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sodan

If You Have 1.6m To Spend, To Choose Condo Or Landed?

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retirement age already old, still have to fly across countries to live in different homes... too much of a hassle for me.

since there is a 1.6M in capital, i would have spread it across property and bonds (Stat board bonds) for income yield. Stable, recurring income would be the most important priority.

Having said that, it would be hard for me to imagine retirement age as it is still too far away. :P

if i retire at 40-45, its still ok..still have more than 10-20yr to do shop around since there's no need to worry about income. I guess having homes in different parts of the world is more of a hobby, visiting friends and relatives around the world. So having said all these, it's time to prepare for retirement activities!

 

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if i retire at 40-45, its still ok..still have more than 10-20yr to do shop around since there's no need to worry about income. I guess having homes in different parts of the world is more of a hobby, visiting friends and relatives around the world. So having said all these, it's time to prepare for retirement activities!

buy property overseas not that easy i think.

need to see if eligible to buy (and think about pr or citizenship status)

also look at taxes that you may have to bear like property-related tax, personal tax? (tax experts, anyone?)

and estate issues

plus managing the property when you are not occupying (whether rented out or idle)

and probably other issues too ....

Edited by random_username
 

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buy property overseas not that easy i think.

need to see if eligible to buy (and think about pr or citizenship status)

also look at taxes that you may have to bear like property-related tax, personal tax? (tax experts, anyone?)

and estate issues

plus managing the property when you are not occupying (whether rented out or idle)

and probably other issues too ....

normally pay cash is hassle free...yup have considered managing issues that's why only consider countries that my extended family is there already..NYC, CA, FL, London, Lincoln, BKK

only singapore has the weird PR and citizenship laws coz of space crunch

 

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normally pay cash is hassle free...yup have considered managing issues that's why only consider countries that my extended family is there already..NYC, CA, FL, London, Lincoln, BKK

only singapore has the weird PR and citizenship laws coz of space crunch

financing (needed or not) aside, what i was wondering was if there may be, among others, tax consequences (from buying and/or selling the property, worldwide tax, taxable presence due to where assets are sited, etc ,etc), estate issues (like what happens to the property after one's passing, things like estate duty, etc, etc). just my own simplistic mind wondering about these, that's all.

Edited by random_username
 

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Here is what I will do with $1.6m.

(PORTFOLIO 1)

1) $600,000 as 50% downpayment for a $1.2m apartment for own stay

2) $400,000 to buy $800,000 apartment for rental

3) $400,000 to buy $800,000 apartment for rental

Total property porfolio = $2.8m

Total loan for 3 property = $1.4m

Total mortgage per month = approx $4.8k per month (over 30 years)

Total rental income = approx $5.0K month

Net cash flow = +$200 per month

vs.

(PORTFOLIO 2)

1) $1.6m property fully paid

Total property portfolio = $1.6m

Total loan for property =$0

Total mortgage =$0

Total income =$0

Assuming if average property prices in Singapore grew by 5% per year, at the end of 10th year, portfolio 1 will be worth $4.2m; net gain of $1.6m [4.2-1.6m-1.0m outstanding loan], while portfolio 2 will be worth $2.4m;net gain of $0.8m.

Its always good to be prudent with your investment, however just make sure you dont become penny smart and pound foolish.

 

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This is how the subprime starts... When people buys with loan/credit, thinking that property will appreciate over time.

BUY within your mean.

dont confuse subprime mortgage with property bubble, they are very different,

 

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Here is what I will do with $1.6m.

(PORTFOLIO 1)

1) $600,000 as 50% downpayment for a $1.2m apartment for own stay

2) $400,000 to buy $800,000 apartment for rental

3) $400,000 to buy $800,000 apartment for rental

Total property porfolio = $2.8m

Total loan for 3 property = $1.4m

Total mortgage per month = approx $4.8k per month (over 30 years)

Total rental income = approx $5.0K month

Net cash flow = +$200 per month

vs.

(PORTFOLIO 2)

1) $1.6m property fully paid

Total property portfolio = $1.6m

Total loan for property =$0

Total mortgage =$0

Total income =$0

Assuming if average property prices in Singapore grew by 5% per year, at the end of 10th year, portfolio 1 will be worth $4.2m; net gain of $1.6m [4.2-1.6m-1.0m outstanding loan], while portfolio 2 will be worth $2.4m;net gain of $0.8m.

Its always good to be prudent with your investment, however just make sure you dont become penny smart and pound foolish.

