristic location, a community is a big added bonus and the offer must come from a builder of repute. We are not really looking at the best builder brands here but the builder should have delivered projects in the past which walk the talk. Even if this builder is selling at a premium compared to other local builders in the neighbourhood, it is a safer bet.

# Try and invest money in a project under construction. You might argue that there are no homes available for 10 odd lacs anymore. We disagree. Drive out 20 kms from your city and you might find some even cheaper. Remember, it is not about bragging or taking your friends out to for a poolside grill. It is about funding your child's future. Use your instincts to narrow down on this location.

# Make sure the project is approved by Home Loan companies. Look for an HDFC/ SBI or equivalent Project Approval. If the builder tells you that approvals are expected soon, tell him to call you for the booking check once the approval has arrived on his desk.

Step 2: Make the real estate investment and monitor it

# For a Rs. 10 lac property, you need a Rs. 2 odd lac down payment and a Rs. 8 lac bank loan going by the text book. Even if you have money to spare to make a larger down payment, stick to these 20:80 home finance figures. Hold on to any spare cash. Cash is king and you probably have a queen at home and there are numerous anniversaries and birthdays to be forgotten every now and then.

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# Once every 2 months, or when you get a demand note for payment from the builder, drive down to the project to verify the progress. Chances are that you will feel you are gaining substantially in terms of your investment value already! Sip some milk shake. If the construction has progressed as informed, make the due payment. Repeat process at every new payment demand from builder.

# As your apartment nears completion, make a thorough inspection and inform the builder in writing as well as over a meeting about the things that you need done or simply, done better. Follow up regularly and inspect every fortnight in the last phase of construction to ensure that you get a home that is at least everything that was promised to you. This is the part where investing in a reputed builder becomes critical.

# Once the project is complete and a few people have moved in and called it home, complete the registration formalities, put a neat TO- LET sign on your main door and on the community notice board. Informing the local maintenance guy adds more zing to your effort.
TIP: Just leave behind an email and not a phone number. 90 out of 100 times, a to be tenant who emails you for details and your phone number will be a better tenant to have.

Investment and Returns

# You made a Rs. 2 lac upfront payment for the apartment.
# Your monthly bank loan for a 20 year term (same amount of time needed by your kid to grow up) for an 8 lac loan would need an EMI payment of Rs. 8000 per month approximately. That is about 1 lac each year.
# However, even at 5 Grands a month on an average (crazily low but lets assume the worst), you will be getting back 60 thousand by letting out that property every year! So you actually pay only 40 thousand a year as your home loan EMI.
# At the end of 20 years, including the 4 years that the project took to be built and inhabited, your 10 lac Rupee investment should be worth Rs. 40 to 45 lacs, safely and by any standards.
# You now have almost 50% more money than you had planned and invested for. That should not hurt.

Points to Remember

# You are investing in real estate to fund your child's education. So please don't get all emotional about the property. You are buying to flip it. Be absolutely practical while making a choice.

# For every such real estate article you find on the internet, you will find 496 articles which advocate investing into other schemes. So no one really told you this before.

# When you invest in good real estate, you know where your money is. Try and figure out where your money really went when you signed out that check and all you got were some papers with holograms and a book full of fine print.

Give your child that awesome education you had/ did not have/ always wished you had. Yes, only a real estate investment can make this possible, EASILY!

Cheers!

About the author

Rahul Mishra is a real estate professional who started his life as a salesman, selling homes in the city of Kolkata since 2001. He worked pan India in real estate organisations like MMG Realty, Bengal Shrachi, The Phoenix Mills and The Space Group before helping co found Pillars with a single objective - To make real estate easy!

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Additional Resource:

Article: Real Estate is a long term game. Don't burn yourself out too soon.