Your search results

Evaluating Property Investments: Pros and Cons to Keep in Mind

Posted by Jayson Ang on August 7, 2023

| 0

TLDR: Key Takeaways from the Blog Post

Singapore’s real estate market offers both pros and cons for investors. The advantages include potential capital gains, stable returns, protection against inflation, and leveraging opportunities. However, investing in properties requires substantial initial capital, long-term commitment, and careful financial planning.

Becoming a property owner in Singapore can provide rental income and protection against inflation. Leverage can significantly boost investment returns but comes with risks.

On the downside, high initial capital outlay, ongoing upkeep costs, illiquidity, and potential mortgage stress are challenges to consider. Successful real estate investment requires prudence and a long-term perspective.

It’s essential to weigh the advantages and disadvantages carefully before diving into property investment in Singapore.

Singapore is the fifth most expensive country to purchase property, yet it boasts one of the highest rates of homeownership.

Despite economic uncertainties and cooling measures, the real estate market in Singapore has consistently proven its resilience.

Many people still choose to invest in properties here.

However, before you jump on the bandwagon, it’s important to weigh the advantages and disadvantages of property investments.

PROS:

The potential benefits of investing in real estate include capital gains and stable returns. Owning property can also act as a safeguard against inflation, and utilizing leverage can increase your investment potential.

CONS:

The investment requires a substantial amount of initial capital and may involve a lengthy process. It is possible that the investment may require considerable upkeep.

Additionally, it may be difficult to sell or convert the asset into cash quickly. There is also a risk of mortgage stress associated with this investment.

There are numerous properties available for investment, but not all of them guarantee success.

Pro: The Investment Strategy Involves Obtaining Profits From The Appreciation Of A Capital Asset While Ensuring Consistent And Predictable Returns

In Singapore, due to limited space, property prices tend to increase steadily even as the size of homes decreases. If you are an investor, choosing a well-managed property with some nearby amenities almost guarantees capital gains.

Real estate is a less volatile investment than stocks and does not quickly lose value unless there is a significant economic downturn.

Therefore, there is a good chance of making a profit or entering the local real estate market, especially since Singapore’s property market has remained strong despite the global Covid-19 pandemic.

Pro: Becoming A Property Owner And Leasing Out Your Property Is A Viable Option For You To Consider

As a property owner in Singapore, you have the opportunity to become a landlord, even if you reside in an HDB flat. There are certain conditions to be met, but it is possible to tap into your home’s rental potential.

Pro: As A Way To Protect Against The Negative Effects Of Inflation

Owning real estate is considered an effective way to protect yourself from inflation. This is because as inflation increases, so does the value of your property and the amount you can charge for rent.

Meanwhile, your mortgage payments will become more affordable over time.

By investing in real estate, you can earn additional rental income that keeps up with the rising cost of living. This makes it a wise choice for long-term financial security and retirement planning.

Pro: Leveraging

Leverage is the act of using borrowed capital such as a mortgage to increase your investment returns. It is rare for someone to pay for their property entirely, and many people opt to purchase properties on leverage.

This method allows you to own properties that you may not have been able to afford otherwise while also increasing your investment returns when you decide to sell.

For instance, if you purchased a property worth $1 million and sold it for $1.2 million after a year, you would have made a 20% profit.

However, if you paid only $200k for the same property and borrowed the rest, a $200k profit would mean that you made a 100% return instead of just 20%, which is a significant difference and one of the primary reasons why property investing is lucrative.

Additionally, leverage can help you acquire your first property, which can be sold at a profit and used to invest in more expensive real estate.

Real estate properties can be lucrative investments, however, it is important to exercise prudence when considering investing in them. It is advisable to avoid situations that may result in unfavorable outcomes

Con: High Initial Capital Outlay, Long Term

In the world of real estate, it is important to have money in order to make money.

Purchasing property can be expensive and requires a stable source of income to finance.

Although paying your monthly mortgage may be feasible, the initial down payment is often a challenge for aspiring investors. It is also necessary to set aside funds for unforeseen repairs and maintenance to ensure maximum rental income.

Additionally, owning property involves hidden expenses such as taxes, insurance, and legal fees.

It is important to understand that investing in real estate is a long-term commitment. While there is potential to sell properties quickly for a profit, transaction costs such as the Seller’s Stamp Duty should be taken into consideration.

Overall, successful real estate investment requires careful financial planning and a willingness to commit for the long haul.

Con: May Require Significant Upkeep

As an investor managing your property can be overwhelming. It requires you to be able to identify income-generating properties and manage them effectively.

This can become a full-time job especially if you are also a landlord.

