How to invest in property

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Her World


Saturday, Sep 13, 2014

You want to buy a home that you can sell at a profit years from now, or pass on to your kids as an asset. Here's how to pick a winner.

Suss Out The Neighbourhood

If you've got your eye on an area, research what developments will be taking place over the next 30 years. Does the government plan to build a new MRT line nearby? Will there be new malls and schools coming up? These things could add value to the property.

If you'll only be able to invest in a few years' time, investigate up-and-coming districts.

14 common mistakes home buyers make
  • Your agent can make or break a deal on your behalf. If you really want a certain property, make sure your agent is on-the-ball and one step ahead of the competition. Agents who are slow to respond could cost you your dream home.
  • Shopping for homes without knowing how much money you can loan is a definite mistake. You might end up shopping for houses you can't actually afford and get your hopes thoroughly dashed if the loan doesn't come through.
  • If you got approved for a loan, don't rush into buying a home that fits the budget exactly. Be conservative and leave room for extra expenses like taxes, renovations and other such needs.
  • When buying a home, it is sometimes useful to hear the thoughts of others to decide if your investment is worth it. However, pick and choose which advice to take. For example, if the person giving you advise has never bought a private home before, don't take their advise word-for-word when you are considering a private purchase.
  • The property could be really hot on the market and you know many people are competing for it. Nevertheless, do not make an offer unless you are very sure of what you are getting in to. Make a thorough inspection, or a few inspections if possible. <br><br> Never be hasty when giving hundreds of thousands of dollars away.
  • Asking for too many viewings could scare the sellers and ruin your chances of buying the home. People who put up their homes for sale are often apprehensive about selling. Asking for one too many viewings could convince them that selling was a bad idea in the first place.
  • If you start to fall in love with a property, pull yourself back to reality. Getting too attached can only mean disappointment if your bid for the house falls through.
  • Before you buy, be aware of how many options you have with the property and renovating it. Don't set your hopes up too high.
  • You should experience the space to determine functionality of the space. This way you can cut down on unnecessary renovations and focus on areas which need it more.
  • Since location determines price, consider size versus dollar value per sq ft. If you have a budget, you need to sacrifice one for the other.
  • Give and take with your expectations. Be ready to moderate your preferences according to what you can get on the market.
  • No house is perfect. Consider lifestyle concessions you have to make for the house you are going to buy. Also take into account the mortgage options with the house you are considering to buy
  • Before committing to a house, you must be sure that you can afford it with your current lifestyle. If not, are you willing to change your lifestyle for the house?
  • Just because you really want it doesn't mean you should take the plunge as soon as the option becomes available. Take a step back and re-evaluate the deal, and ensure you are facing favourable interest rates and housing prices before signing that cheque.

For instance, with the government planning to decentralise the CBD, we'll see more offices and industrial hubs shift to places like Jurong East, Woodlands and Seletar Aerospace Park.

This could make these areas more popular among homeowners. Get more information from the Draft Master Plan 2013 and the Land Transport Master Plan 2013 - these can be found on the Urban Redevelopment Authority (URA) and the Land Transport Authority websites respectively.

10 tips for property virgins

Click on thumbnail to view. Story continues after photos. ST, TNP

  • -Determine your reno space limit and how many options you have with the property <p>-Maximise buyer potential with your renovations
  • -Experience the space to determine functionality of the space. <p>-Determine specific renovation areas and how much work you would like to do
  • -Build equity or property value <p>-Think about long-term longevity of the way your house looks and if it will look dated in 5 years' time.
  • - Location determines price <p>-Consider size versus dollar value per sq ft. If you have a budget, you need to sacrifice one for the other.
  • - Seek price reduction <p>-Ask for completion or repairs of unfinished work <p>-The ball should be in your court
  • <p>-Give and take with your expectations <p>-Be ready to moderate your preferences according to what you can get on the market
  • -Money does not buy happiness, no matter how much you have <p>-Consider lifestyle concessions you have to make for the house you are going to buy. Do not expect a perfect house. <p>-Consider mortgage options with the house you are considering to buy
  • -Work out your monthly expenses <p>-Be honest with the amount of money you are going to spend a month, and what you are really willing to give up.
  • - Avoid remorse the over purchase <p>-Adopt a 'did your best' approach when it comes to the amount you agreed to pay
  • -Take a step back and re-evaluate the deal <p>-Ensure favourable interest rates and housing prices <p>-Aim to match every dollar you spend with any increase in interest rates or prices

Spot the trends

If you must hedge your bets, go for smaller properties - think a two- or three-room HDB flat, or a private property under 500 sq ft.

