18 July 2011

Why Buy a property for own stay in early age is a wrong move?

Why buy a property for own stay in early age is a wrong move?

Consider that you are a fresh graduate with a lovely girl friend / handsome boy friend. For a fresh graduate in Singapore/Malaysia, your starting salary could range from 2,000.00 to 3,000.00. Now, both of you decided to own a house after few years of working experience. Your household annual income could be in the range of 50,000.00 to 100,000.00. To buy a private property for own stay, the private property must be at least 500K in Singapore and at least 400K in Klang Valley.

 
If your saving to annual income ratio is 20%, you would have  10K to 20K savings every year. So, if you want to make the 20% down payment, you must save at least 3 to 4 years before you can purchase a private property.

After you have your own property at early age, you will have to start make the mortgage loan payment to the bank and it is opportunity cost for you to:
  1. Use the money to open your own business, although not many people want or like to do their own business. They would prefer to enjoy life and get the stable fixed paychecks from their boss.
  2. Use the money to invest in any other sort of investment products to generate positive cash flow.
  3. Create more financial burden and it would cost you to work for bank for longer time. After you have your own house (family), you will start to have as many children as you wish. And it will stop you from fulfilling your dream if your cash flow are all flows to the expenses that cannot give you income.
Of course, you would think that your own private property will appreciate in long period. But you will only see the real value after you liquidate your own private property. And you loss the opportunity to learn more investment products and experience of investing in it. 

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