Buying vs Renting

BuyiNG VS RENTING

There are several blogs revolving around this topic – whether buying or renting is better, which one is more advantageous than the other. Some try to intentionally weigh up buying and some try to weigh up renting based on bias. What is less commonly seen, is people talking about preference. Which one do you think would be better fit for you? Which one do you think suits your lifestyle? There are several factors when it comes to choosing between buying or renting, and they are all pertaining to your personal needs and your lifestyle. Circumstances make buying and renting different for several people around the world, and it is not advisable to follow somebody else’s steps in matters that can be so personal to someone. It is obvious that there are cost differences between both, but there are intangible differences that matter the most when it comes to buying or renting.
These are the kind of questions you should ask while thinking about buying over renting or vice versa:
  • What are your financial plans or family goals?
  • Are your plans reaching towards the direction of a long term or short term
  • Are your options more geared towards stability or flexibility?
  • How long are you planning to stay, or are you planning to stay at all?
These are some of the basic starting points to consider when it comes to thinking about whether to buy or rent a property/home. They merely provide you with a roadmap or guidance to help you to reach the ultimate decision.
Your roadmap to renting
If you’re someone who has more of a short term plan in terms of finances and lifestyle, then renting would be a preferred area of choice. There are several times where people are not secure within their jobs and think it would be more suitable to keep moving and remain flexible rather than stable, this is one of those situations where renting may be ideal, because you’re not responsible for anything related to the property, and you can simply pack up and leave based on your own needs.
A significant difference is that there is no hassle with regards to selling the property because the process itself takes a lot of time, and there is no promising that you would be able to sell the property for more value than you originally bought it for, based on market value. With renting, that area is ruled out completely. You might even be renting in order to build credit points for when you might want to own a house in the future, and it would be ideal to wait until you can either afford enough to buy a house on your own or build enough credit to finally attain a house on a mortgage basis. If you choose to rent for a long time, the rent will stick with you for a lengthy period and you might end up paying more when you rent than in comparison to when you buy – this is subject to the rent, how much it increases or decreases as the years go by, etc. Another thing to keep in mind would be the fact that once again, selling the property is not in your hands. If the landlord decides to sell the property to a different owner, you might not be able to live there and eventually have to move out, making stability quite difficult in a situation where a home is rented.
Your roadmap to buying
If you’re following a long term financial and lifestyle plan, it would make sense for you to buy instead of rent, because it would mean that you probably have plans to live in that particular place for a long time. If your family has established itself in one place, and work-wise, it is convenient for you to stay in that one place, it could secure your stability and be of great benefit to you. Lifestyle and personal plans are some of the most personal reasons why one might want to choose to buy over renting and these are the attributes that should first be taken into account before you actually start making the tangible calculations/comparisons between both options.
On the practical side, you would probably need a lot of money on the forefront in order to buy a home or property as well as the entire process of paperwork. If you don’t have the time, money or patience to handle such things, buying would most certainly not be ideal for you, and it would make more sense to wait it out rather than impulsively making the choice to buy at that point. Purchasing the property with the mere expectation of the value going up would be a gamble, speculation. You can’t speculate, nor can you predict the future.
Here is an example of how a couple were not able to manage mortgage payments due to the husband losing his job in between the process.
If you buy a house with the intention of living in it, you might lose money over the years aside from your mortgage payments in terms of the fact that you would be in charge of all the fixing and remodelling that might need to be done to it. Even though the expenses will drastically reduce after the mortgage has been paid off fully, you would have lost a lot more money and the cash flow would not be rolling in much of a smooth manner.
If you buy a house with the intention of not living in it and would rather put it up for rent so that you could earn rental income from tenants, this could benefit you even more in the long run, because rental income is more certain than price appreciation. The rental income would mean that you have a monthly income from the property purchased, and once you have paid off the mortgage, you will become the legitimate owner and be able to save much more at the end of it, in retrospect.
Since it takes such an intimidating sum to invest in a property, Smart Crowd is a niche that is able to balance ownership along with cash flow. It is now possible to own a share of a property with minimal capital along with earning rental income from it.
For a more detailed view about financing your real estate investments, check out our blog on “how you should finance your real estate investment“.

Investing in Real Estate is not for the 1% anymore!

With Smart Crowd, you can build a simple & affordable crowdfunding real estate investments portfolio starting from USD5,000

