20 Pearls of Wisdom to Build Sustainable Property Wealth
By Gerald Tay (guest contributor)
Someone once told me that there are two types of people in the world those that spend all their time trying to make their fortunes but lose them eventually, and those that once they make their fortunes, spend all their time trying to guard it. Who do you prefer to be? Everyone says they want to be the latter, but most end up as the former.
If you want to be able to guard your fortune instead of losing it, take heed of the following pearls of wisdom I’ve gathered over the years.
Property is a poorhedge against inflation when you buy at inflated, future prices.
Singapore’s population growth has no direct correlation with property prices.
Spend time learning the math. The math will keep you from buying a bad deal, which is more important than buying a good one!
Keep in mind the Chinese proverb ‘马到功成’ (literally translated as “success is when the horses come”). Success comes only to those who dare and act; it seldom goes to the timid. The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.
The people who say ‘All I want is to buy and sell my property and be a millionaire’ are a bit like blokes who say ‘All I want is to go out and get laid tonight.’ They normally go home on their own.
Owning property with little or no down payment can sound quite wonderful, but there are major pitfalls to this strategy – and plenty of marketing BS too!
The prized location properties have corresponding negative cash flows that may negate any true increase in wealth from one’s long term appreciation in value.
The Cash Flow Positive Mantra means nothing if a whole $200 a month net cash flow on a million dollar property purchase is all you get for your trouble and effort.
Own properties that pay a fair Cash-on-Cash Return. When you buy property you are taking money out of your liquid financial assets and putting it into a very illiquid asset – property. If you were earning a rate of return on your financial assets, say 4 percent or 6 percent, you should strive to earn a fair cash-on-cash rate of return on your property.
Owning a property is less risky than owning stocks and shares, if you do it properly.
The investment is only as good as theskill of the investor.
“Return = Skill + Work.” The moreskills and work you put into your property investment, the higher your return should be.
It is important to understand who is going to be renting from you before buying a property. If you cannot answer that question, then you haven’t done enough research. If you need to spend hours in front of the entrance of an apartment just to see what kind of occupants dwell in the building, you do just that.
There’s no such thing as a bad property investment. Only a bad investor. So never blame everyone else but yourself for failure(scams included).
One man’s meat is another man’s poison. What is a good property for one person, maybe a bad one for another.
Know whether you are an Investor or a Speculator. The difference is simple: an investor looks at a property as part of a business and he as the owner for the long term, while the speculator see property as an asset they buy now in the hope that someone will pay more for it down the road.
If you’re not prepared to manage tenants, avoid property investing. Buy mutual funds instead.
A market correction is an opportunity for the patient, long-term investor. Long-term investors should welcome market corrections as an opportunity to purchase good properties at attractive prices.
Property investing is not about how beautiful the property is, but rather how much the return you are getting on your investment. Or as one property investor once told me, “Only women are beautiful. What are the numbers?”
Home buyers are looking for attractive neighbourhoods, good schools, amenities, connectivity and nearby MRT stations. Experienced property investors buy investment properties solely based on factors that will influence rents, prices and occupancy.
If you’ve enjoyed these gems, I have dozens more I’ve gathered to share in the future.
By guest contributor Gerald Tay, who is the founder and coach at CREI Academy Group Pte Ltd, an organization dedicated to empowering retail property investors with smarter investing philosophy and strategies. He is a full-time investor with over 13 years of solid experience in building his wealth through Property Investment and is financially wealthy today. Posted courtesy of www.Propwise.sg, a Singapore property blog dedicated to helping you understand the real estate market and make better decisions. Click here to get your free Property Beginner’s and Buyer’s Guide.
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