What should I invest in if I already have two apartments?

Question from reader Lukelegend30:

My wife and I do not have children yet and are about to turn 30. Our combined monthly income is around VND60 million (US$2,400) after taxes. Our maximum monthly spending is about VND10-15 million. Currently, neither of us has any bank debts, and we have bought and are living in an apartment in HCMC valued at about VND10 billion in 2020. Additionally, we own another apartment with a title deed that can be rented out for VND15 million a month but I send all of this money back home to support my parents.

Since we are still quite young, I would like to ask experts for the best investment strategy under these conditions, especially as we are planning to have a child next year. Thank you, expert!

Advice from Ta Thanh Tung, Head of Real Estate, FIDT Investment Consulting and Asset Management Joint Stock Company:

First, I would like to congratulate you and your wife on owning relatively high-value properties at such a young age. Based on the information you provided, I have the following recommendations.

Your family's savings rate is between 66-75% of your income, which is commendable compared to many young Vietnamese families we have advised. With a child planned for next year, this rate might decrease due to additional expenses. However, maintaining a 50-60% savings rate is still excellent. If you are comfortable with this rate, consider maintaining it or cautiously increasing your expenses by at most 10% as a reward for your hard work.

Regarding the optimal use of your monthly surplus:

You should first create an emergency fund to ensure financial stability in case of unforeseen circumstances like illnesses or job disruptions. Since you have not mentioned life insurance and are planning a child, this fund should be able to cover six months of expenses. Once you have life insurance, you can reduce the fund to a minimum of three months of expenses.

Next, a life insurance policy is also essential for both of you, especially as you are expecting a new member to your family and your assets currently lack highly liquid options. Remember to prioritize emergency funds and life insurance before considering investments. Effective investments can be undermined by unforeseen risks, leading to financial difficulties if you do not have protective measures.

After establishing the emergency fund and insurance, invest the remaining monthly surplus in stocks. This should be a regular, monthly activity, especially when the market valuations are attractive. Your choice of stocks should align with your risk appetite. If you lack experience or time for research, consider hiring a financial advisor or investing in fund certificates, such as open-end funds or exchange-traded funds (ETF).

As for the apartment you currently live in, I am not sure if you have a special lifestyle, but it is relatively high-end. Owning such an apartment makes your asset portfolio very concentrated on real estate and almost exclusively consisting of the two apartments.

You might want to consider restructuring your portfolio by switching to a slightly less expensive apartment. The extra funds could be used to bolster your stock investments or to purchase one or two land plots, which will diversify and boost the liquidity of your asset portfolio.

Regarding the apartment that generates monthly income for your parents, FIDT’s data on the HCMC apartment market from 2015-2021 shows that the average yearly price growth for older apartments (over four years since completion) is 5-6%, which can go down to 3-4% for apartments over five years old.

Rental yields are typically 4-6% per year. Therefore, the combined return from price appreciation and rental income is around 7-12% but will diminish over time.

Hence, owning an apartment in the long term is less profitable than land in HCMC’s outskirts, which can yield an average annual return of 10-12%. By switching this apartment to land, you can use the monthly surplus to support your parents without relying on rental income.

This, however, requires a detailed financial plan, factoring in the stability and potential income growth from your primary jobs.

*The question and answer are translated into English by AI