Dubbed “the world’s most expensive city”, Singapore enjoys a lofty seat in terms of economic performance and stability. Since declaring its independence, the island nation has thrived in virtually all possible aspects.
Among the most aggressively profitable industries in the country is real estate. Anyone who owns a piece of property in Singapore knows that they have a hot commodity. But ownership alone doesn’t guarantee property investment success. There are lots of things that can go wrong between buying, holding, selling, and renting out your estate. Find out what 5 mistakes to avoid in order to make the most of your property investment.
- Buying and Holding for Too Long – A common strategy used by real estate investors is called buy-and-hold. This basically means an individual will buy a property while prices are low, hold on to it as prices descend, and then liquidate the investment when demand and market value increase later on. When people hold on to their property during the rise of its cost, they might keep holding on until it starts to descend again. Remember, it takes a while to find a sure buyer. If you hold on to your property in the hope of further increase, you might not secure a buyer in time to take advantage of the price hike.
- Underestimating Other Costs – Some people buy fixer-uppers at low costs and then repair it to sell it for more. Under the right circumstances, this can be very profitable. However, underestimating the cost of repairs and renovations could put you at a loss. Before you invest in a property that needs repairs, subtract how much you spend for the house and the renovations from the estimated selling value to find out how much profit you’d make.
- Choosing the Wrong Location – Hoping to rent out a property investment? Be sure you’re in the right place. Tenants care about the accessibility they’ll have to key points in the community. If the property you’ve purchased is an inconvenient distance away from malls, grocery stores, hospitals, and other important check points, it might not have a lot of prospects.
- Expecting Quick Returns – With property investments, it’s rare that you’ll make quick returns. It takes several years before estates are turned over because of the different trends that control the market. If you dove into a property purchase thinking you could liquidate in a year for double the price, you’ve set yourself up for disappointment.
- Avoiding the Math – It pays to compute how much you’ll spend and earn with your property before you go through with any decisions. For example, if you find a house for sale in Singapore worth 1,000,000 SGD and sell it for 1,040,000 SGD 8 years later, you ultimately make 4% on top of what you originally spent. But divide that over a span of 8 years, and you’ve got an annual rate of income of just 5000 SGD a year. Ask yourself – will it be worth it to wait 8 years to liquidate something for such a small annual profit? Consider the math – sometimes, numbers only look good on paper.
Property investments can be very lucrative, but that depends on how well you play the game. Be sure to avoid these biggest real estate investment mistakes to help you get the best out of every cent you invest.