A Guide to Investing in Singapore Property

Is investing in properties a good idea? I have invested in property and I am going to share with you my opinions. Keep in mind that what you are about to read is not financial advice – different individuals have different situations. This is why you should have a closer look at your situation before you decide to invest.

Below are some of the reasons why properties are a good investment.

1. Cheap leverage which can be used in boosting returns

One of the biggest benefits you can expect to get when you invest in property is the fact that you can borrow a large amount of money to buy a house. These loans are also low interest. Every time the price of the property increase, your return on what you invested is multiplied.

If there is a drop in price, your equity declines faster. Provided you have holding power and not too greedy, you are going to come out fine in the long term. Asia is the place to look for dividends.

You can make a lot of money when you purchase the right property at the right time. There is nothing better than getting a large bonus when you decide to sell the property at a profit. 

2. Generating passive rental income

You can rent out the property (or even a room in a property you live in) so you can get rental income. You can use the rental income to pay your mortgage, with some of it going to the repayment of the principal repayments, which will help in building equity in the property. If you are getting a high yield from the property, you can end up with a positive cash flow after maintenance fees and mortgage payments.

Chance of making enhancements

If you are one of those people who enjoy fixing things, then you can add value to your property by renovating it or sprucing the interior. You will be surprised at how much a fresh coat of paint can change how the property looks and also its property.

No capital gains tax

Just like with stocks, there is no capital gains tax to pay when the property value increases and you make a profit when you decide to sell it (unless IRA follows you claiming you are a property trader). Compare this with your employment where up to 20% of your income is going to tax. 

5. Property is a good vehicle on your journey towards wealth

When you read the top 50 richest people in Singapore compiled by Forbes, you will notice that many of them made their wealth through investing in real estate. Most wealthy people in Singapore usually have wealth from real estate because it appreciates more than any other asset. 

Cons of property investment

You need to know that there are some disadvantages of investing in property compared to other forms of investment. 

One disadvantage of owning a property is the trouble and time you have to put in when buying and maintaining it. Looking for a property to invest in can take time, and negotiations are usually complicated. You also have to spend time on repairs and other tenant complaints.

Properties are not that liquid – which means you will not have an easy time converting them to cash when you need cash. It can take months to sell a property. 

The biggest obstacle for people not to invest in property has to do with the amount of capital needed to get started. It can take 3-5 years of saving before you can afford to get enough money for one property. 

Greed, Caution

Keep in mind I am not saying that you should go out and start investing in properties right away. You should be very careful especially now that the prices have surpassed the peak in 1996. When others are greedy, be fearful, and be greedy when others are fearful. 

Property is not the only option at your disposal for making money. If you are a smart investor, you can make money in any type of investment provided you know what you are doing. Know where your abilities, interest, and knowledge lies before you invest. You also need to invest in something you know well. Do not follow what the crowd is doing because that is a sure way to fail. 

What I am trying to show here is that there are some benefits you can expect when you invest in properties, and these are some of the things I have noticed investing in property. Property investments provide you with a good option to build your wealth.

24 Feb 2021
SG Expats