Typical case of Capital Budgeting Analsysis, too bad, you've portraited a skewed analysis by failing to mention/compare important considerations:

1. ROI of porfolio 2, if owner sells existing and stay at say 1.2mil property or much cheaper home at 10th year..

2. Future value of money being taken into calculation, as CPI counters property appreciation.

*3. Bold assumptions owner in portfolio 1, could have properties rented out at prices stated and always letout.

*4. Bold assumption owner in portolio 1 having no cash flow problem in the 10 years period.

*5. Bond assumption interest rates of mortgage loans for 3 properties remains unchanged for period of 10 yrs.

Real cases have shown that 3,4 & 5 are very unpredictable, and, have killed many when there is a economy downturn.

Many fail to do Worst Case Analysis which lands them need renting a home to stay in the end. Need to look at "bright" side, but always standby an umbrella for unpredictable rain. How big is the umbrella? Reality is, it cannot be precisely calculated and another problem is in nowadays' corporate management theory, the umbrella is being considered as a "cost" and theory teaches theory believers to eliminate costs at all cost!.

Within heart, all know that umbrella is needed somehow - particularly true in Asians' philosophy.

Edited by bepgof
 

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dont confuse subprime mortgage with property bubble, they are very different,

I think you're the one get confused by the modern management greed. Let's look into correlation between subprime loans and property bubble.

1. How subprime mortgage loans start : The democrats did not think is was fair that only people who owned homes were people could afford to make their payments. So they made it possible to buy a home even if you could not afford it.

2. What's subprime loans?: A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders due their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.

3. What drive subprime to be popular: Subprime mortgages are loans intended for borrowers who are perceived to have high credit risk. Although these mortgages emerged on the financial landscape more than two decades ago, they did not begin to expand significantly until the mid-1990s. The expansion was fueled by innovations, including the development of credit scoring that made it easier for lenders to assess and price risks. The crisis are when the defaulters increase in number as a result these kind of mortgages becomes less in number by the banks.

4. What make real crisis: Lenders lending money to people who were not qualified to repay it. The lenders made their money up front in the form of commissions, so some made it a policy to sell as many bad mortgages as possible so they could reap their own profits without being concerned over long-term effects on the ecomony. In some cases, the lenders themselves falsified qualification documents to ensure the loans went through. Lack of government oversight was a part of the problem, but it mainly falls back to the corruption and greed of a few powerful individuals.

5. Too much money chasing too less goods: When lending is made easy, money floods the market, prices shoot up and money chase after these less goods(property), and lenders lend more and borrowers borrow more....cycle repeat itself and growing bigger & bigger, till "bang". Everything back to dust, flying, slowing setting down onto ground.

Edited by bepgof
 

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Typical case of Capital Budgeting Analsysis, too bad, you've portraited a skewed analysis by failing to mention/compare important considerations:

1. ROI of porfolio 2, if owner sells existing and stay at say 1.2mil property or much cheaper home at 10th year..

2. Future value of money being taken into calculation, as CPI counters property appreciation.

*3. Bold assumptions owner in portfolio 1, could have properties rented out at prices stated and always letout.

*4. Bold assumption owner in portolio 1 having no cash flow problem in the 10 years period.

*5. Bond assumption interest rates of mortgage loans for 3 properties remains unchanged for period of 10 yrs.

Real cases have shown that 3,4 & 5 are very unpredictable, and, have killed many when there is a economy downturn.

Many fail to do Worst Case Analysis which lands them need renting a home to stay in the end. Need to look at "bright" side, but always standby an umbrella for unpredictable rain. How big is the umbrella? Reality is, it cannot be precisely calculated and another problem is in nowadays' corporate management theory, the umbrella is being considered as a "cost" and theory teaches theory believers to eliminate costs at all cost!.

Within heart, all know that umbrella is needed somehow - particularly true in Asians' philosophy.

1. Dont understand that you talking about

2. CPI applies to both portfolio 1 and 2 and I think over time, portfolio 1 will fare better in hedging against inflation.

*3 - The reason why I am looking at $800,000 apartment instead of a $1.6m for rental is mainly because rental demand for low cost private apartment are more recession proof as compared to highend deveopment. e.g. in places like Jurong. Do you have reason to believe that Singapore rental market will come to a complete halt if we are in recession?

*4 - If the owner cant even afford to pay $1 to 2K of cash/CPF for mortgage, then I think he or she should not even think abot living in 1.6m property regardless if it is fully paid or mortgage. btw under portfolio 1, the owner is actually living for "FREE"

*5 - I am using 1.5% for first 3 years and 2% for 4 to 10th years as calculation., not a flat rate for 10 years. What interest rate would you recommend?

You might want to give some example of how a worst case situation will affect both the portfolio over 10 years.

