I DON'T believe in investing in stocks or insurance, it is akin to gambling!” asserts Suresh Talekar, 32, a professional with a media company in Mumbai.

So, where did he put his money? Property. And not one but two!

Apart from a self-owned house at Kandivali, Mumbai, where he resides with his wife and parents, he has invested in the following properties:

-- A one bedroom-hall-kitchen house in a prime location in Pune for Rs 25 lakh in 2007.

-- A two bedroom-hall-kitchen house for Rs 17 lakh in Nasik (close to an upcoming Information Technology Park) in 2007.

The logic: He saves tax on interest paid on the home loans, plus he builds an asset.

The glitch: He has taken two loans to finance his homes and wiped out all his savings in making the down payment on them.

Loan numbers:

Two loans -- was it a smart move?
”Smart move or not depends on his cash inflows and outflows,” says Sridhar Vetapalem, financial advisor.

In Suresh’s case, it was certainly not a smart move. Here’s why:

1. He has a fixed take home of Rs 50,000 per month. Recently, his wife started a Human Resource Consultancy firm, so there’s no contribution from her end yet. For a family of four, he has a surplus of approximately Rs 17,000 (Rs 50,000 less Rs 33,000 EMI on loans) and is living on a tight budget.

Smart Tip: Remember the maxim -- Do not pay more than 30 per cent of your income as EMI.

2. Sridhar continues, “He has over leveraged on real estate. Investing in one property is acceptable but without clearing the loan amount, investing in a second property is uncalled for. He’s sitting on liability."

Page 2: What Suresh wants to do next

Use our asset allocator tool to see where you should invest!

Read: Tips to lower your EMI burden

Photograph: Thomas Starke/Getty

1 | 2 | 3 |  

e-mail: Gayathri Madhavan

Suggest a story idea! Write to us!