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Anonymous

12d ago

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General Investing

Investing lump sum from property sale to get monthly passive income

My 53 year old mom is selling her HDB and will get about $330k of proceeds. Currently I'm fully supporting all her expenses by giving an allowance. After the sale, I would like to help her invest the money in such a way that she can get a monthly passive income, which she can use for her living expenses. We are ok to take moderate risk. Please suggest any ideas. Thank you!

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Ngooi Zhi Cheng

Edited 7d ago

Student Ambassador 2020/21 at Seedly

It's great that you want to help your mom make the most of the proceeds from the HDB sale to secure a monthly passive income for her living expenses. Here are some ideas to consider:

  1. Singapore Savings Bonds (SSBs): SSBs are considered a safe option. They offer a fixed interest rate and can be a good choice for a portion of the funds to provide stability.
  2. Dividend Stocks: Consider a diversified portfolio of dividend-paying stocks. Look for companies with a history of consistent dividends. These can provide a steady stream of income.
  3. Real Estate Investment Trusts (REITs): REITs are known for their regular dividend payouts. They invest in income-generating real estate properties, offering exposure to the real estate market.
  4. Fixed Deposits or Singapore Fixed Income Bonds: While they may not offer the highest returns, they are low-risk options that can provide monthly or quarterly interest payments.
  5. Annuities: Annuities can be purchased to provide a guaranteed income stream for a set period or for life. They can offer peace of mind for retirees.
  6. Robo-Advisors: Consider using a robo-advisor to create a diversified portfolio tailored to your risk tolerance. They can automate the investment process.
  7. Immediate Annuities: Immediate annuities provide regular payments for life. A portion of the proceeds could be used to purchase one.
  8. Consult a Financial Advisor: It's advisable to consult a financial advisor to create a customized investment plan that suits your mom's financial goals, risk tolerance, and time horizon.

Remember that while these options can provide monthly income, they also come with varying levels of risk. Diversification is key to managing risk, so consider spreading the funds across different asset classes. Additionally, your mom's age, financial goals, and overall financial situation should guide your investment decisions.

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I am currently a Financial Advisor as well, so feel free to reach out to me on IG (@ngooooied) if you have any further questions๏ผ

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Here are some tools you could use: Annuities, Keep Property and rent for rental income + capital appreciation, Dividend paying Funds with low risk profile.

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Larry Mah

Edited 7d ago

Property Agent at Propnex

DISCLAIMER: Property Agent here, so take everything with a pinch of salt and DYODD. Not investment advice, just educational purposes.

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Dear Anon,

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Congrats on your mom's positive sale proceeds! It's great that you want to help your mom make the most of her proceeds from selling her HDB and create a source of passive income for her. Among the $330k, do remember to portion away 6-12 months of emergency funds first to protect her downside. Here are 4 passive investment options to consider, bearing in mind her moderate risk tolerance from highest to lowest:

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  1. DIY Dividend Investing - Dividend instruments such as REITs or Unit Trusts (look out for non-divdend ones!).
  2. Annuities - if you have a favorable income, speak to your FA on premium financing. It is a good way to leverage and hold/invest more cash while increasing cashflow every month.
  3. Fixed Deposit / T-bills - Split your investment into portions so that you can get monthly income (read Chin Guo Qiang's explanation).
  4. CPF - As conterintuitive as it sounds, locking the money up into your mom's SA at 4% p.a. may not make sense now. But with lesser volatility and a solid 4% interest, your mom will enjoy better payouts via CPF LIFE when she hits 55 years old.

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Last but not least...

  • As a property agent, I would recommend upgrading her house to collect monthly rental. A large downpayment amount of $330k and a longer loan tenure would mean lesser mortgage per month.
  • With the rental market booming now, your tenant will be paying off the mortgage plus the extra cashflow can be contributed to your mom's expenses.
  • Don't forget that the mortgage paid off is a "forced savings system", which adds on to the cash portion of the sales proceed when you exit.
  • While you may think high sums of money is high risk, it is not true. Property prices do not move as fast as the stock market, but they move in percentages. If you cannot stomach the loss in numbers instead of percentage, always remember that you are collecting rental income instead of "flipping it" for a profit. Hence, the risk can be lowered with a right mindset and if you know what properties to pick.
  • This is passive income as the property agent will handle your tenant's needs while the landlord collects rent.
  • If you have a home yourself, you can work it out whether it is worth it to rent out your own house or her new house.
  • or, we can sit down and have a chat to understand your situation better, and look at whether purchasing a property and renting out for your mom is better or not with no obligations at 80 321 321.

ALL IN ALL...

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While moderate-risk investments can offer higher returns, they also come with a degree of volatility. Diversifying the portfolio and consulting a financial or property advisor are essential steps to ensure your mom's financial security and generate a reliable source of passive income for her retirement.

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All the best!

Larry Mah

T-Bills, REITs or FDs...

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