Monday, June 6, 2011

Sometimes it is better to Cut the Goose which lays Golden Eggs

There is a old saying it is stupid to cut the goose which lays golden eggs, but sometimes it is better to cut the Goose with Golden egg.

Some of the unmovable assets like Flats given on rent are really a loss not gain, especially when the Flat has a running EMI (on Loan). Today's interest rates are so high and will go even further in days to come. Petrol now at 70+ how long will it take to reach 100?, in no time, so the RBI tightening will start. Simple Statistics

Income : Rent 10,000 x 12 = 1,20,000
Expense : EMI 17,000 x 12 = 2,04,000
Expense : Property Tax = 6,000
Fixed Annual Maintenance = 25,000
Unexpected expenses on house = unknown
Tax benefits 45,000
gain / loss : -70,000

Loss of 70,000 is bigger avoiding loss is good. Think again, so sometimes it's not worth to rent out, instead selling and investing in Stocks, MF's or most traditional will never recommend FD's make sense. The returns is better there, or worst case even putting in savings account is better.

Sometimes what we think as gains will be realized as loss if written on paper :). Sometimes it makes sense to sell losses and make gains by cutting loss.

Everyone cannot be Warren, but we can try to be one.