If you have been looking for property you would definitely have come across multiple ads over Facebook or google selling you so called “secrets of owning multiple properties” or showing that you can sell your current place and own 2 or multiple properties without stress . Are these just another form of Nigerian DHL scam or the TVB drama qualified kidnap telephonic scam that troll the hard earn money of naive grandma who are genuinely concern about their grandson. If you are curious and want to know how do these people do it without paying a single cent to learn their secrets, then read on as i will breakdown the concept of how to own multiple properties.
Why people do it?
It is almost every singaporean’s apiration or dream to own multiple properties . With the ever changing world affecting their job security and the ever increasing cost of retirement planning, who wouldn’t want to be in the shoe of RICH DAD (Rich dad poor dad by Robert Kiyosaki) leverging on multiple properties and making our money work hard for us even when we are asleep?
Save on taxes
Every singaporean knows property investing in singapore is a lucrative business and as prices have been soaring given how land is scare, good security and always popular with demands from foreign investors . Even at difficult times like this with covid at the time of writing, the property prices in the market is barely affected as singapore has proven to be a safe haven compare to many other countries. With the government locking down and trying to artificially depress property prices with multiple cooling measures, it gets even more difficult to own a 2nd property. Decoupling is a popular method if you already own a private property to free up one of your spouse name to purchase another property so that you can avoid ABSD (Additional buyer stamp duties). Unfortunately if you own a HDB, you can’t decouple as HDB has already closed up this loophole to prevent singaporean from hogging up HDB which was meant for providing affordable housing. Assuming if you decide to keep your HDB to buy another private property at $1m. You would have to pay an extra $120k in cash compare to your neighbour singaporean who do not.
Cpf lock in and not leverage
I have neutral feelings towards the CPF system. I appreciate the thoughts of government planning our retirement for us but im also not completely convinced by the rigidity of the system. With the ever changing rule and increasing withdrawal age, many has given up hope of living till the age to see you money again. Instead of doing nothing, one of the best way to leverage on your cpf is to use it for property purchase for better returns.
HDB a depreciating asset
From you are still unaware or shock to see the overall HDB prices has been decreasing , welcome to back to reality. Above is a 10 years overall price movement comparing general HDB and private development. On the contrary, its not surprising to see private home prices has been gradually increasing over the past 10 years. Some HDB estates in the outskirt area from punggol to sembawang has seen prices drop more drastically than the HDBs in the central area. With most of the central HDBs coming near 40 years old, it will also not be easy to sell given the high prices. For an example because of the difference in loan framework, for someone to afford a $800k HDB, he can also afford a new condo of up to $1.5m. Comparing choices between both, there is definitely more potential upside for the new launch compare to the older HDB which has more or less stagnant if one can afford.
Let me share with you a real example of a client i have help to sell their HDB and bought 2 condo.
Adam,45 & Jane,42 both owns a 4 room HDB flat in Boon Keng.
They sold it off at $700k and have a balance of $670k including total CPF available and cash proceed.
Based on Adam’s income of $10k/m, he is eligible to loan up to $1.3m and he bought a 3bedroom. Jane’s income is only $6k/m and eligible to loan up to $600k only and she bought a one bedroom $700k
Adam bought a 3 bedroom for own stay given his higher income.
Jane bought a 1bedroom for investment with a goal to sell upon TOP.
Both have balance cash savings of $130k after the 2 purchases.
Both still have yet to touch their personal savings of $100k
Why they decided to go for it?
The decision was simple, their exisiting 4room flat at boon keng is coming 30 years old. They are convince that the prices are unlikely to go any higher because these will be the selling price when the newer BTO nearby reaches MOP in 3 years. It will be difficult to sell any higher given afforability of most buyers as well.
Adam bought a 3 bedroom for his family and 2 kids. Being a new property, there is new potential upside for further growth given how private market is performing.
Jane decided to bought another 1 bedroom for investment. She was comfortable because she can leverage on the progressive payment framework which she only requires to pay a few hundred dollars every month before getting her keys on T.O.P day. Her goal was to sell in 3 years when she gets her keys so she does not even have to deal with the monthly mortgage. If she does decides to keep, assuming she rent out $1600, she can top up the balance of $860 with her CPF and not come out a single cent.
Who is it for ?
A condo or a HDB flat with healthy sales proceed
Regardless if your HDB flat just reaches MOP or a condo that has peaked and in stagnation, this is where bulk of the money will goes down for the hefty downpayment.
Both Husband and Wife have stable jobs and relatively good income
I would assume to even consider buying a property you must at least feel that you can afford it. Job security would be paramount.
Reserve cash or savings that could last at least for a year
I never believe in over leveraging and would never advise my clients to do so as well. I believe regardless if you are buying just 1 or 2 that you should always have a safety net for rainy days.
As simple as it sounds, i do like to emphasis this is concept is not for everyone. As lucrative as it can be, every investment has its risk. Every client i have met have different scenario and the sums are uniquely different. Feel free to drop me a message if you are really keen to explore to see whether this plan is for you and if you are able to sleep well at night after executing.
GET IN TOUCH FOR A FREE CONSULTATION FOR YOUR OWN HOME IF YOU HAVE NOT BEEN DONE ANY PLANNING BEFORE