Most of my classmates and friends have started purchasing houses. This coupled with the fact that I am in coveted DINK (double income no kids) group now have prompted me to do some preliminary research on buying a house. In my quest few things became obvious,
- Any house worth its tiles costs more than a million rupees.
- For a first house 2bhk is ok, 3bhk is good.
- An apartment with 2bhk in Chennai (where we would be based for a while) costs atleast 15L (that is on the lower side, it might be upwards of 20L)
- Making a quick decision on whether or not to have your own roof is not so easy.
So I have come up with a way to decide it based on pure numbers (obviously using excel). Here it is.
At the outset the choices are whether (1) to invest in house or (2) to invest the money somewhere while paying the rents.
The cash flows associated with (1) are: EMIs, One time down payment, tax benefits on interest and principal. And at the end of the period house value if I decide to sell. I have assumed that I would sell it off.
The cash flows for (2) are: rent, tax benefits on HRA, any appreciation of money (EMIs) through investments and tax paid on the same
The variables that control the net present value (npv) of these investments are,
- monthly rent
- basic & hra (to calculate the tax benefits on hra)
- growth rates in basic sal and rent YoY
- cost of the house
- loan %age & tenure
- interest rate (assumed to fixed through out)
- house value appreciation %age YoY
- maximum allowed tax free interest & principal payments
- tax rate
- returns on your investments if you invest it elsewhere
- returns on 5 yr. bank FD.
A sample set of values are shown aside.
My guess is you need about 4 seconds for each of these 15 values. Once you know them, you can generate the cashflow for both buy and rent options. As you can see, for this set the npv of rent is higher than buy.
Some observations:
1. House value need to appreciate at really high rates for it to become attractive. Something like 12% YoY. Given the current property prices, 12-15% growth may be unreasonable over a horizon of 12-20 years.
2. On the contrary even if your investments generate a modest 11% return they could be worth so much more than the house.
3. As house cost goes up so is the attractiveness of the rent option.
My conclusion:
I have decided not to buy a house although not entirely based on this. I want to give some more time to myself and that little freedom of having a bulging savings account or whatever.
But if you want to play around and find out if the house is actually working out for you can download the excel sheet I have made. Just use the sliders to change the values, have fun. And let me know how it is. Download the house investment decision maker excel sheet
15 Responses to “A Gantt Chart Alternative – Gantt Box Chart”
That's a great idea.
Maybe the planned End Date should be highlight more.
I don't know how it would look like (nor how to do it yet), but what if instead of finishing the bold line to the best case End Date, it finishes to the realistic End Date?
The idea is ok, I think other project management tools have this, already? Maybe not.
Gantt charts in my view are about the signal most unless thing in the world, theres no way you can look at one thats more that a little complex and understand what it's telling you. I'm going to write a diatribe on project management at some point, its one of my pet areas I think!! 😉
The issue I have with this chart Chandoo, is that Tasks need to be linked to each other, so they should inherit the uncertainty, which would mean the as you moved down chart the lines would be miles apart for later tasks, and you might have to add lots of lines for subsequent tasks to cover the various outcome of it's parents.
Having said that, for the high level board summary, it's a nice way to go, it it appeals to the management 😉
thanks Chandoo, great post.
Ross
Whoooa !!! That's a very clever idea Chandoo. I really love it.
I think i'll update my gantt project sheet with that idea soon (remember my template ?)
@ross : you can link start date to the end date of the previous task in your data. The only problem I still se is to which end date (real ? planned ? best ?) in order to have average amount of information.
If best end date, you'll tend to increase uncertainty at the end of chain, although if you link to real end date, uncertainty will be decreased too much, leading in both cases to wrong management direction.
Maybe planned till the task is finished then real will do the job ?
Hey chandoo, this looks good and this would definite add value in production planning / scheduling. Uncertainity in finishing a task is very high in production scheduling and this could give an insight or a bird eye view of possible shipments we can have....
I've always been frustrated by the limitations of gantt charts. Will definitely use this, I've always struggled with how to succinctly communicate the uncertainty of certain tasks without confusing stakeholders.
I like this, I think it's a very effective way of showing how a timeline can change and which parts of a project need close attention.
@Cyril / @Ross: I would intially link the the start date to the planned end date of the previous task, with the chart updating when a task has been completed to reflect the true end date.
Or what about giving a drop-down selection box to allow the user to see the chart based on planned/best-case/worst-case end dates?
Like the idea. Have found that Excel is more flexible than MS Project for graphical solutions. The "Best Case"\"Worst Case" metrics are theoretically appealing but once the project and\or phase commences their reliability diminishes. A chart like the above that showed Planned Start, Planned End, Replan End Start, Replan End Date, Number of Replans the Start and End Dates, and Actual would provide an active, actionable view of each task\phase. It would also highlight the areas which are riskiest.
It is always amazing how flexible excel can be.
My question is how would the chart show a scenario where the date moved up? If a task is dropped or the duration of the task is significantly reduced by applying more people or machinery to the task, the dates will move up.
The gantt chart has been around for a long time, but it is still quite useful to show progress.
Cheers,
B
I like the idea but seems bit complicated in case of long projects involving numerous activity.
Also, reading and explaining is required hence not feasible where plans are just send to audience for approval.
Cheers
SY
Great idea Chandoo,
When I was reading this idea regarding delivery dates, another thought popped into my mind, how can you show the uncertainty with MONEY!!
In this case, applies to cost management or even a normal budget, you think?
Would Box Chart and Gannt Chart help to understand the best case, middle case and worst case when money is spend or planned with these three risks are involved?
I imagine that this chart could help people who write their budgets get a better understanding of risks affecting their spending.
Peter
Chandoo,
I like it. How would you display an entry once it has been completed (actual)?
Thank you,
Matt
From what you have shown so far I think that this box Gantt chart is awesome! I think that this could be an extremely useful tool.
I can't wait to learn how to make my own charts in Excel.
Will the methods that you are going to teach us work in 2003 as well?
[...] Firday, we proposed a new chart for showing project plans. I chose an ugly name for it and called it Gantt Box [...]
You need to read Eli Goldratt's Critical Chain. The uncertainty you are looking for should be accounted for in a project buffer. Not at each task level.
Further you should spend time understanding Agile Development. This would have you plan only in 1-3week iterations. This allows you to embrace changes to work not yet started, and for your customer to re-direct your course at regular intervals (after each iteration) throughout your project. keyword search: Agile Scrum
These items will show you that you are solving a tracking problem for something that you can entirely avoid!
[…] Chandoo.org’s Gantt Box Chart. […]