The asset i have now is $1.1m cash (that's all). The reason for all this is because the prices for property is too high. Please advise, thank you.
As you are already aware by now, property investments are ideal over a long term basis because of this thing call leverage.
Here's a simple and summarised way of looking at it.
If you were to rent out a property at an average annual yield of 4%(after deducting property taxes, commissions, stamp duties, interest rates, etc), you would require a total of 25 years to fully pay for the property. Technically, you are unable to do that since you require an initial minimum sum of say 20% for your first property. This also translates to you paying only for the first 5 years while the tenant pays for the property for the next 20 years. Assuming if you pay 40% for your 2nd property, this will be a translation of you paying for 10 years of the property while the tenant pays for the next 15 years, which is still a pretty good deal.
Other than leverage, property investments also enjoy this thing called capital appreciation. Some people like to call this the MRT effect. But it really encompasses much more than this. This is also the reason why some properties appreciate much more in value compared to others.
We are currently the sole agent for Thomson Grand. If you are keen to know more about the capital appreciation potential of this development or other developments for that matter. Do contact me so that I can be of assistance to you.
As for property prices, it may be high now but is high price a reason for prices to drop?
Huttons Asia Pte Ltd
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