If everybody is as pesstimistic about Singapore real estate and worry about taking mortgage, then I am sure most will be renting instead of buying. Then again, if you did choose to rent 10 years ago and avoided 1 or 2 property bubble along the way. will you be better off as an investor?

 

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I think you're the one get confused by the modern management greed. Let's look into correlation between subprime loans and property bubble.

1. How subprime mortgage loans start : The democrats did not think is was fair that only people who owned homes were people could afford to make their payments. So they made it possible to buy a home even if you could not afford it.

2. What's subprime loans?: A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders due their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.

3. What drive subprime to be popular: Subprime mortgages are loans intended for borrowers who are perceived to have high credit risk. Although these mortgages emerged on the financial landscape more than two decades ago, they did not begin to expand significantly until the mid-1990s. The expansion was fueled by innovations, including the development of credit scoring that made it easier for lenders to assess and price risks. The crisis are when the defaulters increase in number as a result these kind of mortgages becomes less in number by the banks.

4. What make real crisis: Lenders lending money to people who were not qualified to repay it. The lenders made their money up front in the form of commissions, so some made it a policy to sell as many bad mortgages as possible so they could reap their own profits without being concerned over long-term effects on the ecomony. In some cases, the lenders themselves falsified qualification documents to ensure the loans went through. Lack of government oversight was a part of the problem, but it mainly falls back to the corruption and greed of a few powerful individuals.

5. Too much money chasing too less goods: When lending is made easy, money floods the market, prices shoot up and money chase after these less goods(property), and lenders lend more and borrowers borrow more....cycle repeat itself and growing bigger & bigger, till "bang". Everything back to dust, flying, slowing setting down onto ground.

you have just explained the difference between american subprime mortgage crisis and property bubble cycle. The end result might be the same (as in there will be price correction), but the magnitute (e.g.. foreclosure, lender goes bellyup) and speed rate of recovery is very different. There is no subprime in Singapore, just property bubble.

 

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1. Dont understand that you talking about

2. CPI applies to both portfolio 1 and 2 and I think over time, portfolio 1 will fare better in hedging against inflation.

*3 - The reason why I am looking at $800,000 apartment instead of a $1.6m for rental is mainly because rental demand for low cost private apartment are more recession proof as compared to highend deveopment. e.g. in places like Jurong. Do you have reason to believe that Singapore rental market will come to a complete halt if we are in recession?

*4 - If the owner cant even afford to pay $1 to 2K of cash/CPF for mortgage, then I think he or she should not even think abot living in 1.6m property regardless if it is fully paid or mortgage. btw under portfolio 1, the owner is actually living for "FREE"

*5 - I am using 1.5% for first 3 years and 2% for 4 to 10th years as calculation., not a flat rate for 10 years. What interest rate would you recommend?

You might want to give some example of how a worst case situation will affect both the portfolio over 10 years.

If everybody is as pesstimistic about Singapore real estate and worry about taking mortgage, then I am sure most will be renting instead of buying. Then again, if you did choose to rent 10 years ago and avoided 1 or 2 property bubble along the way. will you be better off as an investor?

I'm not surprised that you don't, or, rather refuse to understand what I've written, otherwise, you would not have written those. Let me, make it plain:

- Each has his own appetites and different size of umbrella.

- Debt/income ratio is a good yardstick as to how much one should borrow.

- When income diminishes or completely loss, "umbrella" comes in. 6, 9, 12, 24 months? Each has different zones of comfort.

- Worst case is "forced sell" at loss and need to rent for a shelter, and actually camp at seaside is not a bad choice too.

Notes: To be precise, total monthly instalment for 30yr tenor of loan amount of $1.4 mil @1.5% is $4831.68 for the first 3 yr. $5155.67 monthly for the 4th to 6yr @2% interest.

Edited by bepgof
 

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You might want to give some example of how a worst case situation will affect both the portfolio over 10 years.

If everybody is as pesstimistic about Singapore real estate and worry about taking mortgage, then I am sure most will be renting instead of buying. Then again, if you did choose to rent 10 years ago and avoided 1 or 2 property bubble along the way. will you be better off as an investor?

worst case scenario: rental drop until not enough to cover mortgage or not rented out. Likewise, property prices drop, u are forced to sell since you cannot make repayments.

Thats the end. Finance theory would say increase leverage, increase returns. But they fail to cover the magnitude of loss when something drastic or unexpected happens. A very sudden and severe situation can potentially wipe out your leveraged properties. Chances of that may be low, but low does not equate impossible.

Buying a property = paying rental ahead.

Property is sold on lease, it never really belongs to you. People buy so that they can have a shelter when they are no longer working, i.e. no income.