Dealing with problematic tenants can be time-consuming, costly and stressful. A tenant who fails to pay rent can cause cash flow problems while others may damage your property or fail to maintain it properly.

Con: Cannot Be Easily Sold Or Converted Into Cash Without Incurring A Significant Loss

Illiquidity is a term used to describe assets that are not easily convertible to cash. Real estate is an example of such an asset, and it takes a longer time to sell a property compared to investing in short-term bonds or the stock market.

It is advisable to have readily available funds for emergencies because selling your property quickly for cash is usually not possible without significant financial loss.

Con: Potential Financial Difficulty in Paying Mortgage

Have you noticed how some of your wild and crazy friends seem to become more responsible and cautious after becoming parents?

This is because when you have the responsibility of raising a child, you naturally become more risk-averse in order to ensure their well-being. You start to plan more carefully, manage your finances more prudently, and make wiser investments.

However, being overly cautious can have its downsides. You may find yourself second-guessing every decision that involves taking a risk, such as changing jobs, having another child, pursuing your entrepreneurial dreams, or diversifying your investments.

This can lead to staying in a job you hate, missing out on the joys of parenting, not fulfilling your dreams, or having all your money tied up in assets that are hard to sell.

While some conservative investors may be fine with this, those who are looking for faster gains may feel the burden of long-term financial stress.

Should You Buy, Sell or Wait?

If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?

It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.

I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.

I can help you by:

Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.

You May Also Like …

Mandarin Top 5

Top 5 Reasons : Why Do Singaporeans Still Flood The Property Market?

Jayson Ang – November 17, 2024 –

Singapore's property market has been a hot topic of discussion for many years, with its resilience and growth attracting both...

All Buying Tips Opinion

Larger Living Spaces: The New Demand Surge Post-Pandemic

Jayson Ang – January 13, 2025 –

TLDR We explore the significant impact of digital marketing strategies on business growth in today's competitive landscape. It highlights the...

Mandarin Top 5

Top 5 Tips: Gain an Edge in the Singapore Property Market: Steps to Boost Your Investment Returns

Jayson Ang – May 11, 2025 –

The Singapore property market has always been a hotbed for investors looking to make substantial returns on their investments. As...

All Buying Tips

4 Fresh Trends among Young Homebuyers Could Shake Things up in Singapore’s Real Estate Scene

Jayson Ang – March 18, 2024 –

TLDR Younger generation in Singapore is reshaping house hunting by showing a preference for quality of life over location. Millennials...

All Blog Posts Buying Tips

Avoid These 6 Terrible Property “Tips” in Singapore

Jayson Ang – May 1, 2023 –

TLDR When it comes to property advice, it's crucial to be cautious of common misconceptions. For instance, schemes like the...

Mandarin Top 5

The Future Of Singapore Property Investing: 5 Trends To Watch Out For

Jayson Ang – July 10, 2024 –

The future of Singapore's property market is shaped by several emerging trends that reflect cautious optimism, enviable locations, and sociable...

All Buying Tips

Using CPF Funds to Finance Your HDB Flat or Private Property in Singapore: A Comprehensive Guide

Jayson Ang – May 13, 2024 –

Discover the extent to which your CPF savings can be utilized for the acquisition of a HDB home in Singapore,...

All Blog Posts

3 Steps to Protect Yourself from Real Estate Scams in Singapore

Jayson Ang – December 17, 2022 –

Lately, there has been an increase in scams related to real estate. Scammers are pretending to be real estate agents...

Mandarin Top 5

Top 5 Factors : Why Not All Properties Appreciate Steadily

Jayson Ang – January 20, 2025 –

Real estate has long been considered a lucrative investment option, with the potential for significant returns. However, not all properties...

All Buying Tips Reports

2024 Residential Property Market Outlook

Jayson Ang – December 22, 2023 –

TLDR The market outlook for 2024 suggests continued uncertainties affecting housing demand and risk appetite due to geopolitical tensions, macroeconomic...

Mandarin Top 5

Top 5 Dim Sum Restaurants in Singapore

Jayson Ang – May 14, 2024 –

Dim sum, a popular culinary delight that originated from China, has made its way into the hearts and taste buds...

Mandarin Top 5

5 Cons of Buying a New Development

Jayson Ang – March 4, 2024 –

Luxury properties in Districts 9 and 10 of Singapore are highly coveted, and for good reason. From stunning views and...

Mandarin Top 5

Top 5 Factors : Why Now Is the Perfect Time to Invest in Singapore’s Real Estate Market – Insider Analysis!

Jayson Ang – March 15, 2025 –

Singapore's real estate market has always been an attractive investment destination for both local and international investors. The city-state's stable...