What to note when buying a market kiosk?

With a capital of 400 million VND, experts advise taking out a mortgage to buy a kiosk, but need to carefully evaluate the price, location and business plan.

Hello expert, I am 31 years old, single and living in a remote province in the Central region. I currently have only 400 million VND in savings. Because I live with my parents, my monthly expenses are about 5 million VND. My average income is 20 million VND per month.

I am planning to buy a piece of land in a district on the outskirts of the province where I live for about 800 million VND. The remaining amount will be borrowed from the bank. I am researching and looking for land.

In addition to the above option, I saw a market project in the town where I live selling a 2-storey kiosk for about 800 million. I have no experience in trading and if I buy a kiosk, I will mainly keep it for myself or rent it out, or lend it to relatives to do business if they want.

I see that traditional market kiosks have very few customers because the online shopping market is popular. I also have no experience in trading and I still have an administrative job. I don't know what the risks are when buying a kiosk? I hope experts can give me advice. Sincerely thank you!

Vinh2293

Consultant:

In the context of an increasingly developing economy, investing in commercial real estate has become one of the attractive investment trends. However, not everyone knows how to approach and handle situations effectively. Through your specific case, we can draw out the necessary issues to manage personal finances when wanting to invest in a kiosk in the district as follows

In terms of income and the ability to create surplus, you have a monthly income of 20 million VND and savings of 400 million VND, monthly living expenses of 5 million VND. The surplus that can be set aside monthly is 15 million VND, equivalent to 75% of income. This is a great indicator and the basic financial resource for any investment decision.

Next, we will evaluate the investment objectives and the factors of loan management and risk management. You want to buy land or a kiosk in the district for business with the goal of stability and being able to bring passive income and income from real estate price increases. The budget is 800 million VND to buy a kiosk. So with the current financial situation, you will need to borrow 400 million from the bank.

With the use of financial leverage at the bank, I recommend that you consider the form of real estate mortgage loan and use the real estate you are planning to buy to make this loan. Currently, according to the provisions of law, kiosks can be granted a certificate of land use rights ownership. Along with legal issues, when making a bank loan, you should note the following principles.

Your interest and principal payments should be within 30% of your income. This number can be increased to a more reasonable range depending on your wishes as your current surplus is very high at around 75%.

You also need to pay attention to regulations such as interest rates and loan terms. If you borrow for a long time, the monthly interest and principal payments will be low; short-term loans will reduce the bank interest, but will put pressure on monthly cash flow. In addition, you need to understand the bank's floating interest rate regulations (which will greatly affect the loan when bank interest rates increase), and prepayment penalties.

In addition, to manage loan risks in unexpected situations that require large amounts of money such as illness, medical treatment, accidents, or retirement, you need to prepare an emergency reserve equivalent to 3-6 months of income and a life insurance contract.

You can refer to some of the latest private bank loan interest rates in the table I have compiled below.

Bank	Unsecured loan (%/year)	Mortgage Loan (%/year)
Agribank	7.0 - 17	6.5 - 7.5
Techcombank	13.78 - 16	5.99 - 12.99
VPBank	14 - 20	6.9 - 8.6
ACB	12.5 - 20	6.9 - 12
TPBank	8.7 - 17	6.4 - 12.03
HDBank	13 - 24	6.6 - 10.6
Sacombank	9.6 - 18	7.49 - 12
VIB	16 - 18	7.8 - 11.4
SHB	8.5 - 17	6.99 - 10
OCB	from 20.2	5.99 - 9.5
MSB	9.6 - 18	5.99 - 9.1
Vietcombank	10.8 - 14.4	7 - 9
Vietinbank	9.6	7.7 - 8.5
Vietnamese version	14.9 - 20.5	8.49 - 14.8
BIDV	11.9	7 - 9
MB Bank	12.5 - 20	6 - 9.5

Note: The above comparison table of bank loan interest rates is for reference only. Bank loan interest rates may change from time to time depending on the bank's lending policy. For detailed advice on loan packages and policies, please contact the banks directly.

Real estate appraisal, legal assessment and investment - business planning

You have no experience in direct or online business, which increases the risk when investing in this field. I will list some important criteria you need to carefully evaluate before deciding as follows:

First is the real estate valuation. You need to find out the past price level of kiosks compared to the present and what factors determine the potential for price increase in the future. How is the monthly cash flow from the business or rental at the kiosks going. If the kiosks are not yet put into operation, you must evaluate the expected revenue and profit of that kiosk.

The second is the macroeconomic assessment. You need to assess this factor to determine whether the time to decide to invest is appropriate or not. For example, if you own real estate during a hot period, the price has increased too much and with the use of financial leverage, it will cause interest rates to increase, along with the real estate no longer having growth potential due to the previous strong increase. This investment will turn into an ineffective investment. If you do not have experience, you can consult personal financial planning experts to get a comprehensive perspective.

Third is to evaluate the location and potential of the property. A kiosk in a densely populated area will be completely different from a kiosk in a new area because the main purpose of developing a kiosk is to do business. Without residents, capital gains (profits from increased real estate prices) and cash flow gains (profits from business activities on the land) will not be effective. Therefore, carefully researching the location of the kiosk, potential, population, electricity, roads, schools and stations around the kiosk area will help you make a more accurate investment decision.

Fourth is the legal assessment of the property. For experienced investors, this is relatively simple. But for those who do not have much experience, you should take the time to learn in advance the necessary legal procedures and regulations on taxes that must be paid when owning real estate to avoid unnecessary risks. Currently, owning a property will require attention to registration fees and annual land use taxes. If it is a kiosk, you need to find out whether that area charges service fees or maintenance fees. You should also pay attention to land use rights fees.

Finally, evaluate your investment and business plan. I recommend that you have a detailed plan for the above activities because this item almost takes up all of your savings and a part of your monthly surplus. Therefore, it is very important to build a detailed plan. You can focus on the following three factors: financial capacity assessment, budgeting and cash flow management plan (income and expenses).

Tran Manh Hoang Viet
Personal Financial Planning Expert
FIDT Investment Consulting and Asset Management Company

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