Mistakes You Could Be Making While Investing

MISTAKES YOU COULD BE MAKING WHILE INVESTING

Investments can be incredibly tricky if you haven’t been a long-time investor already, but that is absolutely okay since you are never alone. With that being said, reconsidering investments and consistently being aware of your mistakes along the way can save you from a lot of trouble. Although it would pay to learn from the worst, it could also cause a possible pause to your investments in the future with the possible fear of risk emerging within you. (Read more about how to get rid of your fear of investment here).
Here are some of the common investment mistakes that might have slipped off your mind. If any of these mistakes sound common to you, it might be time to reconsider and re-evaluate your investment decisions.
The unclarity of investment goals.
Investment goals are incredibly necessary. Your goals are the guidance maps in order to help you with what you want to achieve with these investments. If you don’t have a goal in mind, or if you’re just stuck at a stage where you only have a visualized goal, start with laying out a step by step plan with what it is that you want to achieve. Everything related to business, investments, and money going in and out of your account, are extremely personal aspects that are based on your own experiences.
Buying high and selling low
Buying low and selling high is the central principle that revolves around investing. The intention, however, shouldn’t be to sell as soon as the market value of the property goes up again. Understanding the highest value that your property can attain, takes a long time and would require you to hold a property for a longer time in order to make observations about the market in such a sense. You might end up having the thought of regret with the property that you sold when you could have got a much better value for it later on during the years. People usually have the mindset of maximizing returns on a short-term level and would immediately buy high because that would benefit them the most at that given point of time.
Not reviewing investments regularly
Leaving investments unreviewed for a long time can take a toll on your portfolio in terms of balance. One asset class or one type of investment could be piling up within your portfolio and it could increase the risk concentration, meaning that if that one asset loses value, you would be losing a lot of money. You would rather have your investments reviewed and analyzed based on your investment goals so that you can re-strategize your plan and redirect towards the ultimate goal that you had envisioned.
Being unaware of your property’s performance
It is rather astonishing that over a period of time, people tend to have no idea about how their investments are performing. They usually just understand what is going on within the surface of the investment, but never in relation to their goals or portfolios. Keeping the contextual background of your portfolio in your thoughts is important because you might not understand if the return or the value of that investment is good or not through the vision of the financial goals that you might have set for yourself.
Not diversifying enough
We keep mentioning diversification several times, over and over again. Come to think of it it is heavily connected to most of the points that have been mentioned so far. Diversification and risk concentration are the keywords that you may need to keep in mind with regards to your investment portfolio. Not diversifying enough might make you concentrate your risk into one single investment, and in the long term, this will make you lose more than you gain. Your gains and loses are all linked to your optimum investment plan and the diversification will strongly determine whether your plans are being accomplished or not — even how far they have been accomplished.
If you have made any of these mistakes, they can be easily recognized and rectified in terms of the future. However, if you are a new investor, it is necessary to keep such things in mind before stepping onto the investment ladder.
“Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.”
~ Fred Schwed Jr.

Diversify your investment portfolio!

With Smart Crowd, you can build a simple & affordable crowdfunding real estate investments portfolio starting from USD5,000

The Truth About Wealth Inequality

The truth about wealth inequality

According to inequality.org, the richest 1% own 45% of the world’s wealth, and that the global wealth inequality has either been rising or staying extremely high nearly everywhere around the world. Wealth inequality is a concept that is crucial to understand to analyze the gap between the percentiles. The major question is, how can the gap be bridged?
Are you aware of what is wrong with this picture?
If not, you’re probably someone whose investment portfolio looks like the bottom 50% of the percentile. This chart expresses the way in which assets are distributed within each wealth percentile. It can be observed that the top 1% has a much more spread out proportion of assets and as the wealth percentile goes lower, real estate becomes the asset that is the most prevailing.
A large sum of your earning might be contributed to one big investment, which may be a home. When the market value drops, you’re essentially losing a lot of money, because your investment and risk are both highly concentrated in just one asset, with a low amount of diversification involved.
Diversification of income and assets is vital for the sustainability of your wealth, even if you belong in the 1% of the wealth percentile, because you could lose the money just as you’ve accumulated all of it if you are not careful with what you do with that money. The wealthy don’t do anything special with their earnings, other than living frugally for some part of their lives as they save money in order to invest in assets. They don’t just invest in assets, but diversely spread out their investment in order to stay low on risk. If one investment doesn’t work too well, they could just turn to another since they are still earning regardless of happens with one investment.
If all of your money is tied up in one investment as seen in the bottom 50% percentile, you’re essentially going to lose a lot of money if that investment is not fulfilling for you. This concentrates the risk in just one property, and can cause a great prospect of halt in the preservation of capital or returns for the future. It can also be noticed that their consumer durables are more in number because of how those individuals might impulsively buy appliances that they think that they need, when in fact it might have been a want in the spur of the moment. It is common that the top 1% of wealthy people say no to most things merely because they believe that it is a want rather than a need and put it off for a while unless it’s absolutely necessary to be purchased, which is why the percentage of consumer durables is so low for them.
Portfolio diversification can be done in a few different ways – it can either be across different asset classes or diversification within an asset class — investments being spread across within the same asset class. It isn’t a surprise that real estate has become the fastest growing and largest class in the world, considering that people from emerging countries actively seek homes and saving vehicles. The income generating capacity of the asset makes it an advantageous investment for people who are looking to save either for a more flexible retirement or for the future generations. Even when it comes to the returns in the present, real estate doesn’t disappoint as it provides a steady flow of income if your real estate investment portfolio is well diversified over a period of time.
With attention to wealth inequality, Smart Crowd is building a smart solution towards potentially bridging the gap between the top 1% and the rest of the 99%. Investing is something that is essential for growth. Just like how we invest in ourselves to educate ourselves formally, it is also important to invest to educate ourselves financially and attaining experiences which can bring uplift us in the distant future. The reduced risk factor that comes from purchasing a share of property and being able to spread out the risk by investing in small fractions of other properties can be of immense benefit as a whole. Investing in the largest asset class in the world is slowly but surely becoming more accessible, but it is up to you if you want to take the steps towards the direction of growth.

Investing in Real Estate is not for the 1% anymore!

With Smart Crowd, you can build a simple & affordable crowdfunding real estate investments portfolio starting from USD5,000