4 Don’ts Of Real Estate Investing

Since land is scarce in our country, properties had always been a go-to investment option for many. The majority of these investors have strategies limited to purchasing, reselling, and renting flats or condominiums. While others consider other options such as the Real Estate Investment Trust (REIT).

REITs allow the investor to have a professionally managed portfolio of properties by purchasing a publicly traded investment product. Investors of REITs purchase units of the trust similar to shares of a common stock.

But no matter what type of property you purchase, here are 4 Don’ts Of Real Estate Investing to help you on your journey…

1. DO NOT FORGET TO IDENTIFY YOUR GOALS

Before committing to a property or even a property visit, it is important to understand what you want to achieve from investing on real estate. Be on a peaceful place where you can think carefully about your goals for the long-run.

You must have a transparent idea of your existing income, current expenses, and outstanding loans before diving into another complex route. Also, you must identify your budget and type of risk you are comfortable with.

2. DO NOT GO WITHOUT RESEARCHING

After identifying your financial circumstance and your investment goals, you must do your research on real estate investments in order to be sure that it is worth your money. For example, a two-bedroom HDB flat can cost about S$250,000. That is a huge sum of money you may be willing to risk if you are serious in property investing. The risks only increase when the investor does not understand how the property market works or when and where to invest. Hurrying up without analyzing the situation thoroughly can only bring about more damage (e.g., bankruptcy) than good.

So if you lack sufficient knowledge, seek advice from a financial consultant or other professional advisers. And when you find the “right property”, ensure that you keep your expectations realistic and keep your finances in tact.

3. DO NOT EXPECT TO BE A MILLIONAIRE QUICKLY

Do not fall into the trap that some real estate investors set – offering you properties for small amounts of cash with higher returns. These “undervalued assets or profitable investment opportunities” are mostly likely unsold overseas property projects. You see, real estate investors usually do not offer “jackpot” properties to complete strangers. They only invest with the people they know well.

There are no shortcuts to success on real estate investments! In fact, you must allot a long period of time on finding a property in a decent location, building a good relationship with the tenants, and maintaining the condition of the property. Time that may not be in the good side of most.

 

Image Credits: pixabay.com (CC0 Public Domain)

Image Credits: pixabay.com (CC0 Public Domain)

4. DO NOT PURCHASE A PROPERTY WITHOUT VISITING IT

In support of your in-depth research, you must drive to the property itself before signing any contracts. There are a number of reputable realtors and agents who can give you feedback about certain properties but you must follow your own instinct in the end.
There are no shortcuts to success on real estate investments! In fact, you must allot a long period of time on finding a property in a decent location, building a good relationship with the tenants, and maintaining the condition of the property. Time that may not be in the good side of most.

Sources: 1, 23, & 4

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The Age-Old Relationship Of Money And Time

If you lived in Singapore long enough, you will realize that time is money! Not in the literal sense. In a fast-paced work driven environment, time is seen as a valuable and finite resource. Since time is irreplaceable, we must accomplish tasks as quickly as possible. You can always make money but you can never bring back time.

Time and money’s dynamic relationship is manifested in different daily scenarios such as these:

a. HAVING TOO MUCH TIME

Experts say that the unrealistic expectations people have with time outweigh their irrationality with money. It is because measuring our lifespan is a complex task. In a study, participants placed more bets when they gambled with their time than when they gambled with their money. Time is such an ambiguous currency that people cannot see its actual worth.

b. HANGING OUT WITH THE CROWD

Financial psychologist Brad Klontz said that: “It’s the herd instinct that influences each of us, particularly when it comes to our wallets.” Generally, we surround ourselves with people with the same monetary habits. If you frequently hang-out with a cautious buyer, you are more likely to learn a thing or two about the importance of budgeting. And that is not a bad thing!

c. POWER OF COMPOUND INTEREST

As an investor, the longer you keep your money on the account, the more you will make out of it. Elevation of your wealth each year is possible because of Compound Interest. This is why it is advantageous if you started young. And if your “younger years” passed, the next best thing is to start now.

d. BUYING A CAR

When purchasing a car, the present value of your money may not be enough. And you will have to make several financial strategies to increase your future value of money. Watch this short video to grasp its idea:

According to Investopedia, “Time Value of Money is the idea that money available at the present time is worth more in the future due to its potential earning capacity”. Provided that money can earn interest, any amount of money is worth more as time passes. Thus, it is important to calculate the Time Value of Money before you start investing.

Sources: 1,  2, 3, & 4

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Beginner’s Essential Guide To Unit Trusts

 

WHAT IS UNIT TRUST EXACTLY?

