3 Reasons Why Property is the Best form of Investment
Many of you have asked me how I first got into Property investment. The truth is, I first learnt about investing when I got the chance to read the book Rich Dad Poor Dad, written by Robert Kiyosaki and Sharon Lechter. For those of you who have not heard of this book or read it, let me attempt to provide a brief summary of it.
The book tells of a story of a protagonist growing up with two dads. His first dad—the poor dad—is his biological father, and his second dad—his rich dad—is the father of his best friend. The book then goes on to compare the ways in which both men shaped the protagonist’s thoughts about money and investing.
In its own way, the book shows us the importance of financial literacy, financial independence and building wealth through investing in assets, real estate investing, as well as increasing one’s financial intelligence. Put simply, Rich Dad Poor Dad provides the strong argument that you should use other people’s money and other people’s time as a form of leverage to make your money work for you.
As I went through the pages of the book, I felt that this masterpiece by Kiyosaki and Lechter really spoke to me. The points brought up resonated with me and I truly thought that they were making a lot of sense. And true enough, I began to realise that more and more Singaporeans around me are making crazy amounts of money and retiring at an early stage of their lives. Perhaps all of them read Rich Dad Poor Dad and were equally inspired?
Well, it could all have been a coincidence, but here, we could all agree on one thing from this case study: real estate is a great and safe investment that at the same time warrants a good return of investment.
As Billionaire Andrew Carnegie once famously (and succinctly) said, “90% of millionaires got their wealth by investing in real estate”. Today, we are going to dive deeper into that. Specifically, let me share with you the top 3 reasons why real estate to me is the best form of investment.
Why Property Investment? Reason #1: It has the best form of leverage
For this first reason, we have to take a look at what we call a Wealth Triangle, a conceptual framework made up of three fundamental components to generate wealth: High Income Skills, Scalable Business and High Return Investments.
Firstly, High Income Skills form the base of the pyramid. It is any valuable skill that can earn you a consistent and substantial amount of money each month. If you are able to develop a high income Skill, you can deliver value to the marketplace and trade your skill and expertise for very good money. Some examples of high income Skills include coding, web design, and consulting.
The second component of the Wealth Triangle is Scalable Business. Essentially, this refers to a business that you can grow and develop without the need of a lot of overheads or infrastructure. You do not need to spend large amounts of money to grow this business. Examples of scalable businesses are businesses that operate online, like e-commerce (Amazon, Drop-shipping) or traffic driven businesses. Scalable businesses are therefore systems that are in place that provide you with cash flow and makes you money, even while you are deep in sleep!
The final component of the Wealth Triangle is High Return Investments, which help to build your wealth, net worth and passive income. Some examples include stocks, bonds, mutual funds, and of course, real estate.
As mentioned earlier, Rich Dad Poor Dad got me into investing. While I am unable to tell you all the nitty gritty details of the book, I am proud to say that more than a decade later, I find that this one quote from the book still stands out to me.
It reads “People with leverage have dominance over people with less leverage. In other words, just as humans gained advantages over animals by creating leveraged tools, similarly, humans who use these tools of leverage have more power over humans who do not. Saying it more simply, leverage is power.”
So, you may be wondering “how does this quote relate to the Wealth Triangle?” While the Wealth Triangle seems simple, it is able to tell us a lot. Each time I look at it, I ask myself three questions:
- What is scalable?
- What can you leverage on?
- What are the risks involved for all three components?
While brainstorming on the answers to these questions, I come to the conclusion that the third component—High Return Investments—has the best form of leverage, using other people’s money and time. The power of leverage in real estate therefore makes it the best form of investment that not only is scalable and also you can leverage on others yet having the lowest risk.
Why Property Investment? Reason #2: It is Easy and Predictable, without the need of specific skills
Because of the stability of Singapore’s market, Real Estate in Singapore is easy to predict, and therefore easy for one to make money from. Moreover, in land scarce Singapore, we can easily predict the supply of the new developments that are up and coming, as well as predict the demand for these developments based on birth rates and immigration statistics.
In addition, because property is pegged to inflation, it is difficult for one to lose money by investing in property. As inflation suggests a general rise in the price level in an economy over a period of time, property prices will rise accordingly.
However, that is not to say that property prices are immune to decline in value due to economic crises. Instead, what it suggests is that if you have the holding power to hold on to the property through an economic downturn until the market recovers, you will be able to make profits. The fact that real estate requires little to no maintenance helps you to easily hold on to it in times of economic downturns.
How much profit you make and how you leverage on the predictability of the property market in Singapore for you to generate profits depend heavily on the set of tested and proven systems that you use. To fully leverage on the predictability of the property market to make more profits, you should use tested and proven tools like the 4 ‘S’ System and my Property P.L.U.S System.
As an investor myself, I have looked through thousands and thousands of properties in Singapore, be it brand new or resale. My experiences have allowed me to derive at 4 ‘S’ Model as well as a Property P.L.U.S System, both of which work to help you to choose properties with great value, in turn generating and maximizing returns.
Because these systems are data-driven, it helps in accurately and effectively predicting the values of different properties. It is also extremely helpful that accurate data about property prices are readily available in Singapore through various platforms.
Above all, what these all mean is that with the right tools and systems, investing in real estate does not require any special skills. Any first-timer will be able to do it, and that is why it makes for my number 1 choice of investment.
Why Property Investment? Reason #3: It is safe to enter into as compared to stocks!
Here, we will look at property as a safe haven. Real Estate is considered one of the safest sectors to invest in. Compared to real estate, stocks present a whole host of uncertainties. We always hear of people “burning their hands” after dealing with stocks. As the field of stocks requires excellent skills to make money out of equities and leveraging trades, it is a highly risky investment.
On the other hand, real estate not only provides you with a place to stay in, it is safer and will also get you better returns in the long run, even if we consider a case study that witnesses the worst-case scenario.
In this article, I have shared the top 3 reasons why I always tell my clients that property is the best form of investment. So, why property? Here’s why: real estate investment is easy to predict, safe to enter into, it has multiple streams of income, and most importantly, it is the best form of leverage in which you can invest in without the need to have a specific set of skills.
I hope you enjoyed reading this article and that it has helped you to understand property as a safe and good choice of investment. If you have any other reasons why real estate is your number 1 choice of investment, leave a comment down below and let all of us know!