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 …

All Opinion

Why Can’t We Have More Housing Options For Singles?

Jayson Ang – April 5, 2024 –

TLDR The blog post discusses the evolving regulations for single individuals to purchase public housing in Singapore. It highlights the...

All Blog Posts Buying Tips

Downsizing From A Spacious 4-Bedroom Condo To A Cozy 2-Bedder: How I Chose A Condo Over A HDB

Jayson Ang – April 28, 2023 –

TLDR Mdm Sim's decision to trade her four-bedroom house for a two-bedroom condo is explored, highlighting the benefits of right-sizing....

Mandarin Top 5

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

Jayson Ang – March 26, 2025 –

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

All Buying Tips Opinion

2024 Will Be A Buyers Market

Jayson Ang – January 23, 2024 –

TLDR 2023 saw a roller-coaster ride in the real estate market, with various challenges like high interest rates and geopolitical...

All Buying Tips Opinion

Neighbourhood Estate Guide: Is Holland Village the Most Charming and Relaxed of HDB Estates?

Jayson Ang – January 1, 2025 –

According to the 2014 master plan, Holland Village was given the prestigious title of an "identity node," confirming its status...

Mandarin Top 5

Top 5 : Benefits of Investing in Older vs. Newer Singapore Property Market Condos for International Buyers?

Jayson Ang – January 14, 2025 –

Singapore's property market has long been an attractive investment destination for international buyers, offering a stable and well-regulated environment with...

All Buying Tips

Your Key to a Happy Retirement in Your HDB? Let’s Unveil The Mystery Behind the Lease Buyback Scheme!

Jayson Ang – March 30, 2024 –

TLDR The Lease Buyback Scheme (LBS) is gaining traction among older Singaporeans looking to boost their retirement income by selling...

All Blog Posts Buying Tips

Beware! Spot These Warning Signs Before Making a Home Purchase!

Jayson Ang – December 21, 2022 –

TLDR When purchasing a property in Singapore, it is crucial to thoroughly assess various aspects of the home to avoid...

All Buying Tips Opinion

Debunked! 6 Popular Property Myths of 2023, Including the 99-1 Loophole – Legal or Not?

Jayson Ang – January 4, 2024 –

TLDR This blog post delves into various aspects of the Singapore property market, including topics such as decoupling, 99-1 property...

All Buying Tips Opinion

My 6 Factors to Consider When Buying a Property in 2023

Jayson Ang – March 11, 2023 –

As the housing market shows no signs of slowing down, many of us may feel left behind, questioning whether it...

Mandarin Top 5

The Top 5 Myths About Buying Property in Singapore – Debunked!

Jayson Ang – June 4, 2023 –

The Top 5 Myths About Buying Property in Singapore – Debunked! Here are the top 5 myths about buying property...

All Buying Tips Selling Tips

Unpacking Property Ownership: Joint Tenancy vs. Tenancy-in-Common

Jayson Ang – September 10, 2024 –

TLDR When a property has multiple owners, the choice of ownership type is crucial to determine how shares are distributed...

All Buying Tips Opinion Selling Tips

Is Renting Out Your HDB to Live in a Condo a Smart Move? How Rentvesting Can Help You Save Money

Jayson Ang – February 18, 2025 –

TLDR Rentvesting is a strategy where individuals rent a home in their desired location while purchasing investment properties in more...

All Opinion

Why En Blocs Often Fail to Succeed

Jayson Ang – April 26, 2024 –

TLDR In this blog post, the focus is on the challenges and complexities of en-bloc transactions in Singapore's property market....

All Blog Posts Buying Tips Opinion Selling Tips

3 Errors to Steer Clear of When Transitioning from Private Property to an HDB Flat

Jayson Ang – November 7, 2024 –

TLDR Homeowners may downsize from private properties to HDB flats for various reasons, such as financial benefits and lower maintenance...

All Buying Tips Opinion

6 Misleading Claims Property Agents Often Make That Savvy Buyers Are Aware Of

Jayson Ang – March 15, 2024 –

TLDR Real estate agents can sometimes use deceptive tactics to push sales. Be cautious of claims about other interested buyers,...

Mandarin Top 5

5 Tips : How To Spot A Good Investment Opportunity In Singapore’s Property Market

Jayson Ang – July 18, 2024 –

Singapore's property market offers a plethora of investment opportunities for both local and foreign investors. To spot a good investment...

All Buying Tips Opinion

4 Key Factors to Consider When Purchasing a Private Property for the First Time

Jayson Ang – August 27, 2023 –

TLDR When considering buying or selling property in Singapore, it's crucial to understand factors like Additional Buyer’s Stamp Duty, Loan-To-Value...