Thursday 24 July 2014
Rental Property or Dividend Stocks?
If you only have a million $ and you are allowed only 2 choices:
1) To buy a rental property to collect rent.
2) To invest in equity to collect dividends.
Which one would you choose and why?
My esteemed reader temperament asked this question and I think this can be a fun exercise to see what others think.
I believe most people would say:
a) It depends...
b) How can buy either at current prices?
c) Can choose half/half?
d) And other "wu liao" (silly) questions...
To make this exercise more interesting and clearer, let's imagine a genie pops up with a gift of a million $ to you. The condition is you have to make a decision right here right now in 1 minute - either buy a rental property or invest in dividend stocks. Failing with, the genie disappears with the million $.
Clear enough?
OK, own time own target.
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In 1 min, I choose equity first. Too much paper work for property.
ReplyDeleteI would choose to buy a rental property with the million $ - fully paid.
ReplyDeleteReasons why:
1. Even if I can't rent it out, the empty house still has utility. Can bring women here out of prying eyes of mom. No mom! Not coming home tonight!
2. Desperate enough, I can decide how low the rent to charge. $500 per month is still money right? I am in control.
And greedy when market is good, I can also decide to increase the rent to whatever the market can take. Squeeze the tenant dry dry. I "song", why you care?
Dividend stocks I am dependent on the whims and "generosity" of others. I have no say on whether the dividends are increased, decreased, or cut altogether.
Sounds nice I "own"... But if I behave like a "dog", people throw me a bone I wag my tail... That's not exactly Master of the Universe feeling right?
3. Without a daily market price shooting in my face, I am less likely to succumb to itchy finger syndrome or heart palpitations.
Can have a life instead of watching or worrying about the market all the time...
Ok. I adopt ur view. Since I hv my equities, still can sell and buy ppty. Hee hee.
Deletepf,
DeleteYou have answered; the genie has already given you the make-believe million $.
The genie doesn't care what we choose or pass judgement on the reasons why - just as long we answer within 1 minute.
There are no right or wrong answers; just opinions ;)
Thinking abt what to do w money is such a chore...very tiring one leh...
DeleteThe more money u hv, the more choices, more thinking...every beginning of the year after getting bonus, increments, IRAS coming to knock at the door...those blessed with more, comes with expectations to multiply into more....decisions, decisions...on how to manage excesses...
Never had such issues when I was making $1,300 at my first job.
pf,
DeleteThat is why most people say they want more money; but their actions do the opposite by pushing money away.... Thinking is hard; making decision is tough. Definitely not passive ;)
Would you be happier if you take a pay cut now back to $1,300?
Or maybe it's not money per se that's the problem? Its only a tool, a means to and end.
That's where philosophy or spirituality comes in. If thinking is hard, try thinking less and giving up our egos to the big guy upstairs or trusting nature will provide.
Do animals plan and have goals?
Hahaha....yeah, not so good to think too much.
DeleteWith only one minute to consider, I would choose dividend equities although I think it is not cheap now. For properties, the supply gut has just started and there is higher downside risk
ReplyDeleteThanks YJ72 for participating!
Deletee) Keep $100K cash and the rest it depends whatever is higher rental or STI ETF yield?
ReplyDeleteCW,
DeleteThanks for chipping in with another example of those answers that will not be accepted by the genie ;)
You still got 59 seconds. No answer the genie will disappear with the million $ liao!
Facilitator SMOL oppa
Because the cost to me is $0 (free one mah!), no stress and therefore anything is ok as long as it can last a long long time lah.
ReplyDeleteIf I have a free million, I reckon that should be able to get a small but FH rental property with some leftover and that's what I would do. Like you had suggested, less stress over the market.
Good man Patty!
Deleteok stop dreaming!!!
ReplyDeletecoconut,
DeleteTeh!
Wrong answer.
The genie has gone off with the make believe million $.
Thank you for your participation.
No. There's no consolation prize.
Facilitator SMOL oppa
Singapore Pools is giving out $5m ToTo on 1 Aug, Friday.
ReplyDeleteNo need to answer any questions.
Got $1 to spare?
Thanks for the heads-up CW!
DeleteI go buy 2 x system 7 and $3 quick-pick :)
Hi SMOL
ReplyDeleteSince they are essentially free money, I would choose equity that gives me the dividend yield I want. Cashflow is important at this stage in my life though you do get to control your own destiny more with property though with lower yields.
Is the answer accepted by the genie? When is he or she coming to get me?
B,
DeleteThe genie doesn't care what we choose or pass judgement on the reasons why - just as long we answer within 1 minute.
There are no right or wrong answers; just opinions ;)
The genie has already given you the make-believe million $. It's in your mind now :)
I will buy a property! Mainly because I will have in a sense "more control" over my property asset, as compared to owning shares where the company's management makes the decisions instead.
ReplyDeleteWelcome new blogger and first time commenter The Introvert!
DeletePsst, you are the few who can think outside residential property when we say investment property. Shh...
You know I know can already :)
Free 1 mio.?
ReplyDelete1st thought dividend. Within 1 min, change to property.
Reasons:
1 mio and sell my HDB, I should be able to get a far fling freehold condo. I know a 3 bed rm free hold property selling at 1.3-1.5 mio.
Fulfilled my wife dream of owning condo and leaving something for our kids.
Since fully paid-up, my CPF will be ba ba... No worries when retirement come. No interest cost too.
Right cycle, can cash out. No money, cheap sell it. Since 1 mio is free, how to lose money.?
