On the Sunday Times (09 Dec 2012), you will come across this article titled “Just 32 and already financially independent”. I felt it was an article our readers would benefit from reading, and I intend to supplement it with some of my own views (even though I must admit I’m in no way financially independent).
Let me give you an introduction to the story in case some of you guys decide to not read because you have to read that article to appreciate this post. The guy being interviewed is 32 years old, he’s made some wise investment decisions that gives him a passive income of $5000 a month and he could technically survive without working.
What financial freedom means is to have the shackles of debt and commitments taken off your shoulder. And that burden passed on to some other entity, and in this article’s scenario, the entity is the person’s 2 properties.
After reading beyond the first few paragraphs I learnt he is still living with his parents and his “wise” investment decisions were to buy 2 properties during the downturn. In my opinion, yes, I agree he is very astute and has rightfully earned financial freedom, and luck played no part in his decisions. But, we have to consider his background, he is living with his parents in an a sixth avenue terrace house. This has played a big role in his ability to purchase two properties giving him rental income. And I doubt the ability of many Singaporean families able to accommodate multiple families in one household.
And secondly, anyone and everyone who bought a property around the financial crisis period would have made a great return on capital. Should we label them wise or financially savvy?
My humble and non-expert opinion is that everyone in Singapore is overly fixated on the returns of properties. We tend to think they are safe and will forever continue to give returns. Rewind to the credit crisis in 2008 in America, this was exactly what they thought and why the market crashed there.
And before I end off, I want to introduce another article that I read in Business Times today, it was about a landlord who owns a condominium in the city which has splendid views and great location, she had to search for tenant for 2 months before finally slashing her rental by 25% to find one. Leaving a question for readers as to whether a bubble is growing or a burgeoning shortage of tenants given the introduction of a glut of new housing supply in Singapore.
Imagine now the scenario that the owner is leverage to the extent that the rental income is rolled over as mortgage payments, this scenario would leave the landlord in the situation where the mortgage payments are more than the rental and it can’t be repaid. The property might have to be sold or seized by the bank. And if this happened throughout Singapore, we would be living the credit crisis faced by the US.
I hope you guys read these articles to give yourselves an age target to achieve financial freedom and realize the growing sentiments that tenants might be harder to come by and that the property market in Singapore is not just a bed of roses.
Original photo by Benjamin Lim. Used with permission.
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