Another convert to property! :)

[focus1974]

I remember he is always writing about equities and index.
but recently, he have started to research on the value of property investing for the Ordinary investors.

I have also came to the realisation that ordinary investors should not be actively involved in equities/bonds.

THey should just socked it up and just buy property for own stay and buy another investment property.

they will retire happily. Of course.. For me, the most important part of property is trying to time the buy.

http://investmentmoats.com/wealth-building-2/singapore-home-condo-landed-and-hdb-property-prices-grow-over-time/

 

[Majestic12]

1. Incomes drive asset prices - not the other way around. With incomes slowing and in certain sectors stagnating or even declining, sustainability becomes a notch harder.

2. For young couples getting their first house, property is not an asset but an expense, since you are unable to rent it out for yield. Having a mortgage further hamstrings the entrepreneurial spirit and potential of young working adults. Is it any wonder Singapore is solely lacking in entrepreneurs unless they come from a home with a silver spoon?

3. Liquidity is scarce and likely to continue declining.

4. Singapore has moved from developing to developed status. The last 30 years will not be like the next 30. This applies to all areas, even crowd favourites such as real estate.

5. Prices appreciate as interest rates decline. The reverse is equally applicable.

6. While the point can be made that the the monthly instalment payable to the bank is both P + I, P is being repaid in a low interest rate environment. See above for implication.

7. Technology is rapidly replacing human labour in numerous fields. With displacement, earned incomes decline and the ability to service loans decreases. Going back to point 1 - the link is there.

8. The opportunity cost in locking up a sizeable chunk of money into real estate versus other asset classes.

9. Like it or not, Singapore's real estate market is looking increasingly like those of developed nations. There is also nothing much the government can do to revive the growth of previous years - because it is a societal issue.

10. Rentiers do not add value to the economy. In certain circles they are perceived as leeches. It is vastly different from creating businesses or investing in ventures that create value. Too many people tried to be rentiers and thought that they could get something for nothing much.

---

As with all assets, there is no one 'best' class. Whenever the herd chases any one asset class overwhelmingly, yields decline to levels that don't justify existing prices - such as the current environment.

Commercial over residential real estate. I have always actively looked at the latter and have started on the former.

The real estate market here has to correct - hard - for it to continue climbing higher into the future.

Technology is displacing much of the old ways. It is natural for most, especially those who have made money in real estate, to want to maintain the status quo. The question is if it's realistic to have such an expectation for one's financial portfolio.

 

[crossfitter]

I remember he is always writing about equities and index.
but recently, he have started to research on the value of property investing for the Ordinary investors.

I have also came to the realisation that ordinary investors should not be actively involved in equities/bonds.

THey should just socked it up and just buy property for own stay and buy another investment property.

they will retire happily. Of course.. For me, the most important part of property is trying to time the buy.

http://investmentmoats.com/wealth-building-2/singapore-home-condo-landed-and-hdb-property-prices-grow-over-time/

Asset prices now are being supported by cheap money ie cheap loans, low interest rates for savings. It will continue to be supported until money becomes more expensive. Once interest rates increase and no one knows when that will happen, asset prices will fall and it will fall hard. Remember the times when interest rates are 5-6%? Current rental yields are possibly only 2-3% and thats assuming you can find a tenant in this depressed market.

Once interest rates increases beyond rental yield, property prices will surely drop and drop like a rock. Money cant get any cheaper esp in Singapore. Its not likely property prices will continue to increase given that there is a large number of vacant units and the fire sales prices you see in certain developments (eg Sentosa and Orchard developments).

Some friends who bought investment properties in 2008 and 2009 are sitting on capital gains but are all struggling to find tenants now. How long can one see their units sitting empty or late payments before deciding to sell at a lower price?

 

[Bedokian]

The initial capital outlay for properties is huge, and factoring in leverage, only those with the stronger holding power will prevail in this (anytime soon) rising interest rate environment. Physical properties IMO is suitable for people whose investment portfolios reach at least 7 figures.

 

[w1rbelw1nd]

Personally will never purchase a second property for investment purposes. Cash outlay is just too huge, and there is obscene interest rate risk and regulation risk (absd). Won't bother unless I have a networth of 8 figures... But thats just my preference.

Sent from OnePlus A0001 using GAGT

 

[Majestic12]

As with all things it is situational - surely if a district 9 condo goes at a 40% discount to valuation, you will pick it up.

