Have you also heard many say that property is the safest and the best investment to get because of its stability and being a hard asset, the value will never go to zero? You gave it some thought, and you decided that purchasing a property could be the best investment for you?
What if you based on these two extreme points to make a decision without understanding more, will you feel safer?
In this article, I’m going to share with you four important factors you, as a busy professional and homeowner must know before you do any form of property purchase so that you would not blindly follow the wrong solutions but invest in property with confidence!
After consulting hundreds of busy professionals and homeowners in their property plans using The REI method for over a decade, one of the mistakes many make is that their understanding of property is very limited.
Many of their knowledge came from hearing from friends’ opinions or maybe mainstream media that investment in property can achieve financial freedom and many jumped into the market second guessing.
With that, I want to share with you these 4 important factors so that you can also avoid making those mistakes.
Before we go into the details of the things that you need to know about property purchase let’s go ahead and look at your inner-self first, yes you’re right, your inner-self.
What are your hobbies what are you passionate about?
Now, what have hobbies got to do with property? Everything!
Do you agree there are things in life that work for others but may not work for you or vice versa? It’s the same with investments.
You probably have friends and families encouraging you to invest in a certain business
stocks bonds communities like gold or silver even cryptocurrencies or overseas investments, but do you follow because they have done it or introduced you? Perhaps there are other investments that are great for you depending on your appetite for risk and what is your strength or specialty.
There are always pros and cons for every investment some of them are highly liquid, some are not. You may look up the internet for the rest of the other investments but for
Properties, let me give you a real few facts about it before you go and buy.
No one will want to share this with you: the negative aspects of a property
Highly Illiquid
Properties are highly illiquid or cannot easily and readily be sold or exchanged for cash without a substantial loss in value.
If you are looking for investments that will give you ready cash anytime soon, whenever you need it then the property is not the best investment for you.
Because the entire sales and purchase sharing or time frame can take months or even years depending on the terms agreed upon by these buyers and the sellers.
Requires a Higher Capital Payment
The second point is, that properties also require a higher capital payment with a minimum of 25% down payment while products such as stocks requires as little as hundreds of dollars just to start.
There’s a Lot of Fees to Pay
On top of the purchase price, expect other fees as well such as your stamp duty, your legal fees, your agent commission fees, and not forgetting your running costs such as the property tax, as well as your MCST maintenance fees.
You may be wondering why despite these things, properties are still one of the primary choices for investors looking to grow their hard-earned money.
Let’s break it down.
LEVERAGING
One of the reasons that despite the properties illiquidity many are still buying now is because of leverage.
Leveraging means even with a small amount of money or if you have just the right amount of money you can buy properties even up to 4x your investable capital.
So if you have $250,000 you can buy a property worth $1,000,000. In other investments, you cannot leverage.
Your capital outlay is equivalent to the value of the products or goods, so in leveraging you can make the most out of your money.
STABLE PROPERTY PRICES
Singapore property prices are more stable and are slow to react to market trends or changes.
Unlike other investments like cryptocurrencies and stocks that react very strongly to market sentiments, properties are hardly speculative products; thus providing the security that many are looking for.
PROPERTIES ARE RESILIENT
Property purchase is also resilient because it tends to feel the effect of property price index at a much later stage. It gives the investors sufficient time to readjust their portfolio before they even feel the full effect of the market sentiments.
With the introduction of cooling measures, we have to see that this is a way for the government to keep property prices in check.
This will also ensure that Singapore will continue to have stable and affordable property prices even for our next generation of buyers.
LEGACY PLANNING
Another thing why most people are considering property first is because they get to park their money for their own legacy to their children.
Family members are able to will the property to their children or even purchase property under a trust for their beneficiaries either for their children or even grandchildren.
Another good thing is that they can even stay in it since it’s their asset. They can choose to stay in it or have it rented out first.
We are also witnessing more families starting their children as young as 21 years old to have a head start owning their first property. This way eventually over the years the property value would appreciate and more can be done in the future.
First mover advantage is very crucial in a property.
UNIQUE HEDGE AGAINST INFLATION
Now let’s talk about inflation.
With inflation purchasing power or capacity to buy declines due to increasing prices of goods and services it gradually decreases the value of money and in turn the value of savings.
Knowing this fact we can fight inflation and secure our savings by using property as a hedge over inflation.
Real estate can be a good hedge against inflation because property values tend to stay on a steadily upward curve.
Another point is as landlords or owners you can use properties as an inflation buffer maintenance fees and operating expenses rise with inflation and as property owners, you can pass them or part of them down to your tenants.
Now that you heard the pros and the cons what then is the best decision to choose?
Again it’s all based on your current situation and what kind of needs and wants you have for the future.
Don’t purchase a property if you have a huge risk appetite and you value liquidity. Buy property only if you prefer the stability part of it, you want to use leverage to your advantage, and you’re considering legacy planning.
Now the next question that will come to your mind is this when is the right time to buy a property?
We have done another video on this that you can watch HERE. You’ll be able to get more information out from it that can help you make a better decision in your property.
Let me remind you again, since property is one of the major financial decisions you
ever make, make sure that you assess your situation first and what you want to do for your current and future needs.
CONCLUSION
These are the things you need to know first before purchsing a property:
- Leveraging allows up to 4x your investable capital.
- The stable economy in Singapore makes it favorable not only for locals but foreigners as well.
- Property is a hard asset you can sell, rent out or even leave to the next generation as it allows the value to grow over time.
- Real estate is a good hedge against inflation.
There you have it! I hope you have learned a thing or two about the things you need to know when you are considering investing in property.
It sure has its pros and its cons and there’s a reason why a lot of Singaporeans are still buying property even in the midst of this pandemic.
But do remember to look at property as a savings mechanism and not just an investment too so you will not be stressed whenever there are changes to the marketplace.
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Disclaimer: All information presented is based on personal opinions. Singapore Real Estate Insider is not liable for any losses and expenses whatsoever related to investment decisions made by the audience. The ideas presented are here for reference and educational purposes only.
