These are especially important to consider if the purpose of investing in a property is to generate a stream of investment income. You should never make the mistake that just because the monthly rental of say $2,000 monthly is able to cover the mortgage loan repayment of $2,000 monthly, the property is a good investment as it’s “self-completing”.
As a financial planner, I do realize that I have to play the role of “enthusiasm dampener” from time to time with clients as it’s so easy to get caught up in the excitement of investing in a property. From the Straits Times report, there is a table of the top 25 transactions ranked by loss over the past few years. Most of these properties were sold within 3 years of purchase which suggests that while the buyer had the means to purchase, he or she could not afford to hold. Therein lies the difference between buying a property and owning a property.
At the end of the day, a property investment should be a happy event that adds value and diversification to your financial portfolio. Make sure you set things up for success and if in doubt, remember that your GEN Planner is a phone call away!
P.S. We have an affordability exercise we use to bring clients through a process to evaluate how ready they are to buy a property. Make sure you ask your GEN Planner for it.
Article by Lee Meng
The writer is an Executive Financial Services Consultant representing GEN Financial Advisory