Property Investment!!! How to invest in property in a way that will make you profitable and give you more financial freedom for years to come?
Property investment is one of the investment instruments, used to be exclusive for the rich to get wealth and keep it growing. However, what you might not realize is that, the property investment secrets are now available to the general public like you and me too. We can see more and more young investors venturing into real estate investment.
Obviously, if you do not develop your knowledge of the real estate market, there is a chance that you will never profit from your real estate investments as much as is possible. It surely requires some time and effort, but you will find the rewards so much greater.
A real investor does not simply throw his or her money at any random real estate investment; he or she performs thorough analysis:
- Whether or not the property has the potential to be maximally profitable in the future.
- What is the value of your investment in the eyes of your future buyers or tenants?
- How much funds are required for the initial capital outlay?
- Whether or not you have the appropriate funds to engage in leveraging activity.
All these will take work and effort. It is not just about flipping properties, buying low and selling high. They will commit capital only when there is a reasonable expectation of profit.
Different Types of Property Investments
There are different ways you can go about making property investment in Singapore.
- Private Residential Properties
- Industrial Properties
- Commercial Properties
- Overseas Properties
- Real Estate Investment Trust (REIT)
- Land banking
Each of these vehicles has positives and negatives. By understanding the different types of property investments that are available to you, you will be able to choose which type of investment you want to make and how much risk you want to take on as an up-and-coming property investor.
Why you should invest in real estate?
Real estate investment can be a great way to either supplement your income or have these investments to be the basis as a business. Let’s take a look at how real estate investing might be exactly what your wallet needs.
Positive Cash Flow
Particularly when you, as an investor, decide to purchase a property in hopes of renting it out. As long as you are able to find tenants, you should be able to consistently have a positive cash flow that offsets the cost of maintenance and mortgage on the property.
Higher Yield Return
The monthly rental / positive cash flow serves to not only give you some extra cash, but also serves to yield a higher return. It’s not likely that the initial money that you put down for the property would yield the same return on interest if it were just sitting in the bank gathering dust.
It is proven that real estate properties typically appreciate, rather than depreciate, over time. When inflation occurs, the price of real estate also jumps with it. While the individual consumer suffers through the realities that inflation brings with it, the real estate investor thrives because the cost of real estate is positively correlated with rising inflation. This is a solid reason why investing in real estate could be great for you.
How Leveraging can be Beneficial to the Property Investor?
Leverage is basically use a small percentage of your own money to invest on a property, and the majority of the purchase is being financed by the bank.
Let’s say an investor has $100,000 to invest on a property. If he or she were to buy property in full at a cost of $100,000, he or she would have to sell the property at a whopping price of $200,000, only then would he or she see a one hundred percent return on the money that was originally invested.
Contrastingly, an investor could instead make the choice to put $20,000 as a down payment on two different properties. The rest of the money for each property would be financed with money that the investor borrowed from a bank.
- Each property would only have to be sold at $120,000 in order for the investor to breakeven.
- If the investor were to hold onto these properties and rent them out to tenants, the rent payments would most likely not only cover the monthly mortgage on each property, but also the interest that is being generated from the original loan that was taken out against the value of the property.
In this way, the real estate investor is making even more money through the technique of leveraging.
Take the time to figure out with your mortgage adviser whether or not you have the appropriate funds to engage in leveraging activity.
It is important to make sure that you are able to keep your payment for loans up-to-date, especially when deciding to go down the path of leveraging. Borrow too much money, and the result can be desolate bankruptcy.
Tips for Beginners in Real Estate Investments
It can be extremely exciting when you first start investing in property. However, it needs to be emphasized up front that there are risks associated when venturing into real estate investment.
- It would be smart to begin your investment endeavours small. If you invest in something small to start out with, your mortgage payment will be cheaper.
- It might be helpful to start your investing with a partner, to cushion the cost of repairs, the initial costs and the process to search for tenants.
- Even if you are interested in more than one property investment approach, you should still consider prioritizing each type of investment. You can start your investment portfolio in one category before moving into another.
- Keep in mind the value of patience and that often, the longer you hold onto a property, the more value it accrues over time.
A common saying within the real estate investment industry is to start as young as you can. If you are young now, you have the time to learn and invest your money wisely. If you are older, know that there are many people who are younger than you already in the industry. This makes it even more important that you work diligently to absorb the necessary information within this ever-growing industry.
Don’t delay exploring all these investment opportunities. Let’s get started!