In the meantime, enjoy the facilities, the vanity of I arrived... With 1 C down.
sillyinvestor,
DeleteWe'll do anything for them don't we ;)
Coming home is great, Each time I'll say in Mandarin: "Ma, I've arrived!"
LOL!
I second you, SMOL!
ReplyDeleteThe main thing that puts me off property is leverage and concentration.
But if I get an extra $1 million from the sky, no leverage and so what if I am overweight on property. And not to mention all those benefits you had said.
15 HWW,
DeleteTeh!
"I second you, SMOL!" is not the correct answer the genie whispered in my ear.
I appreciate your support; sorry it cost you your imaginary million $ :(
You understand I understand ;)
High five!
LOL!
Equities for dividends, more flexibility for multiple partial redemption along the way.
ReplyDeleteY,
DeleteCool.
Hey! It's nice to have a fellow story-teller and someone who questions financial freedom in the house ;)
Is it me or there's quite a few financial bloggers with young baby girls? What a co-incidence!
Of course spending more time with baby girl is more fun and fulfilling to the soul than always focusing on "financial freedom" - what are we running away from?
It is like $100K Demo Account fromm your Forex or CFD brokers, we can formulate the best strategies and dream big. No?
ReplyDeleteCW, CW, CW...
DeleteHas life jaded you so much that you've lost the innocence of "youth"?
Or maybe if everyone have a million $ to blow, you don't feel "special" anymore?
The young are encouraged to dream BIG!
And old men should do less popping of the young's dreams ;)
Sorry. Your minute is up. The genie has left.
I will go for dividend paying equities for simple reason : property rental management is kind of hassle...;-)
ReplyDeleteRichard!
DeleteOur first difference of opinion!!!
Now that wasn't so hard, was it?
You're a jolly good fellow!
Equity for me.
ReplyDelete1. Property have to rent out - means actively managing it with marketing, repair/maintenance, rent collection, tax, etc.
2. Equity is almost passive - yes, have to keep an eye on the numbers and Mr. Market all the time but that's more fun/challenge ratio for me. Its like watching my wife's spending habit.
clw-I99,
DeleteAi yeoh!
Other men watch your wife's figure; you watch your wife's spending habits?
You have an exotic fetish...
Personally I prefer stilettos...
Ah stilleto - reminds me of killer lady look. Sexy and deadly LOL
DeleteActually spending habits is very entertaining - she can come up with very convincing arguments why its alright for that dress to cost $*** while my beer money only allowed $**. Sounds like executive bonus vs dividends, no? :p
ckw-I99,
DeleteYes, I'm into leather and lace that's sort of thing... Add in stilettos, it's my life for you!
OK. I a bit drama...
That's is why men have to earn more and women have to save more...
LOL!
My turn!
ReplyDeleteI'll do equities! Then once the genie hands over the money, I'll sell the equities and convert back to cash. Then I'll pay off my housing debts, I'll buy my wife a nice nice jade bracelet, and keep the money for 1 yr min just to 'normalise' my mindset. Thereafter I'll decide what to do with the money. It's not free money if it lands on my lap. It's MY money now, so I'll be just as careful as I am with my other money.
LP!
DeleteYou the naughty one!
You broke the code, the conundrum, the riddle, the shackles!!!
Game not over yet so I'll keep quiet what you just did. You shh.... OK?
This weekend I'll share my reflections from this fun exercise.
OK!
ReplyDeleteI learnt from all the arabic tales that when you deal with a djinn, you have to be careful because most likely they are not out to help you but to have their own fun out of your plight :)
I take the equities. I know nuts abt property!
ReplyDeleteBut hey, it is free money why need to think so much.
WolfT,
DeleteThe genie is most pleased with your answer.
1. Answered the question directly.
2. Shared the reasons why.
I will buy equity within a minute! Less hassle of rental /maintenance / tenant / agent problems. But I must be given time later to choose which equity to buy. If within one minute I need to decide which equity or which property, I will choose property, because with 1 mil, most likely I can only buy one property (easier to decide) but for stocks, I can buy many different one.
ReplyDeleteRolf Suey,
DeleteWelcome to my little watering hole (its bring your own drinks kind)!
Teh!
You have not answered the genie. The genie has left.
Sorry to do this on your first comment here.
You still coming back right?
Hi SMOL,
ReplyDeleteTeh.. 2nd chance please! Haha.. Ok I will buy FH property for rental and sell 20 years later. I want the Genie to come back but prefer the Genie to be like the channel 8 show 小精灵 (Fiona Xie). I will definitely be back for more discussion!
Thanks Rolf
Rolf,
DeleteI have the power to invoke the genie but no power to tell her what to do...
Wah! You never learn; still want to negotiate WHICH genie to "service" you? LOL!
But I have to compliment you on your taste of women. Fiona Xie has an "uplifting" effect on most men.
I completely understand :)
Eh! You "gall big cover sky"; you not afraid your little women read your comments?
But then, silly me! Not a single female reader participated in this exercise. Dare I say women not interested in rental properties and dividend stocks?
Your're safe! (I hope)
Haha.. Thanks for the compliments on my taste! I prefer not to be safe, and have more female readers or bloggers around! An environment with well mix of both sex is more psychologically creative and intriguing. Genie genie genie, rub rub rub... May more female readers participate in SMOL blog... LOL.
ReplyDeleteBtw... My gall not big enough to cover the sky!!! Hahaha.. My gall small like mouse! So funny...