This is it! You’re finally taking that all-important step to getting your own place. It’s one of the most exciting and satisfying experiences you can have in your adult life. You’ve worked your butts off, sacrificed a lot to save enough money, until you’re finally here in this very moment.
You have already pictured out the color of the walls, the type of bed you’ll buy, even where you’ll hang your flat screen TV.
Well, that’s all good, I guess.
Except that you need to pass what I’d like to call the Three-Way Test to know if you really are prepared to purchase your own property. And this test ties neatly with the REI Method that will help you achieve the Science of Real Estate.
Test # 1: Show Me The (Extra) Money
You’re already standing in line to buy the tickets, then suddenly, you reach in to find nothing but loose thread and old receipts in your jeans. You rush to the nearest ATM to get some cash but, alas, you’re too late and the movie has already started.
Now, buying a condo without having enough cash is like that, but instead of easily rushing to the ATM, you can’t really go to your bank for extra loan credits now, can you? So it’s imperative (and common sense!) to not just have investments or insurance, but to have actual cash available right away.
Buying a condo would mean a huge portion of your income will be earmarked for your home loan repayment. The REI Method teaches about the Identify phase, which allows buyers or sellers to have strong security by absorbing minimal risk in their real estate decision. So having enough cash or funds to purchase your property is simply not enough. It is best to have extra cash.
The median household income of the average Singaporean household is a little over $8,000 This will really tighten your cash flow, so make sure that you always have extra funds lying around for emergency cases and purposes.
Prior to jumping into buying a condo, having excess cash is not a luxury, nor is it a poor use of your funds just because it’s not invested somewhere. Rather, it’s your safety net when the going gets tough, especially if you’re not planning to rent out your purchased property. And having a safety net equals strong security, which can be achieved by applying the Identify phase of the REI Method.
Test #2: No-Sweat Down Payment
Okay.
You don’t need to be awash with cash when you buy a condo. But you must at least be able to pay for the down payment without having to take out a personal loan from your bank.
Say you’re planning to buy a condo for a $1,000,000, the newly tightened Loan-to-Value (LTV) limit will only allow you to borrow $750,000.
That means you have to be ready to cough up $250,000 in cash for your down payment.
I know there are tons of financial entities offering personal loans that you can use for all purposes, including the down payment for a flat or condo. But this would mean you are incurring two types of interest expense for just one property: one from your home loan for the principal balance, and one for the personal loan you used to pay for your down payment. This is just going to consume your capital gains since you’re incurring twice the interest expense.
In the Review phase of the REI Method, buyers are taught to go in-depth in their financials to make sure that they have enough funds to make such an important investment. The REI Method mainly assures clients that they can Grow, Accumulate and Preserve wealth for their families.
The above approach will lessen your profit margin in the future if you decide to resell your property to upgrade, which is — let’s face it — what most modern Singaporeans do. This may be hard to swallow, but if you can’t pay in cash for the down payment of your property, then the writing is on the wall. You just aren’t ready for your first property purchase yet.
Test #3 – Know the Property Market History
I don’t think I can even stress this part enough.
Like with everything else, it’s best to be fully educated about your choice of buying a condo in terms of timing and location.
Time is money, and both are key in real estate. This is certainly evident in the REI Method’s Review phase, where situation, timing and numbers are considered greatly.
Take hold of your down payment fund, emergency cash, and all your personal assets to wait for the best moment to jump on that property purchase.
Don’t get caught up in any superficial craze, fad or swing.
The only trend that’s ever going to matter is the property market’s peak or valley.
You wouldn’t want to even come close to a property for sale right at the very peak of a real estate market bubble.
Instead, opt to make investments right when the market is leveling out after a downturn or bubble burst.
This economic period will be teeming with sellers, real estate agents and property developers scrambling to sell properties at unusually lower prices to try to salvage the situation.
At the end of the day, it’s all business.
And if you make the wise moves and ensure yourself that you’ve prepared and will pass all three test areas, then be ready to shop for home decors soon.
Need to make an informed decision about buying a condo? Psh, who doesn’t?! 
Be sure to apply the Science of Real Estate. You may be one step closer to making this all-important decision in your life. Follow us on Facebook and YouTube to be updated on what’s happening in Singapore’s property market. With us, you’ll always get the insider information.
