Why You Should Be Investing in Property

January 12, 2024
Article Category: Property Fundamentals

If it isn’t already clear that this website is dedicated to investing in properties, particularly overseas properties, and you’re questioning the significance of properties in wealth building, let this serve as a simple guide on why buying property stands as one of the most effective ways to grow your wealth and achieve financial freedom.

Fundamentally, the conventional approach involves working, earning money, and saving up, with the assumption that placing money in the bank with interest will lead to growth. However, with typically low-interest rates, especially in Singapore, the money tends to grow slowly. Investing the money, on the other hand, can yield higher returns.

The 10-Year Challenge

Let’s consider two scenarios for Eric, who has S$150,000 in savings, and explore the impact of his choices:

Scenario 1 – Putting His Money into Fixed or Term Deposits

Eric has savings of $150,000 and places it in a bank's term deposit for 10 years — *Currently the best rate for fixed or term deposit in Singapore is 3.6% p.a. But since interest rate fluctuates, we will take an average of 3% p.a. over 10 years for this illustration.

Eric places his savings of $150,000 in a bank’s term deposit for 10 years. The average interest rate is assumed to be 3% p.a. over the period. By the end of 10 years, Eric grows his savings from $150,000 to $201,587, gaining $61,587 in interest alone.

However, what if Eric chose to invest the $150,000 in real estate instead?

Scenario 2 – Investing His Money in Overseas Real Estate

Unable to afford Singapore’s residential market due to high entry prices and additional stamp duties, Eric opts to invest overseas.

Eric buys an overseas property instead. — *Choosing to pay interests only is just one strategy for investing in overseas real estate. We use this to make the illustration and calculations easy to follow. #Some overseas markets have shown even higher capital growth, but we will take a conservative figure of 5% for this illustration. ^While there are expenses related to the sale of the property, such as legal fees and property agent fees, but in this illustration, we will assume the rental income is enough to cover for these miscellaneous expenses.

By investing in real estate, Eric’s savings of $150,000 more than triples, resulting in a gain of $315,000.

In essence, Eric triples his initial investment of S$150,000, reaching a sum of S$465,000 — that is five times more than if he had left his money in the bank.

The principle of leveraging, coupled with capital appreciation and strategic property management, has significantly grown Eric’s savings over a decade.

The Safety of Property Investments

Property investments are also a safer way to grow your wealth or to park your money, compared to stocks and cryptocurrencies, which are very volatile and more susceptible to market forces.

A property is a physical and tangible product that you can see, touch, live in, and fulfills one of the most basic human needs — a house to live in, a roof over your head. With the exception of extenuating circumstances such as a fire or a natural disaster (which is why insurance coverage is paramount), the property may fluctuate in value but never reduced to zero.