I came to Singapore for work in 2018 October. Rather than buying real estate, which I cannot afford anyway, I am collecting REITs in Singapore.
I personally invest in stocks, and I am making a second source of income other than my salary by collecting dividends.
I personally really like REITs (Real Estate Investment Trust). In Korea, products such as Lotte REITs and Shinhan Alpha REITs were listed in 2020, attracting investors’ attention.
The structure of REITs is explained in the diagram below.
In an era where bank deposit interest rates and bond interest rates do not deviate from 1-2% (which has drastically changed from when I wrote this article in 2020), Singapore REITs, which provide stable dividend payment up to 5-6%, can be an attractive investment.
Let’s do a simple calculation. I’m still not sure how expensive the monthly rent will be, but let’s say I spend about $2,000 a month. Then, roughly $24,000 a year goes out as a monthly rent.
How much REIT investment do you need to cover this? Assuming REITs dividend yield at 6% (Singapore REITs do not pay dividend tax), you can cover the monthly rent for a year if you have approximately $400,000 is in REITs.
So, what you need to do to cover your monthly rent is:
1) Reduce personal consumption for wants,
2) Save most of the company’s salary,
3) Create an income pipeline other than the company salary via side-hustle or passive income
4) Keep investing in REITs, with dividends reinvested
If the sum of investment money generates enough cash to cover the monthly rent, then the surplus cash generated after that can now be used to cover my other living expenses.
Once you’ve reached a point where your entire cost of living is covered by dividends or other pipeline cash flows, then your assets will grow exponentially with compounding effect as you no longer need to spend on personal expenses.
If you save most of your company’s salary by reducing your consumption, then are you not living a miserable life, some might ask.
I think it is much better to live sparingly when you are young and live your old age comfortably than to live YOLO (You Live Only Once) when you are young and be miserable in old age. You simply can’t have it all at the same time.
My know-how on Singapore REITs investment is available in this e-book.
I will explain more on benefits of Singapore REITs in my next article.
Korean article can be found here.
