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I've reached a stage in my life now that will allow me to afford to own property and to pay off the mortgage without killing my finances. This is good, obviously. My parents and friends are encouraging me to buy a house at first opportunity and rent it out as an investment.
I've done some homework... and I really can't find any compelling reason to invest in property. The stockmarket always seems to be better. I hope some valuebuddy will be able to enlighten me and point out what I'm missing out on.
1) Rental yields are poor. I believe that the best you can hope for is 4% (after tax and expenses). When interest rates revert to their historic 2-3% rates, the landlord will be basically earning nothing on rent.
2) Capital gains look less and less promising. Even if your property somehow goes up 5% year on year. The multiple taxes / penalties on trying to cash in on selling your property will really erode how much money the seller is able to walk away with.
3) Mortgage is supposedly good debt, when you gear up to your eyeballs with a low cost. Of course this is better than a car loan or a personal loan, but I can find better gearing opportunities elsewhere (e.g. warrants / options).
4) The only compelling argument I've heard, is that property allows you to turn cash you cannot access (your CPF) into money you can access (rental cash). This is good, since I can turn that money into more money via investing.
So all in all, I can't seem to get my head round the supposed fact of life that property is a good investment that you need to get once you are able.
Any of you experts have experiences / better ideas to share?
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Can't find much to disagree with though since buying a property I feel is like buying into a equity index fund with leverage, for the average person, that may be a surer option for reasonable long term returns than attempting stock-picking. Having said that, I feel the current entry point is not persuasive.
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For me only one main reason if leverage is no problem. It's more for asset allocation especially when you are out of the rat race. A company can do the disappearing act. Can your property being "Brick & Mortar (FH only) does the same? Who can tell there is no black swan around the corner?
Besides, if your Nation's fiat money collapses, what are then better than hard assets. For the same matter, keeping some (a little) gold is an insurance. (Go and ask the Vietnamese Chinese refugee during CHINA short war with Vietnam). And nothing can keep track or abreast of inflation better than hard assets. Inflation after any war for any country is no joke.
To tell the truth, i put all my investible fund in SGX when i first started to invest. i still think it can or should be done by people who still have so much more "human capital " to spend. Nevertheless i will still put about anything from 20 to 60 or even maybe 70 % of my capital in the market. It all depends on my total wealth in liquidity at any particular time.
In a way i still agree with you Stock is the "BEST".
imo, only.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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(09-02-2013, 03:38 PM)vader1671 Wrote: I've reached a stage in my life now that will allow me to afford to own property and to pay off the mortgage without killing my finances. This is good, obviously. My parents and friends are encouraging me to buy a house at first opportunity and rent it out as an investment.
I've done some homework... and I really can't find any compelling reason to invest in property. The stockmarket always seems to be better. I hope some valuebuddy will be able to enlighten me and point out what I'm missing out on.
1) Rental yields are poor. I believe that the best you can hope for is 4% (after tax and expenses). When interest rates revert to their historic 2-3% rates, the landlord will be basically earning nothing on rent.
2) Capital gains look less and less promising. Even if your property somehow goes up 5% year on year. The multiple taxes / penalties on trying to cash in on selling your property will really erode how much money the seller is able to walk away with.
3) Mortgage is supposedly good debt, when you gear up to your eyeballs with a low cost. Of course this is better than a car loan or a personal loan, but I can find better gearing opportunities elsewhere (e.g. warrants / options).
4) The only compelling argument I've heard, is that property allows you to turn cash you cannot access (your CPF) into money you can access (rental cash). This is good, since I can turn that money into more money via investing.
So all in all, I can't seem to get my head round the supposed fact of life that property is a good investment that you need to get once you are able.
Any of you experts have experiences / better ideas to share?
actuallly what is the prevailing rental now? it seems its closer to 3.5% correct me if i am wrong.
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The yields depends on property types. Shoebox apartments can command higher yields, at about 4.5-5%, but it is only because these assets are more risky. Typical suburban condominiums within walking distance of MRT can fetch yields of about 3.5-4%, but these assets can be considered to less risky, especially if your tenant is an expat with a rooted family here (i.e. wife working part time in ngo, kids attending international schools).
