33.28 Villa vs Flat Which One Should You Buy?

At this point, you are convinced that Real Estate is a good investment for you.
And maybe you have even finalized the location.
But now your biggest question is: Villa or Flat.
First things First, Villas will be a lot more expensive. BUT, They have a lot of benefits that a flat does not.
Now let's go into them one by one

Flats

• Most of us would buy a Flat (most likely) someday.
• And I myself have purchased flats.
• But, the most important things were:
  • I knew exactly why I got a flat
  • And I had an idea of what to expect from it.
• Let me take you through it. My flat for me served 2 purposes:
  • In my case, I want to set up a small recording studio. (It is straightforward, and all of you also might have such reasons.)
  • During peak seasons, I will convert this into Holiday rentals.
    • I have an option of turning my flat into a short-term Airbnb.
    • And the society allows it.
  • Plus this apartment:
    • Has a pool in the society
    • Relatively close to the beach
    • Spacious Lobby and Rooms

All of this makes the apartment good for short-term rentals.

Villas

• Now let’s take a look at Villas. The most important point here is that when you buy a villa, you also own the land that it is built on. In flats, you get an Undivided Share of Land, which is not exactly the same.
• This means that Asset Price Appreciation on a Villa will be significantly more than Flats. But they will require more investment from you i.e: It will be more expensive.

Now let’s look at the crucial concept of FSA

• If you are buying a property in a city like Bangalore/Hyderabad, what builders do is they buy the land (let's say 1000 sq m) and they get an FSI on it.
• Let's say 150% or 1.5. This means that the built-up area is 1.5x plot area.
• FSI simply means how many units of construction you can do on this property.
  
  I recently made a 50%+ return on one of my South Goa investments.

In South Goa, the FSI on one of my properties was 60%, and now it currently stands at 80%. That itself brought a 33% appreciation.
But there are 2 things to always keep in mind, No matter which one you buy:

1. The deal that you are getting Irrespective of the city/state/location, in most cases If the rental yield is less than 4%, generally avoid buying that property.
2. Check the documents properly.

We will cover some of these documents in the upcoming newsletters.
But the point is It gets difficult for normal buyers to check all these thoroughly.

So usually take a bank loan before buying any property.
The bank will check a lot of documents for you.

Small fees, yes.
But it will be worth it

Just remember:

• Property prices go up when the land price goes up.
• And apartment prices don’t linearly go up with land prices.
• You need a USP that makes the property go up in price.

Understanding such concepts will save you a lot of money.

Source

• Akshat Shrivastava's 30 days Real Estate newsletter.