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Is it worth investing in a second house?

For a retail investor, it is generally advisable not to buy a house from investment purpose, says Dhirendra Kumar

Given that the interest rate of the home loan is just around 6.7 per cent, would it be wise to invest in a second house?
- Rati Jason

The interest rate of 6.7 per cent is going to be the cost of your borrowing. But buying a property for the investment purpose would demand a lot more attention. You will have to look for a tenant, get the basic furnishings done and so on. Also, you will have to see what kind of rental yield you would get. In simple words, if you are buying a property worth crore of rupees and then make some additional expenses on it to let it out, then check the annual rent in terms of return that you would get. Compare it with the efforts and your cost of borrowing. So, it requires careful arithmetic.

Generally, my suggestion to a small investor is that it is better to refrain from investing in property. It requires a lot of attention, a big-ticket investment, you cannot diversify and the loan will add to your liabilities. Also, the rate of interest may not always remain at 6.7 per cent. These are floating rates and the interest rate may go up.

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