CONTRADICTING INFO

Once in a while, I post about the not-so-flowery state of the RE industry, warning buyers. Then, I post ads of properties for sale. Isn’t that contradicting?

The confusion lies in the financial (investment) aspect of RE. See, in its purest essence, RE is for end-use, and it serves as one of the cornerstones of survival: shelter. However, this asset is prone to speculation, just like food commodities. In recent times, RE has been seen more as an investment than for end-use after prices skyrocketed in the past decade.

RE purchases can be both good and bad, depending on your objectives, investment horizon, and liquidity requirements. These are questions fund managers are required to ask clients. And I think brokers MUST do the same thing. Understanding clients’ replies would help determine whether or not RE is an ideal investment for them or what type of RE assets fit their requirements.

1. Objective

If you're looking to buy and flip, stay cautious. The sure-profit era of RE flipping is long gone. Most developers are having difficulty introducing price increases, and laws have been put in place to penalize flippers. It's safer to assume that you won't be able to flip them.

In contrast, if you’re looking to preserve wealth, go ahead. Some buyers continue to purchase RE despite their low single-digit rental yields because their objective is wealth preservation. The key trait that makes RE attractive is its safety (e.g., RE prices don't fluctuate on a daily basis).

2. Liquidity

If you plan to draw regular income from the RE asset and expect large outflows in the near future, RE may not be for you. Currently, government securities present minimal risk, higher returns, and can be sold in seconds.

3. Investment Horizon (IH)

If you're willing to wait 10-15 years because you have other sources of passive income, RE is a sound investment. If you're willing to wait that long, even the 300K to 400K/sqm prices will seem attractive today. This is usually the case if the RE asset is ultimately for end-use or if you’re purchasing for future generations.

So, my posts may be read in different ways, depending on the answers to these three questions.