Real estate investment is considered a great investment option. It can generate income and can be a good investment if its value increases with time. People also use this practice to begin building their wealth.
However, you will have to make sure that you are in a position to start investing in property or real estate. Buying a physical house can be expensive and it does come with a maintenance cost too.
When it comes to investing in property, Singapore is a great investment choice considered by some of the richest people. However, it is difficult to own a property here as it is one of the most expensive places in the world.
Luckily, there are a few options in which you can invest and not feel yourself burdened by purchasing a property. Here are 7 of them listed that can help you by changing your dream into reality.
Seven ways to invest in property
1. Rental Properties
Renting your property or a part of it can help you generate rental income which could help you do the repayment of a property loan or any other investment that you have made towards the property. Once your mortgages are over, you can start earning from it too.
Can be difficult to manage the tenants
Maximizes the capital gain from the property.
In some cases, the tenants can also cause damage to property.
Many expenses are tax-deductible.
Investing in rental property comes up with certain fees in Singapore that you will have to bear. You will have to pay an agent to source your tenants.
The fess of the agent may depend on the size of the property, its price, and length of tenancy too. For example, if a tenant agrees to live in the property for a long term then the tenant would incur heavy fees, while if he for a short duration then the fees will not be that high. Normally, the fees or the amount of commission is the 15 days to 2 months rent.
2. Real Estate Investment Group (REIGs)
Investors are drawn towards REIGs because of the passive income that they offer. A person can fetch a decent yield of 5-8% per annum with Singapore’s REIG. It is so popular that it is considered the largest REIG market in Asia outside of Japan.
These investment trusts allow you to get large properties with small investments and provide professional property management services to manage your property, enhancing your portfolio and maximizing the rent.
The investment process in REIGs is the same as investing in the stocks and other securities listed on SGX. If you already invest in stocks, you can buy and sell REIGs in the same way.
Pros and Cons of owning Property vs REIG
The initial investment can be as low as a hundred dollars.
Minimum 20% of property price should be initially invested.
The interest rate can range between 2.9% to 6.0%.
Interest rate is normally close to 1.7%.
Purchases can be completed via SGX in a few simple clicks.
Involves various steps like working with an agent, viewing property multiple times, negotiation, applying for a loan and so on.
Multiple properties can be easily owned.
Owning only a handful of property is feasible
Dividends received are not taxable.
Tax received is taxable.
Less control over assets.
Full control over assets.
3. House Flipping
House flipping means that someone buys a house and then tries to quickly re-sell to gain profits. Though this method is often called the most frustrating investment, it is also the most rewarding investment.
Generally, house flipping requires experience and it is advised to research well before making an offer for a house. It will help you save a lot of time, frustration, and money.
High profits; generally within 6 months of investment.
High risks of investment
Potentially safer investment.
Rapid changes in the market can affect your investments.
Helps in building a network that might help in other deals.
Unanticipated costs can occur, reducing your profit.
4. Online Real Estate Platforms
This is the latest way to invest in commercial real estate. Crowdsourcing platforms or real estate investment platforms pair developers and other professionals with individual investors who are looking forward to exposing the real estate. This process makes owning, financing, and managing the property hassle-free.
A hassle-free process with no need to own, finance, or manage the property.
Money can be blocked up from at least 3 to 5 years.
The low minimum investment that allows accessing assets that are unaffordable otherwise.
Higher risk as compared to other equity investments.
High-profit possibilities and lump-sum return on the end of the investment.
Depending on the platform and investments, the fees could be high.
This too comes up with a fee or commission involved when a property is finalized. The fees depend on the size of the property, year of construction, locality, etc. It is generally a fixed percentage of the total amount of property’s prize.
5.Build a new home on spec
Spec home is a smart way to invest in real estate especially when the general market is doing well and the supply for the new house is low. While you will have to make further investment to do this, it may not be a great investment for everyone. It is also time-consuming.
It generally involves a couple of months to fix the house. Make sure you consider the increased time and complete several fixes and flip works. A longer timeframe means an additional risk factor of fluctuations from the market. The market may be at the peak right now but things may change unpredictably in time.
6. Home Ownership
This is considered as the most peaceful financial investment. While you keep paying insurances and taxes, you will not have to worry about losing the house. The ups and downs of the market do not affect your peace a lot and it also frees up money to start saving and investing them in other types of markets.
Homeownership is one of the best long term investments and does not increase our cash flow. It will give a huge boost to your net worth as you become the owner of a valuable asset.
If you are not willing to take a lot of property and do not want to get involved in things much after the deal is done then this is the best way to invest. Once the investment is done, you can live peacefully without any stress, while your property appreciates in the market.
How to Make Money Investment in Real Estate or Property?
1. Appreciated Value
Real estate always trends to move upward irrespective of the markets running up or down. Therefore, the investment you make is most likely to be appreciated with time. The longer you hold the property, the more profit you will get in return.
