The Smart way to invest in a second home.
From time to time, we all get lured by a vision of a cosy getaway from the tiring routines of urban living. The second home advertisements that we encounter in the newspapers seem to beckon ever so often.
So what do we do. Well most of us do check this out. Some of us go ahead and take the plunge. Many of us get daunted by a consideration of the following :
- Cost, especially when we realise that these properties do not appreciate in value.
- Hassle of maintenance.
- An acknowledgement that we do not get the time/ motivation to use it often enough to justify the investment.
Our group of seven friends thought and debated this long and hard. We identified Goka Engineering’s project at Velneshwar Beach as our investment. We then implemented the following action plan.
- Formed a Partnership . Call it “a” investments
- We bought two plots, one for the long term and another to trade for short term gain.
- The overall cost of Rs 18 Lakhs for the plot then became a manageable 2.5 Lakhs per head
- Construction cost for a bungalow on one plot will be Rs 25 Lakhs (per head 3.6 Lakhs)
- The total cost per head is Rs 6 Lakhs ( total investment 42 Lakhs )
- In future, the “second” plot will be sold. This will help lower costs.
Assume that out of the 52 weeks, we do not get to use the “vacation home” for 13 weeks,because of bad weather etc, each member of the group can get to use it for at least five weeks in a year, which is more vacation time than any of us have ever enjoyed. The regular maintenance charges also get divided among seven people and therefore we can afford to spend more and keep the property in good shape. Also because the investment is in the name of a partnership individuals wanting to leave the group can do so after the “financials” are worked out. Taking this concept a step further, we can even let out the property to outsiders and use this as a way of generating funds for the upkeep of the property.
As the investment per head is only Rs 6 Lakhs, the cost of holding becomes negligible as opposed to a single owner model.
Since the cost and effort of upkeep of the property is taken care of, by the group, decisions are taken faster. If at any stage , the group feels that they need to collectively exit the investment, they can sell the Partnership.
This is also a good way to keep the group together as they are bound by something they “created” as a team.