There are so many people who argue that owning a private property and using it as a private home is not an investment. However, this is not always true, especially when you consider the definition of an investment. An investment is something you put money into expecting a return, usually your investment plus a profit. So, can a private home be considered an investment? This article will look at how and why this is the case.
With every investment, you have to take your time and be strategic with how you go about it. You need to weigh up all the risk factors and think about whether you can afford the home. The first thing you have to think about is the financial factors surrounding the new property.
You have to think about private property tax, any down payments you need to put down, and the monthly mortgage payments. In the case of a loan, you also have to think about the monthly payments.
The good thing about taking out a loan to purchase a property in many countries, including Singapore, is that the monthly payments from most home loans are very close to or even less than what you would pay in rent for an average one-bedroom apartment in the city.
Taking out a loan has the massive advantage that once the loan is done, you own a property, whereas you would not end up with that property if you paid rent. If you live in Singapore, therefore, consider taking out a DBS home loan for the purchase of a new home. You can find these home loans through platforms like PropertyGuru that make it easy to find the best loans and loan terms and get quotes by inquiring through their website. They also curate different types of properties if you want to buy or invest in one.
Whether you take out a loan to pay for the home or pay for it out-of-pocket, the main takeaway is purchasing a home that will increase your equity and that will leave you enough leeway to increase its value.
If you are able to purchase a new home you can afford, you will not have to do much to the house for the first few years because it will still be new. However, you can increase the value of an older home with renovations shortly after you move in. You can spruce up the kitchen, change a few things in the bathroom and give the landscape a little care and you will have already increased the value of the home.
It is true that doing these renovations will cost money, but carefully choosing your renovations and where to put your money should lead to investing in areas with the greatest return. Two great examples are the kitchen and the bathroom. Both these renovation projects usually have an ROI of about 70%, which is better than almost anything else you could invest in.
When you eventually decide to sell the home, you will use these renovations, adjustments, and additions to justify a higher asking price. If you do not sell, you will have made the home more comfortable and functional for you and your family.
One of the best things about purchasing a private home, which is a real estate investment, is that a property’s value can go up on its own. As with any investment, you can lose your investment due to several factors. However, overwhelming evidence shows that homes appreciate over time, almost always on their own. This is often due to factors you cannot control, such as new amenities being added close to the home or nearby homeowners selling at a higher price.
Investors can liquidate a good investment easily. You can liquidate your private home by selling it or using it as collateral for a loan. This liquidation process largely depends on where you live, but if you wanted to get something out of the house, you could sell it in as few as 30 days. In places with a lot of demand and very little housing supply, you might be able to get a lot more for the house than you anticipated. This can put your profit in your hands faster to invest in another home or any other type of investment.
The point is that the options that come with having an asset you can liquidate would not be available if you had not invested in the home.
Any time you put money into something and get a return, whether that was the aim or not, that is an investment. Although the return is not guaranteed, your home is an investment if you can get more out of it after selling it than what you got it for.