True property investors already have a fully paid home to live, they do not dabble with their home. The half past six property investor are the ones shifting from home to home due to their "investmen activity"

 

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I'm not surprised that you don't, or, rather refuse to understand what I've written, otherwise, you would not have written those. Let me, make it plain:

- Each has his own appetites and different size of umbrella.

- Debt/income ratio is a good yardstick as to how much one should borrow.

- When income diminishes or completely loss, "umbrella" comes in. 6, 9, 12, 24 months? Each has different zones of comfort.

- Worst case is "forced sell" at loss and need to rent for a shelter, and actually camp at seaside is not a bad choice too.

Notes: To be precise, total monthly instalment for 30yr tenor of loan amount of $1.4 mil @1.5% is $4831.68 for the first 3 yr. $5155.67 monthly for the 4th to 6yr @2% interest.

1) Do you know what is TS risk appetities? Comparing to other investment, do you have reason to believe that investing in property (especially in Singapore) is considered high risk?

2) So what is your yardstick of how much one should borrow. Is portfolio 1 of taking 50% mortgage loan and 2 investment properties with rental income consider over stretched? How many of your friends and family member can actually afford to pay 50% down payment for property?

3) you might want to convert all your assets into gold and bury them in a 10m deep hole because in the worst case, Singapore economy will collapse S$ will have no value and we will become part Malaysia.

OK, enough of doomsday theory here. So lets assume you have $1.6m cash now. how would you invest this money?

 

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worst case scenario: rental drop until not enough to cover mortgage or not rented out. Likewise, property prices drop, u are forced to sell since you cannot make repayments.

Thats the end. Finance theory would say increase leverage, increase returns. But they fail to cover the magnitude of loss when something drastic or unexpected happens. A very sudden and severe situation can potentially wipe out your leveraged properties. Chances of that may be low, but low does not equate impossible.

Buying a property = paying rental ahead.

Property is sold on lease, it never really belongs to you. People buy so that they can have a shelter when they are no longer working, i.e. no income.

True property investors already have a fully paid home to live, they do not dabble with their home. The half past six property investor are the ones shifting from home to home due to their "investmen activity"

To be a property investor, you need to own at least 2 properties. One for own stay and other for investment purpose. If you are suggesting that TS dump the entire 1.6m into a fully paid property (which cost about $5 to 6k of rental return) then TS will always remain as a home owner, not property investor.

It is a no brainer that the interest rate will eventually goes up because it is near bottom, however the more difficult question is to know how long is the interest rate is going to be down before it move up? If its going to be low for the next 2 years, are you going to continue seat by the fence doing nothing except talking abot interst will go up? Does that make you a smart investor? I honest doubt so.

I am not sure what is your meaning of true property investors. As far as I know, those who make most money in property and in the corporate world are those who know how to leverage.

Edited by Husky
 

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1) Do you know what is TS risk appetities? Comparing to other investment, do you have reason to believe that investing in property (especially in Singapore) is considered high risk?

2) So what is your yardstick of how much one should borrow. Is portfolio 1 of taking 50% mortgage loan and 2 investment properties with rental income consider over stretched? How many of your friends and family member can actually afford to pay 50% down payment for property?

3) you might want to convert all your assets into gold and bury them in a 10m deep hole because in the worst case, Singapore economy will collapse S$ will have no value and we will become part Malaysia.

OK, enough of doomsday theory here. So lets assume you have $1.6m cash now. how would you invest this money?

1. Get this stright, I'm not against investing in various properties concurrently, as long as it is within one's "mean"= umbrella big enough & within comfort zones.

2. I'm staying at my 3rd home(Val=$518k), with $80k os loan(still within lock in). Have paid 20% + stamp duty for the 4th($1.03mil) which will be TOP in 2014.

3. 1st and 2nd were fully redeemed and sold.

4. To be exact, 1st full redemption and bought the 2nd. Moved in to 2nd and rented out 1st.

5. After 11 months, sold 1st and fully redeemed 2nd, and bought 3rd.

6. Sold 2nd and moved in to 3rd, then buy 4th.

7. I never engaged bridging loan nor reno loan.

8. My umbrella is 24 months, meaning if no income, the "umbrella" able to walk me throught the liabilities for 24 months, safely.

9. Property is not so liquid, I split my umbrella into stocks (~70%) & saving(~30%). The 30% is another "smaller umbrella" for rescue, in case big one get "stuck", and to break even.

10. If have 1.6mil, very likely will put 70% into property, 30% in somewhere more liquid (eg, stock, time deposits, saving) for rescue, in case income diminish or loss, or anything unexpected.

Edited by bepgof
 

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