Decision Tree for Real Estate Purchase in these confusing/turbulent times
A lot of people have been asking lately whether this is the right time to buy a house. Here’s a simple decision framework I’ve been thinking through.
I'll be bloody honest — I fed in my raw idea and got this refined via AI. So yes, you may call this “AI slop.” I genuinely don’t mind, as long as it’s useful or at least worth contemplating.
Suggestions are most welcome - I am pretty sure some of the people out here can create a better framework than this.
House Buying Decision Framework
Node 1 — Does your net worth exceed at least 50% of the total cost of the house?
Include everything in your (and your spouse's name) — liquid and illiquid assets — and compare it against the full purchase cost of the house, including registration, stamp duty, interiors/furnishing, brokerage, and any immediate setup costs.
- Yes → Move to Node 2
- No → Move to Node 8
Node 2 — Is your income source relatively resilient to AI disruption?
This may actually require its own decision tree but in the absence of that - Ask yourself honestly:
Is there less than a ~30% chance that AI adversely impacts my earning ability/business income over the next 5–10 years (say through layoffs, revenue compression, automation, etc.)?”» definition of adverse impact is lay-off and then going for a pay cut of 50% or decrease in your business turnover by 50%
- Yes → Move to Node 3
- No / Unsure → Move to Node 8
Node 3 — Is your monthly net income comfortably higher than the EMI?
- Sole earner → Net monthly income should ideally be ≥ 4x EMI
- Dual-income household → Combined net income should ideally be ≥ 5–6x EMI
This buffer helps absorb job loss, income disruption, rising expenses, and interest rate changes.
- Yes → Move to Node 4
- No → Move to Node 8
Node 4 — Are you buying primarily for investment?
- Yes → Move to Node 5
- No (End-use) → Move to Node 6
Node 5 — Do you have a genuine edge in this investment?
Examples: early access to a high-potential micro-market, strong understanding of upcoming infrastructure, distress pricing, or access to inventory/pricing unavailable to most buyers.
- Yes → Move to Node 7
- No → Move to Node 8
Node 6 — For end-use: Are you satisfied with at least 4 out of these 5 parameters?
Location, builder quality/reputation, amenities, open space/livability, and carpet area/layout efficiency.
- Yes → Move to Node 7
- No → Move to Node 8
Node 7 — Post-purchase financial safety check
After paying the down payment and all house-related upfront costs, do you still satisfy all of the following?
Emergency fund covering at least 12 months of EMI + living expenses, ability to continue investing at least 15–20% of monthly net income, total EMI obligations across all loans below 35–40% of monthly net income, and at least 10% of total net worth remaining liquid after the purchase.
- Yes → Move to Node 9
- No → Move to Node 8
Node 8 — WAIT
You are probably stretching financially, taking concentrated risk, or buying without sufficient margin of safety.
That does not mean “never buy.” It simply means increase net worth, improve income stability, build larger buffers, wait for a better opportunity, or buy a less expensive property.
Node 9 — BUY
You likely have adequate financial buffers, reasonable affordability, sufficient liquidity, lower probability of forced distress, and a purchase aligned with either utility or asymmetric upside.
I am personally stuck in node 7, but one thing I feel - next 1-2 years there will be lot of opportunities to think, deliberate and then buy - as real estate have always moved in cycles. And this is the start of single digit growth cycle for maybe next 3-4 years if not more. So I personally believe in not giving into fomo.