Personally will never purchase a second property for investment purposes. Cash outlay is just too huge, and there is obscene interest rate risk and regulation risk (absd). Won't bother unless I have a networth of 8 figures... But thats just my preference.

Sent from OnePlus A0001 using GAGT

 

[Majestic12]

The metric to determine if real estate can sustain in the near term is the general business environment - declining incomes and weakening economies do not support asset prices. This has been proven time and time again throughout history - as human psychology and behaviour does not differ.

 

[Majestic12]

Why didn't these friends of yours decide to sell? There is a time to buy and a time to sell for all assets. Guess they bought into the whole idea of 'passive' income via real estate without having really looked at the entire picture.

Asset prices now are being supported by cheap money ie cheap loans, low interest rates for savings. It will continue to be supported until money becomes more expensive. Once interest rates increase and no one knows when that will happen, asset prices will fall and it will fall hard. Remember the times when interest rates are 5-6%? Current rental yields are possibly only 2-3% and thats assuming you can find a tenant in this depressed market.

Once interest rates increases beyond rental yield, property prices will surely drop and drop like a rock. Money cant get any cheaper esp in Singapore. Its not likely property prices will continue to increase given that there is a large number of vacant units and the fire sales prices you see in certain developments (eg Sentosa and Orchard developments).

Some friends who bought investment properties in 2008 and 2009 are sitting on capital gains but are all struggling to find tenants now. How long can one see their units sitting empty or late payments before deciding to sell at a lower price?

 

[OngHuatHuat]

Pending demand is building up in Singapore.
They just need a trigger point to start the fire, that's why they don't dare to pull off any cm.

 

[naro]

Personally will never purchase a second property for investment purposes. Cash outlay is just too huge, and there is obscene interest rate risk and regulation risk (absd). Won't bother unless I have a networth of 8 figures... But thats just my preference.

Sent from OnePlus A0001 using GAGT

never say never.

anyway, i personally think that considerations for investment property is different from own-stay.

Dont need to big, thats why those $1mil properties were selling like hot cakes.

 

[WindBoi]

I remember he is always writing about equities and index.
but recently, he have started to research on the value of property investing for the Ordinary investors.

I have also came to the realisation that ordinary investors should not be actively involved in equities/bonds.

THey should just socked it up and just buy property for own stay and buy another investment property.

they will retire happily. Of course.. For me, the most important part of property is trying to time the buy.

http://investmentmoats.com/wealth-building-2/singapore-home-condo-landed-and-hdb-property-prices-grow-over-time/

Hi, I present the data, doesn't mean its ground for action.

 

[OngHuatHuat]

The beauty of property investment is how you use rental to cover loan installment and get condo almost for free after initial capital outlay. Too bad this forum not many people doing it.

I remember he is always writing about equities and index.
but recently, he have started to research on the value of property investing for the Ordinary investors.

I have also came to the realisation that ordinary investors should not be actively involved in equities/bonds.

THey should just socked it up and just buy property for own stay and buy another investment property.

they will retire happily. Of course.. For me, the most important part of property is trying to time the buy.

http://investmentmoats.com/wealth-building-2/singapore-home-condo-landed-and-hdb-property-prices-grow-over-time/

 

[elnewbie]

You should also mention the flipside.

In a depressed market, you need to be able to cover the deficit if the rental income is insufficient.

The beauty of property investment is how you use rental to cover loan installment and get condo almost for free after initial capital outlay. Too bad this forum not many people doing it.

 

[OngHuatHuat]

If rental not enough then just take it as part of the capital repayment lor.

You are supposed to pay for that house what no matter what.

You should also mention the flipside.

In a depressed market, you need to be able to cover the deficit if the rental income is insufficient.

 

[WindBoi]

The beauty of property investment is how you use rental to cover loan installment and get condo almost for free after initial capital outlay. Too bad this forum not many people doing it.

From what i see the principal + interest payment and maintenance might not be covered by the rental and some have not factored in maintenance and vacancy costs (unless you tell me it will never be 1 or half a month vacant)

the growth is then purely leverage and capital appreciation, not rental

 

[WindBoi]

1. Incomes drive asset prices - not the other way around. With incomes slowing and in certain sectors stagnating or even declining, sustainability becomes a notch harder.

