In my opinion, for the working stiffs like me, going into properties investment must be done ultra-cautiously as it is a long term commitment (>=5yrs), illiquid and most of the profits are locked into the property itself via mortgage payments from rental.
Thus, based on the these, hunting and picking only the really worthwhile rental properties - worthwhile in terms of quantitative and qualitative, must be done carefully. At the very least, the cash-on-cash returns must be over and above what I can get from paper assets.
In addition to getting the asset, I think, prudently I should have enough cash for:
1. At least 20% down payment to ensure the expected monthly rental can more than cover the monthly mortgage and monthly/annual costs
2. Legal fees, fixing up, loan fees
3. 3 to 6 months mortgage in case of occupancy issues
Yeah yeah - I'm a pessimistic optimist ;P - plan and work towards the best, be prepared for the worst. Let's see how experiment Properties 101 goes in about 1 to 2 years time ;P.
Wednesday, December 9, 2009
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