The most significant benefit of buying real estate and holding it is that it provides a stable income. Three factors will help you determine the level of appreciation before you select a house:
- The city/market you are buying in: Different cities have a different level of appreciation trends. Doing proper research and selecting the right city will help you earn more profit on your property.
- Where in the real estate cycle you are buying/how much you pay: If you are buying it during a recession, you are most likely to see more appreciation at a later stage as the prices of property right now will be lower than the usual. They will rise in the future. On the other hand, if it is already going up while you purchase it, you will get less appreciation. This does not necessarily mean that you can not get lucky and score a great deal. You can always try it as an investment in property is always a safe idea.
- The Actual Property: Is the property that you are interested in brand new or a renovated one? Is it a single-family home in a neighborhood with mostly owners occupying them or have mostly renters around? Depending on the type of neighborhood, you will earn a different level of appreciation.
The property market is known to always appreciate time at a slow or faster pace. Selecting the right property at the right time will help your money appreciate faster which otherwise would have been a little slow. The more property you will have in the market, the easier it will be for you to understand the process of how this system works.
2. Rental Income
This is one of the most common methods to use your property to generate income. Long term buys and holds residential rentals is always a good idea.
People will always search for a house to live in which means they will have to rent property, if not own it. Location plays a very important role to invest in a property that wants to generate income.
You might have heard about how important it is to choose the right location when it comes to real estate. This will not only lead to an appreciation of property but also easy to find long term residentials people looking for a house on rent.
If you are considering long term residential rentals then look for a great location. That is more important than the state of it. Homes in great locations are one of the best investments that you can make.
It is a traditional approach to make money in the real estate market. This means that you buy a property by making a down payment and plan to keep it for the long term. Depending on you, you can either choose by selecting very low or skip doing a down payment. This holds especially if it is a pre-existing income-producing property.
Look for neighborhood property and if they produce huge cash flow from rentals. However, finding such property may be difficult as people generally don’t want to sell them until they have some urgent need for money.
There are certain sources from where you can find the right property. Online property listing, sale launches, property auction, and property agents are where you can find for your new investment options.
Though these might have some added cost like fees or commission for using these options and if you chose to move forward with any of their listings. But when you regularly check them, you get a lot of options that might not be visible to you, and also they would certainly help you understand the market in a much better way.
When Should You Start Investing in Real Estate?
The best time to start investing in property is NOW.
Regardless of the type of investment you make in real estate, it remains a fact that the earlier you start, the better will be your returns in the long term. Irrespective of the recession or condition of the market, property investment is always fruitful for a long duration.
When you start investing at a young age, you will have more time to invest, ultimately letting your compound money grow. The more time you take to begin, the more money you will have to invest and the higher return will be expected to get the same results.
Real estate comes with its risks and hence, every deal will not go as per the plan. Starting late means less room for error and starting young means having more time to recover from past mistakes. Irrespective of the age you start, it is necessary to be persistent and resilient in real estate.
In other words, if your money does not have enough time to grow, then you will have to put more money into it. Waiting for the right time to invest means you are losing precious time when your money could have started growing.
Is Real Estate Investing for You?
Overall, real estate is considered as a good investment option. It can generate money regularly and can be a good long term investment. It is a good strategy to start building your wealth.
However, you will have to make sure that you are ready to start investing in this domain. Importantly, you will have to take out a significant amount of money to do the investment. Buying property in any form is expensive and there will be a lot of ongoing costs for which you will be responsible. Not to mention, the loss of income when there are gaps between 2 tenants occupying your property.
Few things that could help you manage our property properly include planning any expenses and starting small. With property, you should consider all the maintenance work and other expenses like renovation from time to time that comes along with it.
If this is not properly planned, financing it might become a burden at a later stage. Hence, when you decide to rent a property, make sure you decide the rent while considering all these things.
Also, start investing small, take a small affordable property initially. You can move to a bigger property once it starts generating profit. A real estate is a good option as an investment but you will have to make sure to do good research. Once you start investing and getting comfortable with how things work, managing multiple properties also become easy to handle.
In a country like Singapore, one may be provided with a great environment of real estate investment but the ultimate profit that one can make from it lies on the investor itself.
It is of utmost required that you should not just grab a deal without doing your research well. Identifying and anticipating the different phases of the cycle should not be missed to get the most from investment and convert it into a golden opportunity. The market in Singapore gives a lot of opportunities to invest in the right place.
While you should always be prepared for the Golden opportunity to come, you will also have to take into consideration your financial situation. You should ensure that a golden opportunity doesn’t on the other hand turns out to be a miserable decision.
The above-stated ways can help you find the perfect way that suits your requirement and budget. Taking small things into consideration can lead you a long way and make more profit in the long term. Happy investing!
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