There is no place like home. Yes, there is nothing like owning your own home, thanks to our Singapore government who made this possible for us. As Singaporean, a home is more than a financial asset. A home is a place to live in and raise children, and plan for the future. But make sure you invest on the property that you can afford. Do not follow the crowd. Remember, it is better to buy the home or property that fits your budget. Work out your budget.

In my opinion, your house payments should not be more than 35 percent of your net spendable income (that is income minus CPF, taxes and tithes.) Choose a house that you can afford, taking into account your giving, saving and other lifestyle choices. One of the biggest mistakes I see is when young married couples quality for a mortgage based on both their incomes and get the largest house on the maximum mortgage loan they can get. After a few years, they have children and decide the wife should stop working and become a stay-at-home mom. But unfortunately, she cannot because of their mortgage that is based on both incomes.

The number one financial problem facing most young couples face is they spend too much on housing. I am a strong advocate of buying a home that you can afford and paying off your mortgage loan as soon as possible. People may advise otherwise due to whatever reason. I would rather live debt-free and pay off my house as fast as I can. In order to do that, we may have to force ourselves to do so. Therefore, a shorter year mortgage is best. I know it is going to be tough and a little bit tight, but most of us can make our lifestyle adjustment. If you are not brave enough to do a fifteen years mortgage, then pretend that your thirty-year mortgage is a fifteen-year mortgage. Simply make the payments as if you had a fifteen-year mortgage. In that way, you are not locked in but you can still accomplish your goal. I usually used my bonus for my capital repayment and I can determine the amount of the payment based on available funds.

For some of us, investing on a second property may be a good option. You can generate rental income and also profit from increasing housing prices. But before you do that, you have to make sure your financial house is in order. You need to be financially healthy to succeed as a real estate investor. Make sure you crunch the numbers properly. As an investor you should think of profit and loss and risk and reward.

Therefore, your cash flow is very important. Do not subject yourself in a situation whereby you have to false sell your property because of your flow. As an investor, most of us make money out of our capital appreciation, which means you need to have holding power.

Before investment, know your market. One of the key ingredients to any successful real estate transaction is location, location, location! It pays to know something about the market condition in the area before you invest.

If property are in short supply, you probably do not have a problem in renting or selling. Your first line of defence against vacancies is a good evaluation of the rental market before investing.

Remember that owning an investment property is a business; you have to be willing and able to commit the time and money in order to run your business successfully. So make sure you understand how much time and money you will have to spend, before you invest.

Questions:

  1. Is it better to pay off my mortgage early or keep taking the tax deduction (investment property)?
  2. What is the best way to pay off our mortgage early?
  3. What should I know before buying any investment property?
Week 44 – The Real Deal about Real Estate