How often are we been approached by Financial planner and to be advised to signed up for a “forced” saving plan? At least that happens to me whenever I meet up with any financial planner on the street or someone that I know. They always can paint a beautiful picture that after like 20 to 30 years later the projected appreciation could be 5-8% and subjected to the market situation. For example, if your investment policy were to mature during the crisis like Leman’s Brother, the return might barely beat inflation. Is it totally risk-free? I doubt so. If you are too confuse to manage your portfolio, this might be for you, but most you wouldn’t make your wealth in this aspect.
On the other hand, how can a saving plan in real estate help you to generate wealth? Or let’s think about how much interest can we get out of it by putting all our money in the bank? Most of the time is going to be less than 1% with the USA keeping the interest rate at almost zero. So how can you create a saving plan in real estate not just to generate more wealth but to preserve your wealth too?
Given Singapore context, with seven rounds of cooling measures and new MAS ruling on Total Debt Serving Ratio (TDSR) had it all been a far fetch if you were to be looking into buying more of even your 1st investment properties? Gone are the days where you can try using your parent’s name, children’s name or using priority banking facilities to get the maximum loan and go under the radar. To date, there are still many uncertainties where the banker might not able to answer, but it’s still not the end yet. One door closes, the other doors opens for you.
If you have been a traditional investor who only buys residential property, you can opt for Commercial properties that currently have not restriction tied to it. As for Industrial properties, you are not subjected to additional buyer’s stamp duties but subjected to seller’s stamp duties for the 3 years of ownership.
Similar to investment link policy, you need to make an initial payment and for this context is down payment for the bank loan that could range from 20% of the loan amount; subjected to bank’s approval. The only difference here is that in properties, normally it’s the tenant who’s is the one helping you to service your mortgage. With current low-interest rate environment, potential 4% rental yield is achievable. Getting a 2% gross rental yield is potentially possible where it isn’t that common for residential. The return is almost guaranteed. Don’t forget that you get capital appreciation over the years on top of your rental monthly.
Unlike in Residential, Commercial & Industrial unit are handed over to bare unit and renovation shall be by the tenant. Landlord no longer has to manage lessee as much, and typically lessee will return their unit bare too. This can be an avenue for those who wish to lease out their unit with minimum hassle.
What’s your view on this?