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(09-02-2013, 05:44 PM)lavue Wrote: The yields depends on property types. Shoebox apartments can command higher yields, at about 4.5-5%, but it is only because these assets are more risky. Typical suburban condominiums within walking distance of MRT can fetch yields of about 3.5-4%, but these assets can be considered to less risky, especially if your tenant is an expat with a rooted family here (i.e. wife working part time in ngo, kids attending international schools).
Hi lavue,
i am going to own a shoebox soon for the 1st time. Can you elaborate a little why Shoebox is more risky therefore higher rental yield? And it's within walking distance to MRT. The worst case i may sell it. It's in the money now though my original purpose is for rental income as we are retirees.
Thanks.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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(09-02-2013, 07:53 PM)Temperament Wrote: (09-02-2013, 05:44 PM)lavue Wrote: The yields depends on property types. Shoebox apartments can command higher yields, at about 4.5-5%, but it is only because these assets are more risky. Typical suburban condominiums within walking distance of MRT can fetch yields of about 3.5-4%, but these assets can be considered to less risky, especially if your tenant is an expat with a rooted family here (i.e. wife working part time in ngo, kids attending international schools).
Hi lavue,
i am going to own a shoebox soon for the 1st time. Can you elaborate a little why Shoebox is more risky therefore higher rental yield? And it's within walking distance to MRT. The worst case i may sell it. It's in the money now though my original purpose is for rental income as we are retirees.
Thanks.
How small is the size? 
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(09-02-2013, 08:38 PM)kichialo Wrote: (09-02-2013, 07:53 PM)Temperament Wrote: (09-02-2013, 05:44 PM)lavue Wrote: The yields depends on property types. Shoebox apartments can command higher yields, at about 4.5-5%, but it is only because these assets are more risky. Typical suburban condominiums within walking distance of MRT can fetch yields of about 3.5-4%, but these assets can be considered to less risky, especially if your tenant is an expat with a rooted family here (i.e. wife working part time in ngo, kids attending international schools).
Hi lavue,
i am going to own a shoebox soon for the 1st time. Can you elaborate a little why Shoebox is more risky therefore higher rental yield? And it's within walking distance to MRT. The worst case i may sell it. It's in the money now though my original purpose is for rental income as we are retirees.
Thanks.
How small is the size? About 474 sq ft. Why? i know some can go even 380sq ft or smaller.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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12
(09-02-2013, 08:56 PM)Temperament Wrote: (09-02-2013, 08:38 PM)kichialo Wrote: (09-02-2013, 07:53 PM)Temperament Wrote: [quote='lavue' pid='42509' dateline='1360403086']
The yields depends on property types. Shoebox apartments can command higher yields, at about 4.5-5%, but it is only because these assets are more risky. Typical suburban condominiums within walking distance of MRT can fetch yields of about 3.5-4%, but these assets can be considered to less risky, especially if your tenant is an expat with a rooted family here (i.e. wife working part time in ngo, kids attending international schools).
Hi lavue,
i am going to own a shoebox soon for the 1st time. Can you elaborate a little why Shoebox is more risky therefore higher rental yield? And it's within walking distance to MRT. The worst case i may sell it. It's in the money now though my original purpose is for rental income as we are retirees.
Thanks.
How small is the size? About 474 sq ft. Why? i know some can go even 380sq ft or smaller.
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hi,
474 sf and new mrt...
sounds like soho188. if so, i think its a good choice as farrer medical hub just next door and MRT at doorstep. and its freehold.
just my view
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09-02-2013, 10:30 PM
(This post was last modified: 09-02-2013, 11:05 PM by koh_52.)
Hmms, Shoebox unit 400 sq ft and below and if entry price above $1500 PSF careful hor....in the long run i think this is a risky investment.Currently, many single expat working here Shoebox still in demand but after the 6.9 million population bill passed, situation will be different in the near future.
Remember the govt now is focus on issuing PRs citizenship to replaace the shrinking & aging population, and they have to cut down the employment pass holder quota, PRs will take over the work permit and employment pass holder.
This PR will come with their family and shoebox is unliveable for a small family size of 3 so moving forward 2 bedders might be in demand and if near mrt better still,it's very rentable with better price.
So may someone tell me why everyone like to stay near mrt, despite rental is higher?
Ans : COE = $100k, in future population increase, GDP sure increase and of course follow by high inflation, cannot run one, it could touch 200k looking at the way papies run the country, so u think how many people can afford the drive.
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