5 pains of real estate investing to consider before investing in your first real estate

There is no doubt that many, many people loooooooooove real estate and property – I’ll share the upsides of property investing in another post. Today, I’ll share 5 pains of property investing, and they are:

High upfront costs

Here in Singapore, to buy a property, it’s one thing that properties here are not that cheap – we have government flats that are hitting $1M in price; and private properties are often above $1M depending on the size and location.

To start off, you need to fork out a deposit of 20%, so that’d mean for a $1M property, you need to have at least $200K in cash and/or CPF; and that’s assuming you can get a bank to loan you for the remaining $800K. That’s why not many people are buying more and more properties (at least in Singapore).

Not liquid

Another term for this is “illiquidity”, which means that you cannot sell your house in one day. If you want to sell your house, it’d take weeks if not months to complete the sales process, and at least 3 months after before the money gets banked into your bank account.

Risk of problem tenants

If you’re the one living in it, then this is not an issue…but as landlords, facing problem tenants is bread and butter part of the program. You may get squatters who dont want to leave your home, or people who trash your home. Imagine if your tenant’s 2 months security deposit is a small, pale comparison to the massive damage done to walls, kitchens and toilets.

My mum had her rental home in Seremban slightly trashed by a nasty tenant who decided to break her basin and went missing on us.

But if you’re in the business of landlording, it’s nothing new, just sort it out or get your property manager to sort it out for you.

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Maintenance hassle

Things break down in the house, such as

  • pipe leaks
  • stuck toilet
  • air con spoil
  • fridge spoil
  • gas leak
  • wiring

So many matters that can break, will break with normal wear and tear.

Associated expenses and fees

There are a number of expenses and fees that are associated with landlording:

  1. rental income tax
  2. property tax
  3. agent fees (rental, sales or purchase)
  4. legal fees
  5. stamp duty
  6. maintenance

I prefer something more hands-off

I lean towards more passive income investments such as dividend stocks and index funds that pay me a good % dividends or growth every year, that’s typically banked straight into my bank account. All I do is open my bank account and go “oh, got dividends!” lol =)

But that’s my personal preference.

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