Yes, Airbnb India can probably help you buy a house in Goa.
For many of us who live in India’s crowded and polluted cities, every trip has led to a fantasy of buying a house or apartment in Goa as a holiday / retirement home. After the vacation ends, the plans are usually forgotten till the next trip to Goa.
There are 2 schools of thought with regard to investing in real estate in India.
1.) I Love Real Estate: These are folks who are very bullish about real estate, having invested money, made money flipping properties and believe real estate prices will keep going up in perpetuity.
2.) It Doesn’t Make Financial Sense: They look at the rental yields and realise that putting that money in a Fixed Deposit will probably yield a better return.
If your aim is to not buy a primary home ( i.e. one in which you live ) you should look at investing in real estate as part of your asset allocation – because like equity, real estate is a growth asset class which provides good returns over the long term.
Have the money ? You can probably buy the property outright. While the rental yields might be low, the capital appreciation over a long term period will likely give you above inflation rates.
But what does one do if they don’t have such a large amount of money.
Let’s take an example – Suppose the property you want to buy in Goa is worth Rs 1 crore.
You can typically get a loan of 80% of it or Rs 80 lakhs – To qualify for that, one needs to have an annual income of at-least Rs 16 lakhs ( Home loans sanctioned are typically 5 times your gross annual income )
So you have put in 20 lakhs of your own money and got a loan of 80 lakhs to buy the property.
Great, you now have an EMI of about Rs 61 thousand ( calculator link ) to pay off for the privilege of owning a holiday home in Goa.
You might be wondering how will Airbnb India help ? Read on.
Now that you have a home, you will only most likely use it for a couple of weeks in a year – The rest of the year, the property is going to be sitting empty. You have two options:
1.) Rent it for long lease: You can find a tenant who will take the property on an annual lease. The problem with this is that you will only get rent of Rs 25 to 30k per month – And the property won’t be available for you when you want to take a holiday.
For an investment of Rs 1 crore, earning Rs 3 lakhs in rent per year will result in a return of just 3% – This is before taxes, repairs, brokerage, etc. Effective yield will be in the range of 1.5 to 2%
This is where the naysayers will say it’s better to keep the money in a Fixed Deposit and earn ~7% – And for the most part they are usually right in the short term.
2.) Host it on Airbnb India for Short Term Leases
This requires a bit of work but the payoff and flexibility is much more – Here is what you need to do.
- Signup on as a host on Airbnb India ( Click here >> )
- Find a local caretaker on a part time basis or Property Management Firm
- List your house / apartment.
Then, lease your property to tourists for periods ranging from as short as 2 days to as long as you want. Airbnb will find all the clients for you, verify their identity, collect payments and send them to your bank account.
You need to coordinate with the caretaker to ensure your property is maintained well and your guests served well.
Wait, but won’t the income be irregular and unpredictable ?
Yes – and you need to be prepared for atleast 6 month’s to a year’s cash flow expenses. What you are essentially doing is starting a mini side business – One that will help you own a property over a period of time.
Let’s look at the economics of it. During the summer months, demand is low and in peak season, the demand is pretty high.
Out of 365 days in a year, let’s assume you will have only about 50% occupancy or about 200 days. Here ‘s how much potential revenues you can expect to earn.
Off season (April to September) : 100 x 3000 = Rs 3 lakhs
Season (October to March) : 100 x 5000 = Rs 5 lakhs
Gross Revenue: Rs 8 lakhs
This is inclusive of GST so you can get about Rs 7.2 lakhs.
Deduct caretaker / maintenance expenses of about Rs 10k a month: Leaves you with Rs 6 lakhs.
So you now have have an average income of Rs 50k a month which can cover the bulk of your EMI payment of Rs 61k per month.
If you are more aggressive in marketing, you can probably get higher revenues.
AND, Whenever you feel like taking a vacation, just block those dates and fly off for the weekend.
So yeah, if you have some spare cash and a desire to own a property in Goa, consider giving this a shot.
And even if you aren’t ready to buy a property in Goa right away, try Airbnb’g in your local city. You can start with renting just a room in your current home or leasing an entire second property. It will give you a flavour of what it takes to be an Airbnb host before you take the big plunge. Signup to be a host here >>
And the next time you are planning to visit Goa, consider this villa on Airbnb near Baga Beach in North Goa