Are you looking to make a property investment, but not too sure if you are ready for it? These four questions will help you gauge if property investment is the best for you.

1) Do you have sufficient income and savings?

Income can come from both earned and passive income.

When buying a property, a down payment of up to 25% required. Before making any investment decisions, look and plan well your whole financial situation, especially if you have never started on a financial plan before. You need to make sure you have enough budget for any investment you are looking at. There is no certainty that all investments will give you a profit.

Therefore, set your budget, targets and risk tolerance.

2) What expenses do you have?

We can categorise expenses into long-term and short-term expenses:

Short-term expenses refer to immediate expenses that is paid within one year, such as payments towards insurance, student loans, credit card payment and travel. 

Takedown your short-term expenditure through applications available out there in the market or in a spreadsheet. Notice your spending trend and see if you can cut down on any of these expenses to contribute to the down payment on the investment property.

Long-term expenses can be anything longer than one year. This includes buying a car, home, sending your children to university or even planning for retirement. When investing in property, it is important to consider your long-term expenses to ensure you can afford the loan payment for your property. You should also always pre-empt for any unexpected events, such as loss of job and medical needs.

3) Are you okay with long-term and illiquid investments?

Investing in property is a long-term and illiquid investment.

Long-term investments are more suitable for investors who are looking to grow their wealth for a long-term goal, such as retirement. There won’t be great returns if you put money into a long-term investment and sell it within two to three years.

Do you need money within the next couple of years?

Liquidity refers to the ease of converting assets or securities into cash. Property investment is highly illiquid, as properties cannot be quickly sold in the market at a price reflecting its intrinsic value. It may take months or years to convert it into cash. 

If you need money for the next few years, investing in an illiquid investment like property may not be the best choice. It would be a more plausible option to invest in liquid investments like stocks and bonds. You need to know when and if you need the liquidity and if the investment meets your requirements.

4) Do you have the time and skills to invest in property?

Investing in property requires you to be active in management. You are responsible for finding dependable tenants, maintaining the cleanliness of the property, upgrading the interior design, ordering repairs, and doing inspections. 

That’s all for today! Meanwhile, stay tuned for articles so that you will be updated on the latest financial advisory strategies. Alternatively, contact our Growth Consultants to find out more about our upcoming masterclasses and programmes.