A Unit Trust follows an unincorporated mutual fund or trust structure that allows funds to hold assets and pass profits thru the individual owners. Money is pooled with the money from other investors and it is managed by a fund manager. The portfolio of assets is set according to the fund’s investment strategy and objective. Hence the success of a unit trust depends on the capabilities, expertise, and experience of the management company.

In Singapore, local and foreign unit trusts offered are regulated as collective investment schemes.

WHY MUST YOU INVEST ON UNIT TRUSTS?

Since funds are invested in an array of assets, one advantage of investing in unit trusts is diversification. In the current unpredictable market, this potency helps investors to adjust with the ups and downs without having to worry too much about the performance of a single stock. Generally, unit trusts provide you with more safety in terms of the performance of your investment.

WHAT SHALL YOU CONSIDER BEFORE AND AFTER INVESTING?

Before investing on unit trusts, you must assess the type offered as well as its fees. Also, you must examine the fund manager himself. Determine if the fund manager has the sufficient experience, skills, and resources to lead you to success. Look beyond the short-term performance and look into one’s long-term track record.

After investing on unit trusts, you must regularly monitor if its performance meet your expectations. Then monitor the economic and political risks of the markets you invested in.

WHAT IS ITS NET ASSET VALUE?

The price of each unit is based on the net asset value divided by the number of units outstanding. It is typically calculated daily to reflect changes in the prices of the investments maintained by the fund.

HOW CAN YOU BUY THE UNIT TRUSTS?

Aside from cash, you can purchase unit trusts by the CPF Investment Scheme (CPFIS) and the Supplementary Retirement Scheme (SRS). Furthermore, some insurance companies offer investment-linked insurance policies.

Image Credits: Ken Teegardin via Flickr (CC Licence Attribution-ShareAlike 2.0 Generic)

Image Credits: Ken Teegardin via Flickr (CC Licence Attribution-ShareAlike 2.0 Generic)

Sources: 1,  2, & 3

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Infographic: What is Causing Low Oil Prices?

Remember when oil was over USD100 per barrel?

Due to a combination of demand and supply factors, prices crashed below USD30 per barrel in 2016 and is still about 45% below its 2015 peak.

What caused the oil rout, and what opportunities are there in this low oil price environment?

We’ve gathered the key facts that every investor ought to know:

oil background

Want to find out more? Watch our video which explains the oil rout in detail and read our research reports for coverage of each sector and how they are impacted by oil prices.

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Investment Basics: Bonds Versus Equities

BONDS 

  • Just like some people, organizations and governments need to borrow money in order to function. An organization may need funds to expand into new markets while the government may need money to improve the infrastructures. However, some organizations need more money than the bank can provide. This is why they have to issue bonds to the public market. After which, a number of investors can lend a portion of the capital needed. So in a sense, bonds are borrowed money with a fixed and stable rate of return.

EQUITIES

  • For an aggressive investor that embraces risks, consider purchasing equities. Equities are the shares sold by companies. Buying equities means you become a shareholder – an owner of a percentage of the company. But if the company gets bankrupt, an equity investor will get the last claim on its assets.

PROS

BONDS

  1. Including bonds to your portfolio provides you periodic interest revenue for a certain length of time. Since its interest rate typically does not change, you will know what to expect.
  2. In an unfortunate event that the company goes bankrupt, bondholders are the ones who get paid first because they are creditors with the first claim on the company’s assets.
  3. There are various types of bonds to choose from such as government bonds, zero-coupon bonds, and corporate bonds.

EQUITIES

  1. Since equity investors become owners of a percentage of the company, they are equipped with the highest possible returns.
  2. You can profit it different ways such as gaining from the increase in share prices or dividend income (if the company declares dividends).
  3. Depending on how huge your shares are, you may have power to vote in the company’s decisions and issues.

CONS

BONDS

  1. Since the market changes and the bond’s interest rate relatively remains the same, it can lead you to getting lower investment returns.
  2. If you are keen to sell a bond with an interest rate that is lower than the current market rate, you will have to sell it at a reduced or discounted amount that what you originally paid for.

EQUITIES

  1. Equities are volatile and riskier than bonds. As much as equities can give you the highest returns, they can also give you greater losses.
  2. Unlike bonds, there is no guarantee of dividend payment in equities. Based on the current market and business circumstances, the company can choose whether it pays the dividends or not.
Image Credits: pixabay.com (CC0 Public Domain)

Image Credits: pixabay.com (CC0 Public Domain)

Sources: 1,  2, & 3

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