2. For young couples getting their first house, property is not an asset but an expense, since you are unable to rent it out for yield. Having a mortgage further hamstrings the entrepreneurial spirit and potential of young working adults. Is it any wonder Singapore is solely lacking in entrepreneurs unless they come from a home with a silver spoon?

3. Liquidity is scarce and likely to continue declining.

4. Singapore has moved from developing to developed status. The last 30 years will not be like the next 30. This applies to all areas, even crowd favourites such as real estate.

5. Prices appreciate as interest rates decline. The reverse is equally applicable.

6. While the point can be made that the the monthly instalment payable to the bank is both P + I, P is being repaid in a low interest rate environment. See above for implication.

7. Technology is rapidly replacing human labour in numerous fields. With displacement, earned incomes decline and the ability to service loans decreases. Going back to point 1 - the link is there.

8. The opportunity cost in locking up a sizeable chunk of money into real estate versus other asset classes.

9. Like it or not, Singapore's real estate market is looking increasingly like those of developed nations. There is also nothing much the government can do to revive the growth of previous years - because it is a societal issue.

10. Rentiers do not add value to the economy. In certain circles they are perceived as leeches. It is vastly different from creating businesses or investing in ventures that create value. Too many people tried to be rentiers and thought that they could get something for nothing much.

---

As with all assets, there is no one 'best' class. Whenever the herd chases any one asset class overwhelmingly, yields decline to levels that don't justify existing prices - such as the current environment.

Commercial over residential real estate. I have always actively looked at the latter and have started on the former.

The real estate market here has to correct - hard - for it to continue climbing higher into the future.

Technology is displacing much of the old ways. It is natural for most, especially those who have made money in real estate, to want to maintain the status quo. The question is if it's realistic to have such an expectation for one's financial portfolio.

i take a way that you expect technology to deflate and cause unstability in wages big.

could you list out why you look at commercial over residential?

 

[WindBoi]

One point taken is that the mortgage is covered by the rental but i just want to have a realistic view.

My friend was saying his friend is trying to rent out eight riversuite, a condo 5 mins walk from boon keng mrt which is 2 bedroom for $2800/mth.

From what i gather the current value is $1.15 mil.

So i worked out the figures

It seems the cash on cash cash flow is negative, which means that the owner will have to supplement on top of the rentals.

Or are a lot of the costs that i am considering, not realistic, like too high of an annual value, we should not consider the increase in our income tax, too high of a maintenance and condo fees.

i have not factor in any vacancy cost.

 

[SBC]

The beauty of property investment is how you use rental to cover loan installment and get condo almost for free after initial capital outlay. Too bad this forum not many people doing it.

You are lucky to have a 40-year loan period. This helped to reduce your monthly mortgage payment. Now, no such loans.
Looking at recent BTO, EC & entry level PC sizes, HDB & most developers are reducing their size to meet loan quantum.

Projects that are priced correctly are still clearing their stock fast. Consumers are always on a look up for good projects to vest their funds.

 

[SBC]

One point taken is that the mortgage is covered by the rental but i just want to have a realistic view.

My friend was saying his friend is trying to rent out eight riversuite, a condo 5 mins walk from boon keng mrt which is 2 bedroom for $2800/mth.

From what i gather the current value is $1.15 mil.

So i worked out the figures

It seems the cash on cash cash flow is negative, which means that the owner will have to supplement on top of the rentals.

Or are a lot of the costs that i am considering, not realistic, like too high of an annual value, we should not consider the increase in our income tax, too high of a maintenance and condo fees.

i have not factor in any vacancy cost.

Nice tabulation! Where you gathered it?
Rental yield for PC is going for < 3% and there are no takers. Rate is still going down.

Assuming loan at 2%, the 1% is not enough to over overheads like MCST charges, agent fee & income tax.

 

[WindBoi]

Nice tabulation! Where you gathered it?
Rental yield for PC is going for < 3% and there are no takers. Rate is still going down.

Assuming loan at 2%, the 1% is not enough to over overheads like MCST charges, agent fee & income tax.

the spreadsheet is a personal one but you guys can make a copy > https://docs.google.com/spreadsheets/d/1QPWsI861qtzZJPGVTHanLV3X47Pm0AOC1jexcj_f_n4/edit?usp=sharing

the interest is using 1.6%

i am not familiar with MCST, could you elaborate a bit what it entails?

i am taking 1 year rental so agent fee is half a month.

i think i made a mistake with regards to the increase in come tax. i have included tax deduction and taxable income.