Investing in property could be complex and complicating because every investor has different styles, concepts and rules to reach their goals. If you know what you are doing, you can be rich from investing in Singapore’s property market through investing in Bukit Timah’s landed house or Paya Lebar’s new condominium. With these few golden rules, you’ll be able to go far and prosper in the property investment sector.
Your finances’ health and goals
To invest in property, you have to make sure that you have sufficient capital to support your investment. Besides, you will need to buffer at least 10% to 15% for hidden costs like buyer’s stamp duty, legal fees, maintenance fees and so on. Speak to many bankers (not just one or two) to understand better the loan package that you’re most comfortable with. This will help you set a realistic monthly budget and overall budget when committing to your property.
At the same time, have a clear strategy of your financial goal, technically. Ask yourself if you intend to buy your property in high cash flow and replace or supplement your current income. Or do you invest in properties for your retirement funds? Are your investments for long term capital growth or short capital gains? Most successful property investors started out with a definitive and clear goals to help them through during the journey.
Your investment strategy and level of risk
There are many kinds of investment strategies which you can follow:
- Purchasing property at a discount
This strategy often involves the property’s price to be sold below the market price or valuation which can be usually found in auction. The amount the bank and lenders see the property’s value is called valuation. If the purchased property is below valuation, immediately, you may create the equity – the difference between the current market value of the property and amount owning to the mortgage.
- Positive cash flow
Positive cash flow investment is different with negative gearing, when the income returns do not offset holding costs, the investors will use the tax treatment of loses to their advantages. The advantages of having positive cash flow strategies including having access to a monthly income steam, positive cash flow properties can increase your serviceability and can make you more attractive to your lenders, with positive cash flow you can balance your portfolio as the extra cash can be used to pay shortfall that may be associated with holding properties with high potential of capital growth.
Your acceptance of risk usually depends on your current financial situation and time of life. The principles of working out level of comfort with property investment risk are the same no matter what type of investment you’re considering. Your level of comfort with investment risks consider your level of income, the needs of your dependents and current debt repayments that need to be met. Start simple, don’t over-borrow or over commit if capital growth stalls for a couple of years. Start safe and manage your level of risk with as much accurate research as you are able to do, combined with solid financial backing.
Comparing property pricing
Property pricing is sensitive in Singapore due to the high demand and supply in Singapore. Understand the basic surrounding pricing of your chosen property around the area, for example, the average psf (per square foot) which you’re able to gauge your average rental yield or return on the cost of the home. This is important because the tenant’s contribution constitutes the majority of your investment returns with the other being the sale of the residence at a higher value.
Before deciding on your condo investment in Paya Lebar, cross-check property’s prices surrounding area like what’s the last transacted price. A good way to know if you’ve gotten the deal is when your property price is lower than neighbors, that means you’re taking a lesser risk and higher potential to make more profit.
Location, location, location
This is most important tips because your location will determine how high is your capital gain but it actually varies depending on your property types. Primary form of housing in Singapore, mostly consists of HDB apartments – subsidized by the government for the Singaporeans. In this case, Bukit Panjang has the most expensive property sales. Meanwhile, for condominiums, it is known that Orchard area is one of the most expensive districts. Every part of Singapore is strategic but it is a matter of how fast the capital gains grow. For example, if the condominium has public transportation nearby? Is your property within easy reach of amenities and public transport? Are there any office areas nearby?
If you’re planning to rent out, you should take the distance between your own property and the property into consideration. To be able to handle your property maintenance, you will need to stay nearby your property. However, if you do not have the time to manage your properties, consider hiring a property manager to help you manage your portfolio.