These might be easier to sell or rent out in the future. That's because experts predict that, in the next 20 to 30 years, buying trends will lean towards smaller, more affordable homes.

The per-square-foot price of properties has surged over the last three years and is predicted to increase even more, making affordability an even bigger concern in the future.

Compare prices in the area

Before buying your home, find out the transacted prices of nearby properties. You can ask a real estate agent, or look up the information on the URA and the Housing & Development Board websites (under their E-services section).

If the value of these properties has been going up, it means the value of yours may likely rise in the near future.

4 tips on paying for your first home
  • Financial advisers say you should plan your housing budget carefully before choosing your home and not the other way around. <br> There are many tools available out there which first-time home buyers can use to plan their purchases.
  • For example, Mrs Nyang-Ngiam said, "they can make use of Our First Home Calculator available on the CPF website to assess the type of housing they can afford based on their income and ability to service the loan".
  • The experts also urge would-be buyers to consider the full range of costs and monthly bills prior to purchase. <br> "Once you own the property, you will also incur other regular costs like utility bills, conservancy fees and management fees if your property is a condominium with facilities like a swimming pool, gym and tennis court," said Mr Vasu Menon, vice-president of wealth management in Singapore at OCBC Bank.
  • Saving for the down payment could take several years for most people, given the steep rises in property prices in recent years.
  • Property down payments for first-timers could range between 10 per cent and 20 per cent of the purchase price, depending on whether you buy an HDB flat or a private property and whether you finance this using an HDB loan or a bank loan. "Save at least 10 per cent of your income each month and do this before you even start spending," said OCBC's Mr Menon. <br> He added that home buyers will need to build up a pool of funds through savings and investments.
  • One common question is whether to get an HDB loan or to borrow from the bank. They have their pros and cons. <br> For instance, a bank loan requires a cash down payment of at least 5 per cent while an HDB loan allows full financing of the down payment using just CPF funds.
  • HDB loans tend to offer better interest rate stability, as the rate is pegged at 0.1 percentage point above the prevailing CPF interest rate. Thus, they provide relatively more stability than even a fixed-rate mortgage whose rate is fixed for only a certain number of years. <br> But HDB loans also come with certain eligibility conditions.
  • Home buyers should also evaluate the impact of regulations on their financing options and costs, say the bankers. <br> Some may still be unaware of - or do not understand - the total debt servicing ratio (TDSR) framework for property loans that was introduced last year, noted UOB's Ms Chia. <br> The TDSR caps a borrower's monthly total debt repayments at 60 per cent of his gross monthly income.
  • A key financial consideration at this juncture is the outlook for interest rates, say the experts. <br> "While rates are low for now, remember that they may rise in the coming years," said OCBC's Mr Menon. "When rates do increase, your monthly instalments will rise, and you should assess if this will pose a burden before deciding on the amount of loan you plan to take and the package you wish to sign up for."
  • Home buyers should also set aside sufficient funds to meet rising interest rates and any unforeseen circumstances. <br><br> UOB's Ms Chia pointed out that for every one percentage point rise in the interest rate, the monthly instalment will rise by about $250 for a $500,000 loan stretched over 30 years.
  • To ensure financial liquidity, it is also prudent for home buyers to maintain 18 to 24 months of monthly instalments in their bank accounts, she added.
The DIY resale flat buyer's checklist

Click on thumbnail to view. Story continues after photos. If you’re planning to DIY to save on paying the agent’s fee – usually 1 per cent of the purchase price – here’s a handy list of questions to ask the seller or his agent.

  • 1) What’s the flat’s valuation? What is the Cash-Over- Valuation amount?
  • 2) How old is the flat? How old is the air-con system?
  • 3) When was it last renovated? When was the electrical wiring last changed?
  • 4) Has the flat been upgraded under the HDB’s Home Improvement Programme yet? (If not, be prepared to buy for upgrading costs in future.)
  • 5) What’s the highest offer so far?
  • 6) How long has the flat been on the market?
  • 7) Why are the sellers moving? When do they need to move out?
  • Try to find out if the seller has already collected the keys to another resale HDB flat, or a new HDB flat or Executive Condominium. This means he has to sell his current flat within six months so hopefully, he might let it go at a lower price!

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