Tibits I learnt from "Buy Bye Property"

 

So the 4th book, I'm reading to learn more about investing in Residential Properties in Singapore. You can find the previous post here


So off we go:

This book is loads better than his second book in my opinion.

On Buying Properties

• Start early, don't procrastinate
• Can stretch longer loan duration
• Less financial commitments
• Following advice of others and thinking one can not go wrong with property is a way to failure
• Do as much research as possible before buying
• Look for High Quality with High Returns (both are important, but hard to find)
• View property to inspect conditions
• When viewing old property, get a certified plumber and electrician to accompany you to ascertain plumbing and electrical conditions of the property and find out the repair/replacement costs, so you can factor them in
• If tempted to buy without viewing, think of what can go wrong and the regret you feel when you find out
• Price per Sq Ft ($psf) is a better unit valuation than total cost price
• Low cost price =/= good deal, just means more affordable for you
• However, the lower the $psf, the more potential price upside
• Know your creditworthiness and budget so you can seize opportunities when they appear
• Good deals get grabbed fast
• Can call the bank over the phone for a rough estimation
• Rental income is considered by banks if it comes from stamped tenancy agreements
• Consider the remaining lease of the property before buying
• Unlike AEI of REITs, spending a lot on renovations is not worthwhile
• sunk cost, so don't overspend
• Interior design fads changes. Do renovate to appeal to a broad amount of buyers
• Spend little on renovations and fixtures (i.e. lights and curtains). Fixtures are officially part of the property when sold
• Instead spend on a good set of furniture, which is probably cheaper but can make the property look stylish. You can bring the furniture to the next property when you exit it.
• Look up the URA Masterplan for future hotspots/catalysts
• If planning to invest with others (girlfriend, spouse, relatives, friends, etc), must have contingency plans such as a written agreement and even get a lawyer to legalise it
• Properties are illiquid, many people lose money due to lack of holding power

On Renting Properties

• Leasehold tend to give higher rental yield due to lower price
• But limited capital appreciation as potential buyers face financing difficulties as the lease remaining reduces
• Know your Rights as a Landlord
• Have every right to amend clauses in tenancy agreement contract
• Best to raise any objections or disagreements prior to signing the contract as all parties would be legally bound once the document is signed and stamped
• Net Rental Income must be Positive
• Factor all costs when working out rental amount (including maintenance fees and property tax)
• See renting properties as a business, ensure there is positive cashflow
• Calculate net property yield and compare Rate of Return with other investments

On Selling Properties

• Always clarify terms and conditions, including agent commissions before signing lease agreement
• Be aware of Rights of Buyers and Sellers
• There is no longer a fee recommendation for agents
• You have the right to ask agents to justify fees if you feel the quote is unreasonable or performance is not up to expectations. Do not simply accept the quote as market rate
• When negotiating commissions, it can be good to pay higher commissions so the agent can secure you the best deal, rather than bargain to the minimum fees. Agents provide a service and if correctly motivated, can aid you with insights and connections
• Do not be impatient and sell asap
• Impatience and wanting fast results will lead to losses
• Keep head level  
• After so much time, effort and money, don't shortchange yourself
• Look to hold for 5-10 years, with holding power, you can wait to sell on favourable terms
• Minimum expected return should be price paid for, plus inflation (how about depreciation?)
• If property is self funding, just hold on as long as you like as it provides a source of income even though there might not be much capital appreciation, especially if the mortgage is paid up
• If maintenance is an issue overseas, can commission a property management company to upkeep and oversee management of rental
• Even though it adds cost, but it would be worthwhile due to price appreciation of property (??? does it mean, negative cashflow?)
• For new investors, can accumulate more seed funds by selling for a profit and buying more properties
• Once accumulated sufficient cash to own and hold on to a few properties, take a long term approach and profit from rental income plus potential price appreciation
• Ultimately, property is only worth as much as how much buyer is willing to pay
• Linked to market sentiment and prices of similar properties in the vicinity
• When buyers see property on the market for quite awhile, they feel something is amiss and stay away
• Look at price trends and rental yield to give an indication how much are people willing to pay
• If too high a price, buyer may not be able to secure a loan from the bank because valuation differs too greatly from the bank
• Buyers impression is very important in determining a sale, so spruce the property up before selling. Clutter makes it seem smaller. Give a fresh coat of paint and routine maintenance to your property. Remove any odors by airing the unit or using air fresheners.

Remember:

• Focus on investing in your sphere of competence.
• Lack of patience and self discipline are killers

And that's it for the post.

Probably 2 more books to go.

Hope you enjoyed it.