If you have been following Singapore Real Estate Insider for a while now, you would know that we are all for investing in real property to grow, accumulate, and preserve wealth.
But as in every investment, there's always a risk involved.
With real estate, the catch-all concept is the lucrative property progression: its main idea is to leverage the capital growth and rental income from existing properties to finance the acquisition of new ones.
As the portfolio grows, investors can benefit from increased rental yields, potential tax advantages, and long-term capital appreciation.
This approach allows investors to build wealth and achieve financial goals through real estate.
Sounds easy enough to do, right? Well, yes, with proper guidance and careful research (that's what I'm here for!), and no, if you think it's just a get-rich-quick scheme.
5 Areas Where Undiscerning Upgraders Fail
As a real property consultant, I've witnessed some of the highest highs and, sadly, also the lows. And here are some of the areas undiscerning upgraders commonly fail.
Negative Sales
Gemma haphazardly sold her studio for $500,000, but the devil is in the details: she then had to refund $515,000 to her CPF account and was left high and dry with negative sales. What some property owners do not know is that after selling their property, they need to pay back all the CPF they used plus 2.5% interest.
While this may not always apply to everyone, it's. People can end up with a negative sale after discharging their loan and refunding their CPF.
The rule of thumb in selling is to gain at least 20% growth before selling. This gives you enough buffer to take care of unforeseen expenses that may impact your profit, so you may at least break even at the end of the day.
Price Gaps
By this price gap, I mean the widening price gap between HDB flats vs. condominiums and private condo units vs. executive condos.
As you know, private property prices are continuously growing, and if you intend to pay a portion of your private unit with the sales from your HDB flat, you may or may need more to finalize your upgrade.
"Sell One, Buy Two" with Separate Mortgages
Sell one buy two" in real property investment is a strategy where an investor sells an existing property to finance the purchase of two new properties. This approach is used to leverage the equity and capital gains from the sale of one property to acquire multiple properties, thereby expanding the investor's real estate portfolio.
For married couples with separate mortgages, seriously consider the impact if one of you will:
- Let go of your full-time job
- Start a more flexible work or lower income
- Experience retrenchment
If the above is the case, then you might be compelled to liquidate one of your assets which might pose the following:
- Closure of rental income
- Moving back to a smaller property
It's best to go for the "sell one, buy two" approach only when each of you is financially stable, especially now in the high-interest rate era and touchy economics.
Wrong Timing and Property Downturns
In 2008, the global financial crisis led to a decline in property prices in Singapore. This was due to a number of factors, including a decrease in demand for property from foreign investors, a rise in unemployment, and a tightening of lending by banks.
As a result, property prices fell by an average of 10% in 2008 and 2009.
We all know too well that the property market doesn't always go with our plans.
Over the years, we have seen resale property crashes and other property market downturns--and they are never under our control.
The secret, however, is to keep a holding power: the patience to hold on to your asset longer than you planned to in order to ride out the property market downturn and sell at a time when you can profit better.
Choosing the Wrong Property for Investment Progression
Upgrading for property progression is not as easy as some would think.
Some assets are tougher to sell. For example, a two-bedroom executive condo unit won't sell as fast as a four-bedroom one for families. This hiccup might slow down your upgrade and delay your property progression timeline.
Property progression requires careful research, financial planning, and a deep understanding of the real estate market.
It's essential to work with experienced real estate agents and financial advisors like me to make informed decisions and ensure that each property investment aligns with the investor's long-term objectives.
Property progression is not a get-rich-quick scheme but a steady and strategic approach to building wealth through real estate over time. With patience, persistence, and a well-executed plan, investors can unlock the full potential of property progression and achieve financial success.
Contact me if you want to ensure your 6-figure profit safely and securely! Book your complimentary call with me here.
