30 July 2011

Advantage and Disadvantage of Real Estate Investment Against Stock/Shares Investment

Advantage
  1. Leverage - Normally we could use the mortgage loan to purchase the real estate. It is also a lower risk investment as normally the housing prices will not move fast or down in super fast pace. You can gain a big chunk of money when you use other's people money to purchase your own
  2. Used for Home - If you cannot rent it out for your house, you can still use it for your own home. It does not matter whether the location is far away from your office, as long as you do not really need to pay rental for the home near to your office. Believe me that, you will still earn some energy & time for not moving around your office due to the end of the tenant agreement.
  3. Symbol of Status - Traditionally, people will judge a person by how many properties he owns, regardless whether how much debt he owe to the bank. For Chinese, we believe that the property or land that you bought will give you some happiness. You can pass it to your next generation or for donation purpose.
Disadvantage
  1. Liquidity - It is not easy to sell real estate in short period, unless you are willing to take a cut for your selling price.
  2. Investment Horizon - In Singapore, you will be fined penalty for selling a house within 5 years. So basically you cannot buy a house using mortgage loan and sell it at higher price and earn some margin from there. It always take time for getting positive cash flow in longer term.
  3. Supply & Demand - As Real Estatement investment is a long term investment, you must be careful of the supply & demand issues for the next 30 years. In chinese we  call it '
  4. Tenant Management / Real Estatement Management - it takes time to master the management skills for managing your tenants.
  5. Tax - you will need to make the tax payment for property / rental income.

1 comment:

  1. you will need to make the tax payment for property / rental income? this one i duno..

    Investment Horizon - In Singapore, you will be fined penalty for selling a house within 5 years- not only in sg, i think msia as well.. but nt called penalty but we hv to pay some extra money if sold our house within 5 yrs...

    B.Rgds,Bluelavendar

    ReplyDelete

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