Building passive income in Singapore

We love the idea of being a landlord and collecting rent, which result in many people renting properties as passive income in Singapore.

As a property agent, I have been asked many questions like this before: “What is the best property investment?”, or more “sophisticated” questions like “What is the expected ROI?”. In all honesty, I cannot answer you frankly. All I can do is assume the variables and numbers.

Most people are looking for a fast way to make money. They are so fascinated with the idea of passive income.

Passive income in Singapore does exist. But it doesn’t happen overnight. One has to work hard, earn money, live prudently and save money.

We’ve heard so many stories about people being duped by conmen and yet there are still many more who will be. Why is this so? One of the main reason is GREED.

From the questions above, I know that you are taking an easy way out. And these kinds of clients are the easiest to convince. But after sharing some easy steps to start your passive income streams, I hope that you will not become one of them.

1. Invest in yourself first, passive income can wait

By investing in yourself, the knowledge will always and forever belong to you. However, it doesn’t mean just putting your money for courses that claim to have the “secret formula” to success. Most are bogus but there are rare gems that will tremendously help you.

If you are interested in real estate, there are a lot of consumer seminars happening each week. I can only vouch for the company I work for (Propnex). We don’t do any aggressive sales pitch there. It is more of a sharing session of the property outlook and some tips to be better investors. Best of all: it is free of charge.

As the saying goes, the more you learn, the more you earn.

2. Invest in the investment vehicles that you are most comfortable with

There are different investment vehicles and every successful person will vouch for one than the other. If you look at all the successful business people, they are all in different sectors of the market. The right investment vehicle choice differs from one to another.

You need to understand your current financial position, risk appetite and time frame. Learning each type of investment will make you a more informed investor.

In property investing, you need to have a high initial capital. This includes at least 5% cash and 20% CPF. I would recommend at least 30% initial capital as a guide and as a safety net. Buyers’ and sellers’ stamp duties are some of the taxes that need to be paid.

Property investing in Singapore have its appeal given the current low-interest environment.

Using leverage on investment vehicle is a double-edged sword, thus, the need to learn the investment in-depth and be comfortable with the risk it comes with.

3. Understand the market cycle before investing in Singapore

Every investment has its highs and lows. Each investment has different factors that causes the prices to increase or decrease.  You will need to understand the economics behind this cycle.

The most basic school of thought is that when stocks dip, bonds rise and vice versa. However, this is not always the case. But knowing the market cycle will make you a better investor.

For property, the cycle follows closely to the economic cycle of the country (Singapore). Factors such as gross domestic product (GDP), interest rates, total employment, and consumer spending, can help to determine the current stage of the property market cycle.

4. Buy at low prices when investing for passive income

“Be fearful when others are greedy and to be greedy only when others are fearful.”

Wise words from legendary stock picker Warren Buffet. We are taught to buy when there is a discount and sell when we make a profit. But there are too many cases where people buy high and sell low. People are either just following the crowd or not doing their own due diligence.

Risk vs Reward

These are just some of the ways to make you a better investor. But this will not guarantee that you will not lose money. Investing comes with risks, and with risk comes reward.

The best bet might be buying your first HDB flat with grants and knowing the right time to sell it for a profit.

Nevertheless, I will always advise my clients to prioritise having an emergency fund in the bank before taking a risk to invest.