Hi, Can Anyone Share W Me What Is The Pros Of Investing In Residential Ppty For Rental As Compared To Say Placing The Funds In The Sti Etf, Other Than Using Leverage To Grow Ur Assets, Or The Can Touch, Can Feel Factor, Or To Hao Lian To Relatives During Cny? So Far I Dont Find Rental Yield Of Pte Ppty Attractive Enough For Me To Consider Plonking My Moolah In.. 1) First N Foremost, Ppty Is Illiquid Compared To Say Sti Etf 2) It Is Also Less Diversified Than Say A World Index Fund.. 2) Double Taxation Of 10% For Ppty Tax And Another 10% (Roughly) For Income Tax (Anyone Who Can Afford A 2nd Ppty Probably Earns Upwards Of 100k Pa). And Nt To Mention Half A Mth Of Agent Comm For 1yr Lease, And Maintenance And Sinking Fees Upwards Of 3k Pa Minmally. I Reckon These 4 Factors Can Easily Eat Up To 30 To 35% Of Rental Income.. 3) Assuming A 3.5% Rental Yield, I Will Be Lucky To Get 2.5% Returns Back. In Contrast, Blue Chips Can Easily Get Me 4 To 5% Returns..
Posted by Anonymous - 2018-04-03 14:05:00 - Viewed 59 times
Answers (3)
Mervin Tang
Posted 2018-04-27 13:41:10
Dear Sir,
Thank you for your query on the comparison between real estate and more liquidity based investments like stocks and shares, ETFs and blue chips.
Off hand, yes your analysis is correct if you take away 2 key aspects in real estate:
1. Leveraging, which means that you multiply your capital gain by a factor of 5 if you are on a 80% loan.
2. Time horizon. Time horizon is pertinent as rightly put, blue chips yield a 4-5% year to year return.
Real estate on the other hand, if you track back the historical data on price movements, the compounded yearly effect would be much higher than the blue chip return of 4-5%. There are home owners out there in the market that think of real estate investments over multiple lifetimes whereby their decedents ultimately take over the ownership and accumulate the assets for succeeding generations.
All this is achieved primarily though real estate holdings.
I trust the above would balance out your opinions on real estate as an investment vehicle.
Thank you.
--
Best Regards,
Mervin Tang
Huttons Asia Pte Ltd
Associate District Director (ADD) @ KLG
CEA Reg No. : R030951Z
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