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Saw these comments from a Fit To Post article on Yahoo, and thought I would post it here for comments.
Serial investors need no advice, but I would urge first time investors to consider problems of investing in properties with great care. There are now so many properties on the market that tenants are spoilt for choice. The rental returns will barely cover the interest payments on your mortgage.
Beware Void Periods between tenancies. This is the biggest headache and is very stressful when you are haemorrhaging funds when there are no tenants to help you pay your mortgage. With a low US Dollar, the days of finding rich American tenants are over.
Properties are a lot less liquid than people think. There are lawyer's fees for the purchase, lawyer's fees again for the mortgage (unless the bank absorbs this), stamp duties, agent's fees, and so on.
Very few people actually sell when the market is high. Most people end up selling when the market is low. You are going to need to have the experience of one or two properties, over one or two cycles, at least, to get the hang of things.
I know of more people who have lost their savings on investment properties than people who made bonuses from them. After subtracting interest payments and transaction costs, there is actually very little left for the investor without holding power.
Most of the happy stories are from people who buy property for their own use. Buying a roof over your head is one of the best investments there is. Warren Buffett and all other proven investment advisers consider this to be a very good investment. Until there is a divorce, and a forced sale. So you will have to factor in the long-term stability of your marriage, which most couples in love overlook. The statistics are not in favour of an enduring marriage, so you are generally better off buying on your own.
If you are buying for your own use, there are two rules:
A. The market is always unpredictable, and
B. There is never a "good" time to buy.
So you are buying according to your needs, the analogy is that COE prices will not significantly affect your decision if you really need a car.
The big factor in investment property is the impact of China-reans who are messing up property markets round the world. Before 1997, Honkies bought properties in Singapore en masse. When they realised that things were not so bad in Hong Kong after the Chinese took over from the British, they dumped Singapore properties en masse in 1999. Singaporeans who bought investment properties in feverish times were left holding the baby. Singaporeans who bought properties for their own occupation were barely hurt.
China-reans are buying into Singapore right now en masse; the reasons do not concern us here. When they realise that it is time to liquidate their properties en masse and pump their money back to their resurgent motherland, it will make the property crash of 1999 look like a small blip. The 4-room HDB re-sale flat used to be the best investment one can make as a Singaporean (you get the concessions of a 3 roomer which 5 room/EAs do not get). Not now.
If you have not bought, be mindful that a 35+ year old single person can buy any sized resale HDB apartment, including an EA, which has risen less in percentage terms than smaller HDB properties. Do not despise low-priced HDB in unpopular areas, as these have the highest upside potential in the medium run.
The best property investment one can make is actually to transfer spare CPF in the ordinary account to progressively pay off the HDB loan. You can do this by walking down to your town council office and pay up your outstanding mortgage. The town council can transact sums of as little as $1,000. If you borrowed from a bank, give 3 months notice and redeem in $10,000+ multiples. You will be surprised how much your interest payments drop and how fast your loan disappears. Do this quickly before the rules get changed.
Dump every cent in your Ordinary Account to pay off your HDB mortgage. Title deed in hand is a good feeling. Then additional funds in the Ordinary Account you accumulate later can then be used to buy an investment property.
If you need to depend on your CPF to help pay for an investment property mortgage instalments, investment property is probably not for you. Economic reasons are far too long to set out here. But the legal reason is that CPF makes your investment very illiquid. If CPF is not involved, you can very easily get a temporary loan or second mortgage from the bank very quickly.
So go. Get down to your Town Council tomorrow and transfer all your OA CPF balance to pay off your HDB loan. No notice period is required if you borrowed from HDB. Your interest from your OA is less than the mortgage interest you are paying for the HDB loan (1% higher, payable up front). And if you do not have any money in your OA, what are you doing reading property columns anyway.
Serial investors need no advice, but I would urge first time investors to consider problems of investing in properties with great care. There are now so many properties on the market that tenants are spoilt for choice. The rental returns will barely cover the interest payments on your mortgage.
Beware Void Periods between tenancies. This is the biggest headache and is very stressful when you are haemorrhaging funds when there are no tenants to help you pay your mortgage. With a low US Dollar, the days of finding rich American tenants are over.
Properties are a lot less liquid than people think. There are lawyer's fees for the purchase, lawyer's fees again for the mortgage (unless the bank absorbs this), stamp duties, agent's fees, and so on.
Very few people actually sell when the market is high. Most people end up selling when the market is low. You are going to need to have the experience of one or two properties, over one or two cycles, at least, to get the hang of things.
I know of more people who have lost their savings on investment properties than people who made bonuses from them. After subtracting interest payments and transaction costs, there is actually very little left for the investor without holding power.
Most of the happy stories are from people who buy property for their own use. Buying a roof over your head is one of the best investments there is. Warren Buffett and all other proven investment advisers consider this to be a very good investment. Until there is a divorce, and a forced sale. So you will have to factor in the long-term stability of your marriage, which most couples in love overlook. The statistics are not in favour of an enduring marriage, so you are generally better off buying on your own.
If you are buying for your own use, there are two rules:
A. The market is always unpredictable, and
B. There is never a "good" time to buy.
So you are buying according to your needs, the analogy is that COE prices will not significantly affect your decision if you really need a car.
The big factor in investment property is the impact of China-reans who are messing up property markets round the world. Before 1997, Honkies bought properties in Singapore en masse. When they realised that things were not so bad in Hong Kong after the Chinese took over from the British, they dumped Singapore properties en masse in 1999. Singaporeans who bought investment properties in feverish times were left holding the baby. Singaporeans who bought properties for their own occupation were barely hurt.
China-reans are buying into Singapore right now en masse; the reasons do not concern us here. When they realise that it is time to liquidate their properties en masse and pump their money back to their resurgent motherland, it will make the property crash of 1999 look like a small blip. The 4-room HDB re-sale flat used to be the best investment one can make as a Singaporean (you get the concessions of a 3 roomer which 5 room/EAs do not get). Not now.
If you have not bought, be mindful that a 35+ year old single person can buy any sized resale HDB apartment, including an EA, which has risen less in percentage terms than smaller HDB properties. Do not despise low-priced HDB in unpopular areas, as these have the highest upside potential in the medium run.
The best property investment one can make is actually to transfer spare CPF in the ordinary account to progressively pay off the HDB loan. You can do this by walking down to your town council office and pay up your outstanding mortgage. The town council can transact sums of as little as $1,000. If you borrowed from a bank, give 3 months notice and redeem in $10,000+ multiples. You will be surprised how much your interest payments drop and how fast your loan disappears. Do this quickly before the rules get changed.
Dump every cent in your Ordinary Account to pay off your HDB mortgage. Title deed in hand is a good feeling. Then additional funds in the Ordinary Account you accumulate later can then be used to buy an investment property.
If you need to depend on your CPF to help pay for an investment property mortgage instalments, investment property is probably not for you. Economic reasons are far too long to set out here. But the legal reason is that CPF makes your investment very illiquid. If CPF is not involved, you can very easily get a temporary loan or second mortgage from the bank very quickly.
So go. Get down to your Town Council tomorrow and transfer all your OA CPF balance to pay off your HDB loan. No notice period is required if you borrowed from HDB. Your interest from your OA is less than the mortgage interest you are paying for the HDB loan (1% higher, payable up front). And if you do not have any money in your OA, what are you doing reading property columns anyway.
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