Investment in shares vs commercial real estate

Rajesh Sharma

My answer to Nepali@pardesh regarding investment in share market vs real estate commercial property.

I have copied and posted his post and two other post also for reference.


Nepali@Pardesh - I know the saying that “Expect no good thing free from anyone” but I have been seeing many contributors in this forum who have been providing genuine advises free of costs time and again. I know they have not been receiving anything measurable in cash but the respect, trust which are more than any other thing from the members. I have always been silently saluting those genuine contributors.

I have a situation and want genuine advise from members of this forum, please if you allow. I have been investing in stock market since last 16 years but living abroad since last few years. One of my family members has been making transactions with the outstanding support from the broker house. Total value of the stock that I have in Nepal (as of today) is around 3.8 crore and I am required to make a decision as soon as possible whether to keep them or de-invest (full or part of it) it to buy a commercial house in Kathmandu in order to ensure regular monthly income. I have been maintaining spreadsheet, other members might have been doing the same thing, and announced divided for this year has been around 5,000 kitta of Bonus Share and around 360,000 of cash so far. There are still few companies that have not yet announced dividend this year which will, I hope, make around 5,600 BS and around 450,000 cash dividend in total for this year. I am in a cross road now and need expert advise from generous members of this forum, if it is a good idea for me to de-invest stocks and invest in commercial real estate (estimated price is Nrs. 365,00,000) with the estimated monthly income 170,000 in Kathmandu or stay holding (probably adding good scrips and selling less performing scrips) them for few years.

I know the question that I am putting in the forum is not that easy but good contributor like Rajesh Ji, FrEaK_MoNeYji, Nirbal BabaJi, Genuine NewsJi, Keshavji, Berkshire HathwayJi, SlingJi, FightforCauseji, 50 weeks Lowji, MacBethji and others many genuine contributors can help me with their view so that I can make a wise determination as I, personally, am not in a position to make a concrete decision as I used to do in past.

I would sincerely appreciate advise from friends that is not because they are free but because they are priceless for me which will eventually help me to make a wise decision and thank you all for your time reading this story and contributions.

Thank you all.

Nepali@Pardesh

Keshav - In Nepali culture, owning a home for living is essential from psychological, future security view point. However, I do not think it is a good idea of buying commercial house by selling shares. Of course, there could be capital gain if there will be real estate boom but the regular return from real estate is not justified. In your example, you will earn 5.5% return (annual 2 million from 3.8 crore). You also need to pay tax on your rent income.

To me, being choosy and retaining high returning shares and sell low performing ones will be right strategy. You can easily make at least 20% return with good shares.

Big Bull - i agree with keshav ji....

stocks can never be compared to a rent giving residential property...this is not monaco where u get millions for a room....
stocks are easy to liquidate not house...
people only think about the rent but they forget the add the cost that they need to buy the house...
properties have to be maintained regularly....problems arise time and again etc etc....additional costs....etc etc...

u are talking about rent....guess what:-- u will get more money as interest if u keep it in a deposit..problem free, maintainence free...always liquid...

stocks are even better....just portfolio should be good and well diversified and have to be trimmed time and again....
if i had a house i would sell it and invest in stocks instead.....

and mr. Hajurbau....3.8 crores might seem a big sum but it can be acquired easily....just keep on investing, saving , accumulating...million $ is not very far.....

Always
BiG BuLL.....

My Answer:

1. You asked questions not to an analyst but to all of us, active investors. We see opportunity in investment, so we are here and, by nature, we advise you to stay in share business.
2. The money you are talking is quite small if not used as equity together with bank loan, for real estate or commercial real state property. But, for share market, it is handsome amount. Some people like being king of hell rather than being slave in heaven. BE KING AND STAY IN SHARE BUSINESS.
3. Rental income comes with several complications. The tenant could be a problem, maintenance cost may be high, hazards like fire, earthquake are there as by our attitude, we see insurance as additional burden.
4. Generally speaking, you will never retire mentally if you are in share business. It will keep you always alert as the market moves like a octopus - any side, any time. You need to keep your eyes open and brain alert. In rental income, you have to keep yourself ready just to see your deposits in the bank account and if that is not added to be ready to talk tough with your tenant. I agree with BigBull ji as this is not Macao.
5. Most of the time, investment in share gives you better return than investment in real state. I had purchased Chilime shares at 1100 around two years ago. I got 30% and 20% bonus shares and some cash dividend too. Its price is 1515 now. You could calculate the return and this happened when everybody is crying for falling market. Once its price had reached 2700.
6. Finally, I cast my vote in favor of the same strategy as Keshav ji has stated above. Change stocks according to their performance and growth prospect and if you are away and could not keep close watch, please get help by hiring part time professionals or fund management agencies.

Good luck and all the best.

http://www.nepalsharemarket.com/jambforum/Default.aspx?postid=103932#103932