Four steps to help you succeed on your real estate investment journey

Owning a piece of property is a big milestone. In fact, it is the most common first investment made by couples. But when it comes to investing, the property you live in may not be the property that makes the most money.

It is entirely possible to purchase an investment property that enjoys good rental demand, while staying in another property that you love.

Why real estate?

Real estate is the world’s largest asset class and is worth US$280 trillion, according to a 2018 estimate by Savills Global Research.

It is also a good hedge against inflation. As inflation rises, so does a property’s value. As a homeowner, you can enjoy staying in a property where the value appreciates. As a landlord, you can charge more for rent. Over time, that means a higher rental income.

The starting point

Property investment[1]  starts with the right mindset, not the model. How you think about real estate is crucial.

This is an asset you will hold through the ‘up cycles’ as well as the ‘down cycles’. Unlike stocks, where you can sell and cash out in the short-term, property is a mid-to-long term play. You will need conviction to build equity and allow the property’s value to grow. Flipping or selling out is not effective as there are high transaction costs and taxes.

Once you understand this principle, a good starting point is at home. In Singapore, you can use your CPF to buy a property under the Housing Scheme. You can also receive subsidies as a first-time applicant for a HDB flat if you meet the eligible criteria.

Most people also take out a home loan to finance their purchase. This leverage lets you buy something you otherwise would not be able to afford. In addition, home loan interest rates are currently low, and this helps the total cost of your mortgage.

Once you have your equity built up in a Singapore home, consider other property asset classes like a private condominium or a landed property. Alternatively, look overseas for diversification as well as for better value and growth.

Link to article 3: 5 biggest myths

Four steps to success

First, understand the fundamentals of real estate investments. Read up, speak to a professional or attend a course to help you gain knowledge. Similar to the stock market, there will be short-term fluctuations and you will need to understand what the market trend is before committing to a purchase. If you buy right, you can weather the downturn.

There is also the important first mover advantage when it comes to riding the uptrend in property prices. You’ll need to be able to spot value and not just follow the popular opinion.

Second, does where you want to live tally up with what you can afford? This is a big-ticket item, costing at least a few hundred thousand dollars. It is important to understand your budget and requirements, and whether you can hold on to it despite the market conditions.

Third, scout the market over three to nine months to compare locations, offerings, and prices. Spend time familiarising yourself with the different neighbourhoods and decide if it has the right conveniences for your situation – is it near public transport, a supermarket, and schools? Monitor listings in the area for a period to see what is available, and what prices are like.

Next, engage a smart and reliable agent to help you on your search. Think of property investment as a team sport. In addition to an agent, you will need the support and advice of a good lawyer and banker. Each professional player is responsible for a different aspect of the investment and together, they can help you navigate the purchase.

Head or Heart?

It is understandable to be emotional about purchasing property as it is a big investment. Your emotions can dictate how you feel about a certain property, its location, and the community around it but don’t let that dictate your investment. The head should always rule the heart.

Real estate investing is about the numbers – how low you buy and how high you sell. But equally important is the value of the property. The value increases through market factors like inflation as well as supply and demand, but you can also improve the value of your property by maintaining it well, upgrading and renovating it to increase its attractiveness.

You won’t go wrong even if you buy the worst house on the best block — if you put in time, effort, and money to renovate it, and turn it into the best house on the block.

The formula for success

Finally, what separates successful property investors from unsuccessful ones? It comes down to      understanding how real estate markets work[1] . The downward trend of one segment can be the upward trend of another so you can learn to arbitrage on the cycles of different property segments for maximum value.

To gain further insights on property investments and learn the ins and outs of the industry,sign up for GEX Academy’s SkillsFuture Credit-Eligible “1-Day Effective Property Investment” Course to learn under the guidance of experts.

GEX Academy is an Approved Training Provider (TP) accredited by SkillsFuture Singapore under the Singapore Workforce Skills Qualifications (WSQ) Skills Framework and an Approved and Accredited Teaching & Examination Centre for IPMA | UEN Reg. No.: 201529371H

LInk to article 2: post pandemic property investments