Leverage is all about increasing your real estate net worth and making the most out of your investment. As the years go by, the value of a property will likely increase, more than other investments such as unit trust, mutual funds and so on. Some might regard property investment as high-risk, so it all boils down to your risk appetite.
2. Stable investment
The property market is often seen as more stable compared to the stock market. If you are investing for the long term, a property in a thriving location can bring steady capital appreciation and favourable rental yield. According to statistics from National Property Information Centre, the annual appreciation rate for house prices has averaged 9% in the past five years.
3. Extra income
It always feels good to have extra cash! Properties in a good location often provide positive rental yield. This means that your renter is “paying” for your monthly loan installments, and you might even have some extra balance after clearing all the necessary bills.
4. A basic necessity
Being an essential part our lives, homes have a longstanding demand. After all, it is one of the basic necessities in today’s world. The demand for nice and comfortable homes is on the rise, especially places that provide ample amenities nearby.
5. Retirement plan
Besides giving you passive income, property investment can also be part of your retirement plan. With proper research and equipping yourself with the relevant knowledge, you can purchase a property, maintain it well, and be on your way towards financial freedom (even before retirement age!).
Investing in a home also means adding value to your personal net worth. Besides renting out a unit and enjoying positive returns, these properties can also be inherited by one generation after another. On the other hand, if you take loans that are spent on items that do not appreciate over time, then the depreciation rates are high and there are no returns. The loans for residential or commercial properties that will appreciate in the longer term can be tagged as “good debt”. Car, personal and credit card loans that do not generate value in the future are considered as “bad debt”. For examples, the value of private vehicles depreciate about 10% to 20% per year, based on car insurance calculations and accounting practice.