Best Investment: Vacation Home Or City Apartment
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Investing in real estate has always been a popular choice in India, with the growing affluence of urban residents driving the trend of purchasing second homes. Traditionally, these second homes have served as an additional income source. However, the cost of owning a city apartment has become exorbitant, and many buyers face various challenges associated with such investments. As a result, the urban investors are now increasingly looking towards vacation homes as an attractive alternative. These resort-style properties, situated close to Tier-1 cities like Mumbai and Pune, are gaining popularity due to their affordability, potential for higher returns, and lifestyle benefits.
Choosing between a city apartment and a vacation home can be challenging. To make this decision easier, let’s compare both options across several critical factors.
Value on Investment:
Owning an apartment in a Tier-1 city like Mumbai or Pune can be financially draining. The high purchase price often requires buyers to use a significant portion of their savings. Unfortunately, these apartments often do not generate substantial rental income, and can take several years to break even, let alone see a profit.
In contrast, vacation homes located near these cities, such as in Alibaug or Karjat, offer is more financially viable. The initial investment is considerably lower than that of a city apartment, and the rental income, generated through room tariffs, helps investors recover their costs and start making a profit much faster.
Maintenance Costs:
City apartments, even those with the most basic amenities, come with significant maintenance costs. Typically, owners must pay a minimum maintenance fee of Rs. 8-10 per square foot. This is in addition to internal maintenance expenses, such as repairing faulty pipes or repainting walls.
On the other hand, vacation homes are often managed by hospitality groups that handle all maintenance tasks, ensuring that the villa or room is always in excellent condition. Unlike residential homes, where owners must bear the cost of maintenance, vacation homes usually operate under a zero-maintenance charge policy.
Tenant Management:
Finding tenants for a city apartment can be a daunting task, often involving countless conversations with brokers, property listing sites, and other potential renters. In addition to the time and effort required, owners usually have to pay brokerage fees or subscription fees to listing websites.
In contrast, owning a vacation home in a reputable resort eliminates this hassle entirely. The responsibility of finding guests typically falls on the resort's management, who handle all bookings. Guests either book directly, or the resort facilitates the process, generating income for the owner without the need for brokerage or subscription fees.
Leisure and Lifestyle:
City apartments, especially those used as second homes, rarely offer the opportunity to relax whenever you desire, as they are often rented out. However, vacation homes located in scenic holiday destinations; offer owners a chance to unwind during weekends with family and friends, enjoying the beautiful views, top-notch amenities, and all the leisure activities that come with it. This makes vacation homes an attractive investment for those seeking a blend of financial returns and lifestyle benefits.
Family function:
When it comes to hosting special events, residential societies will not permit the use of common spaces, such as clubhouses, for events if you do not live there full-time. Vacation homes, on the other hand, offer a distinct advantage. Owners can book the entire resort for their events, ensuring access to all the necessary amenities, making the occasion memorable and stress-free.
Some vacation home properties even offer a unique, once-in-a-lifetime opportunity to book the entire resort for big family functions, like weddings or large celebrations, at no additional cost. This exclusive benefit allows you to enjoy a grand event with all the luxury and comfort the property has to offer, without the usual financial stress.
Property Tax:
Another financial consideration is property tax. Owning a second home in the form of a city apartment usually comes with a hefty property tax bill. In contrast, vacation homes, often located in suburban areas, are subject to much lower property taxes, making them a more economical choice in the long run. Given these factors, vacation homes clearly outperform city apartments in terms of investment potential, cost-effectiveness, and lifestyle benefits.
