Quote:
Originally Posted by JustStartingOut
Dear whizzard,
Thank you very much for sharing, from you as well as other contributors. I came here from HWZ (some link on a thread), and realised that most of the posts here are of value, rather than the most of the posts on EDMW. Still go to EDMW for fun, but I really learnt a lot here, from reading the entire of this thread (as well as the Networth thread). So, thanks!
I have a few questions though, if it is possible for those who have rental property to answer. Do you all hold your properties under your own name, or under a pte ltd company? I'm just starting out in adult life, mid 20s. I know I wouldn't get as good a deal on property prices now, but I do wanna plan for retirement in future / passive income.
My plan is to gather up about 50K of my own money, together with 2-3 friends, dump in in a commercial property (warehouse or something similar), held by a pte ltd company (shares equal to our contribution), and sublet it out. I want to have enough passive income before I even think about buying a car.
Actually, I'm already thinking about buying a car (I work in sales, so it would help, but I can honestly say that it's not a requirement, not at the current moment). Still, I want to have enough recurring income to pay for my car expenses, so I'm not "working" for my car, so to speak. Any ideas / thoughts on this?
Thanks,
JSO
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Hi JSO,
All my property investments have always been under my personal name or on a joint name basis with my wife as the other owner. Whilst there could be some advantages in terms of incorporating a company to hold your property investments e.g. claiming certain expenses agst your rental income for tax deduction, I did not do so as there are also some obligations to comply with if I were to have a pte ltd company owning the properties.
The other factor to consider, in your case where you are sharing the property with some friends, is that if you were to hold the property under a pte ltd company, you would only own shares in that property owning company. What if you want to sell off later? You would be selling shares of the company ..... don't know about the marketability of that. Of course, you could always structure a shareholders' agreement at the onset which states out what would happen if one or more partners decide to sell, what is the expected "quorom" that will be required to make certain decisions on the property (instead of a consensual vote all the time), etc. In short, it's not a good idea to share the investment because it could potentially lead to quite a fair bit of complications later on.
Why are so many people fixated with the idea of owning properties to finance their lifestyle or retirement? When the property market undergoes a cyclical downturn eventually, I dread to think of the consequences.
Property is just one of many asset classes out there. Don't put all your eggs in one basket. Yes, properties are expensive in Singapore and therefore it accounts for a substantial portion of most people's portfolio and when you are starting out, your investments would always be in one basket due to relatively low savings at that point in time. That being the case, you should be even more careful to plan for a scenario where it does not pan out as you expect it to. Furthermore, the net yields on investing in physical properties in Singapore is actually very low. You may be better off investing in well managed REITs if you are looking at it from a cashflow perspective.