There are lots of reasons to have your own property. You can live in it, it is relatively cheap to borrow money in today's terms, and you are paying your own mortgage instead of helping someone else.
However, there are other reasons why you should not own property.
1. “Property is the sure way to get rich”
Over the last few years because of super low-interest environment, the property price in Singapore has almost doubled. My mom bought her condo at $$520k and it is now priced at S$1,100k. Although I advocate strongly to allocate all the money in shares, I am guilty of owning an expensive piece of property in my context. In 2016, I bought an Executive Apartment (HDB) in Jurong East for $$760k. It is a silly and impulsive decision. I needed the space to accommodate my wife, baby, parents and a maid. I am betting that Jurong East will become the 2nd CBD in many years to come. I do not believe that owning a property is the sure way to get rich but a lot of my friends do. I just hope that it will not depreciate too much and I am able to sell at the same price which I bought at. Properties allow for leverage which is about 80% in Singapore. Leverage can amplify your return as well as your risk. Interest is not going to stay low forever, properties' price is like trees, it will not keep growing and touch the sky.
2. “Property has rental income”
Collecting rental cheques is nice but there are lots of headaches that come along being a landlord. You need to continue the maintenance of the property, manage the tenant, pay the mortgage, pay for taxes and other expenses. The yields are lower than what you really think.
Another way to earn a steady monthly income is by investing in dividend paying stocks, bonds or REITs (real estate investment trusts). You have to pay taxes on that income as well, but depending on where you live, it can be a much lower tax bracket than rental income.
There are also no maintenance fees, no late-night clogged-toilet calls to take care of, or “the power went out” texts to disturb you. And it’s a lot easier to sell a stock than it is to sell a rental property. You can often earn higher yields from these investments than from being a landlord.
The best reason to own property today is for diversification – to diversify your income and assets. But owning property isn’t the sure path to riches some claim it to be.
However, there are other reasons why you should not own property.
1. “Property is the sure way to get rich”
Over the last few years because of super low-interest environment, the property price in Singapore has almost doubled. My mom bought her condo at $$520k and it is now priced at S$1,100k. Although I advocate strongly to allocate all the money in shares, I am guilty of owning an expensive piece of property in my context. In 2016, I bought an Executive Apartment (HDB) in Jurong East for $$760k. It is a silly and impulsive decision. I needed the space to accommodate my wife, baby, parents and a maid. I am betting that Jurong East will become the 2nd CBD in many years to come. I do not believe that owning a property is the sure way to get rich but a lot of my friends do. I just hope that it will not depreciate too much and I am able to sell at the same price which I bought at. Properties allow for leverage which is about 80% in Singapore. Leverage can amplify your return as well as your risk. Interest is not going to stay low forever, properties' price is like trees, it will not keep growing and touch the sky.
2. “Property has rental income”
Collecting rental cheques is nice but there are lots of headaches that come along being a landlord. You need to continue the maintenance of the property, manage the tenant, pay the mortgage, pay for taxes and other expenses. The yields are lower than what you really think.
Another way to earn a steady monthly income is by investing in dividend paying stocks, bonds or REITs (real estate investment trusts). You have to pay taxes on that income as well, but depending on where you live, it can be a much lower tax bracket than rental income.
There are also no maintenance fees, no late-night clogged-toilet calls to take care of, or “the power went out” texts to disturb you. And it’s a lot easier to sell a stock than it is to sell a rental property. You can often earn higher yields from these investments than from being a landlord.
The best reason to own property today is for diversification – to diversify your income and assets. But owning property isn’t the sure path to riches some claim it to be.
No comments:
Post a Comment