What should you keep in mind when buying a market stall?

VnExpress•19/03/2024

With a capital of 400 million VND, experts advise taking out a mortgage to buy a kiosk, but careful assessment of price, location, and business plan is necessary.

Hello expert, I am 31 years old, unmarried, and living in a rural province in Central Vietnam. Currently, I only have 400 million VND in savings. Because I live with my parents, my monthly expenses are around 5 million VND. My average monthly income is 20 million VND.

I'm planning to buy a plot of land in a district on the outskirts of the provincial capital where I currently live, for around 800 million VND. I'll borrow the remaining amount from the bank. I'm currently researching and looking for land.

Besides the above option, I saw a market project in the town where I live that's selling two-story kiosks for around 800 million VND. I don't have any business experience, and if I buy a kiosk, I'll mainly keep it for myself, rent it out, or let family members use it for business if they want.

I've noticed that traditional market stalls have very few customers because of the rise of online shopping. I also have no prior business experience and a current administrative job. I'm unsure about the risks involved in buying a stall. I would appreciate any advice from an expert. Thank you sincerely!

Vinh2293

Consultant:

In the context of a rapidly 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. Based on your specific case, we can draw the following conclusions regarding the necessary aspects of personal financial management when considering investing in a kiosk in the district.

Regarding income and surplus potential, you have a monthly income of 20 million VND and savings of 400 million VND, with monthly living expenses of 5 million VND. Your monthly surplus is 15 million VND, equivalent to 75% of your income. This is an excellent indicator and a fundamental financial resource for any investment decision.

Next, we will evaluate the investment objectives and factors related to loan management and risk management. You want to buy land or a kiosk in the district for business purposes, aiming for stability and potential passive income, as well as income from property value appreciation. Your budget for the kiosk is 800 million VND. Therefore, given your current financial situation, you will need to borrow 400 million VND from the bank.

Regarding using financial leverage at the bank, I recommend you consider a real estate mortgage loan, using the property you intend to buy as collateral. Currently, according to the law, kiosks can be granted land use rights certificates. In addition to legal issues, please note the following principles when taking out a bank loan.

Your loan interest and principal payments are in the range of 30% of your income. This figure can increase within a suitable range depending on your needs, as your current surplus is at a very high rate of around 75%.

You also need to pay attention to regulations such as interest rates and loan terms. Longer loans result in lower monthly principal and interest payments; shorter loans reduce the amount of bank interest, but put pressure on your monthly cash flow. Additionally, you should be aware of the bank's floating interest rate regulations (which will significantly impact the loan when interest rates rise) and early repayment penalties.

In addition, to manage loan risk in unforeseen circumstances requiring large sums of money such as illness, medical treatment, accidents, or job loss, you should prepare an emergency fund equivalent to 3-6 months of income and a life insurance policy.

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
TP-Bank	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
MB	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 over time depending on the bank's lending policies. For detailed advice on loan packages and policies, please contact the banks directly.

Property appraisal, legal assessment, and investment/business plan.

You lack experience in direct or online business, which increases the risk of investing in this field. Here are some important criteria you need to carefully consider before making a decision:

First, you need to appraise the property value. You need to research the past and present prices of kiosks and identify factors that determine their potential for future price increases. You also need to assess the monthly cash flow from business operations or rentals at the kiosks. If the kiosks are not yet operational, you must evaluate their projected revenue and profit.

Secondly, you need to assess the macroeconomic situation. This is crucial to determine if the timing of your investment decision is right. For example, if you own real estate during a boom period, prices may have risen too sharply, and the use of financial leverage will lead to increased interest rates and the property may lose its growth potential due to the previous surge. This investment will become ineffective. If you lack experience, you can consult personal finance professionals for a comprehensive perspective.

Thirdly, assess the location and potential of the property. A kiosk in a densely populated area will be completely different from one in a new area because the primary purpose of a kiosk's development is business activity. Without a resident, capital gains (profit from the increase in property value) and cash flow (profit from business operations on the land) will not be effective. Therefore, thoroughly researching the kiosk's location, potential, population density, utilities (electricity, roads, schools, and other amenities) in the surrounding 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. However, for someone with little experience, you should take the time to research the necessary legal procedures and regulations regarding taxes that will be paid when owning real estate to avoid unnecessary risks. Currently, owning real estate requires attention to registration fees and annual land use tax. If it's a kiosk, you need to find out if the area charges service fees or maintenance fees. Land use right fees should also be considered.

Finally, evaluate your investment and business plan. I recommend having a detailed plan for this activity because it will almost entirely consume your savings and a portion of your monthly surplus. Therefore, creating a detailed plan is crucial. You can focus on the following three elements: assessing your financial capacity, budgeting, and managing cash flow (income and expenses).

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

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