- Wrong Decisions in Real Estate will cause you Loss of Peace of Mind, Time and Money
- Some people make Wrong Decisions in Real Estate and for the Consequences they will Either blame the seller, Broker or in some cases the Property itself!
- They Don’t listen to the Real Brokers / Advisors, Follow their Instict and then suffer for a Lifetime !
- They want Shaan / Praise in the Society, and they destroy themselves in the process of Buying a New Home
Once into hell lot of Problems they seek advice from the Peer Saheb with regards to the Home,(Who after taking the Consultation fees declare that Ye Ghar Barabar nahi ! – ) Instead of this you should follow the Instructions of your Real Estate Peer Saheb (Real Estate Financial Analysts)
Mr Shahid ( Name changed) wanted to Buy a Property and Approached me, He had a Budget of 1 cr and that was the year 2022 , I Suggested a Nice Apartment with a Spectacular view, but he was Adamant on Buying a Independent Home and he Increased the Budget upto 2.5 cr and the Hunt was on
In between it so happened that Shahid attended the House warming ceremony of his Distant relatives who had just come from UAE, Their house was also Just purchased at the cost of 8 cr ( That Particular Family had a Networth of more than 150 crores ) and had been lavishly living in Dubai for the Last 30 years !
Now our Shahid bhai also got Fascinated, he removed all the Working capital of his Business, and he too made a similar purchase of 7.5 cr , Spent Another 1 crore on Interiors, followed by Lavish Dawat Housewarming ceremony) with Extravaganza Pomp and Show
Now Shahids Business started having problems, with no Working capital, all his Employees began leaving his organization, No Stock, No Sales and No Profit became his Daily Mantra ! and he started blaming this house for the bad luck , Finally one day he Decided to sell his house to infuse capital in the Business and the Family moved on to the Apartment, So this move prevented them from going Bankrupt
I Had Suggested this on a Day 1 – Wrong Decisions in Real Estate
So Heed to your Brokers word rather than trying to show that you are most Intelligent
Our Take on this Issue: You should not directly use your business’s working capital to purchase a personal house, as this is a poor financial practice that risks your company’s liquidity and operational stability. The amount you can spend on a house should be based on your personal income and assets, not your business’s working capital.
Key Financial Principles for Business Owners
Separate Finances: It is critical to maintain a clear separation between your personal and business finances. Working capital is the “lifeblood” of your business, used to cover short-term expenses like paying employees and suppliers. Diverting these funds for personal use can lead to cash flow problems and potential financial distress for the business.
Pay Yourself a Salary/Dividends: The correct approach is to pay yourself a consistent, taxable salary or draw dividends from the business’s profits. The amount you can afford for a home purchase (and the associated loan amount) will be determined by your personal, verifiable income and creditworthiness.
Assess Personal Affordability: Lenders will evaluate your personal debt-to-income ratio to determine how much they are willing to lend you for a home. A common guideline is that your total monthly debt payments (including the potential mortgage) should not exceed a certain percentage (often around 30-35%) of your gross monthly income.
Seek Professional Advice: Given your significant business capital, it is highly recommended to consult with a financial advisor or a Chartered Accountant. They can help you structure your personal income in a tax-efficient manner and guide you on the best way to invest personal wealth in real estate.
Determining Your House Budget
Instead of using the working capital figure, focus on your sustainable personal income stream from the business.
Calculate Your Stable Personal Income: Determine the consistent annual income you draw from the business (salary plus reliable dividends/profit share) after all business expenses and taxes.
Consult a Lender: Speak with a mortgage lender to get a pre-approval based on your personal income and existing debts. They will provide a concrete figure for the maximum home loan you qualify for.
Establish a Personal Budget: Based on your approved loan amount and personal savings for a down payment (typically 20% or more of the property value), you can determine a safe and affordable budget for your new home.
Using business working capital for a personal asset is generally a risky strategy that can harm your business’s long-term viability. Focus on sound financial practices and base your personal spending decisions on your personal financial health.
Join our Whats app Channel Whats App Channel :
https://whatsapp.com/channel/0029Va4QnQXKQuJDKzWgtp1F
Like our Facebook page https://www.facebook.com/propheadlines/
For Latest Real Estate Investment News Log on to https://propheadlines.com/
Our Project Posting page https://propheadlines.net/
