Let me ask you, is today's hottest trend in Singapore Real Estate still the "Sell One, Buy Two" strategy? With current market conditions into the future, is this still applicable?
Let's dive in and understand more about this now.
What is this strategy about?
It basically encourages couples who own a property, be it a HDB or Private Property, to sell their current property and use the profit with your capital as down payment to buy two properties.
Sounds simple? Actually, it’s not. Because if you are doing it wrongly, you will end up with no property even after selling.
I kid you not, we have come across families who were sold such a strategy and end up unable to buy the next property and the person who helped them to sell cannot be contacted.
That is why we do videos like this to educate homeowners like you, with families like yours to bridge the knowledge gap through education. Be an informed homeowner before making any property decision.
It seems like a handsome deal if you consider the sure profit from the continuous growth of this plan right? But is it worth the risk?
Perhaps your grandparents have sat you down for a story about how their hard work in the past paid off: they raised their kids well, finished paying for their home, and are now enjoying their retirement.
But as part of a generation that knows how to work smarter by investing, you might be asking, why not earn some more?
Let's say your grandfather has acquired a home in Tiong Bahru and has been living there for 30 years. He's just about finished paying off the mortgage and is contemplating selling it and might earn a profit at about $500,000. Not bad, right?
But after a successful sale, what should he do next? Is he going back to renting? Purchase a brand new flat? I wouldn't want to spend my retirement like that if that was me.
What would be ideal for me is to have two properties, live in one, and sell the other at a sizable profit. That's how working smart with my money is.
Let's consider the Sell One, Buy Two scheme. What can you get from it?
1. Another source of income.
By securing two properties, you could usher in another steady income stream by renting out, option of reselling it at a profit, and then living in the second one.
2. Avoiding the 12% ABSD and higher down payment.
Say you intend to keep your current property because its your 1st home you purchase when you are married, so you are reluctant to sell it. Yet you still want to have the dream of another property for an additional source of income. Right?
Let's look at the numbers comparison now.
Option 1
If you intend to keep your existing property and buy the next. You are entitled to 45% loan only as you still have an existing outstanding loan.
You still have to prepare the following:
- Downpayment of 55%
- ABSD of 17%
So if you are intending to purchase a $1m property for investment by keeping your current 1 for your own stay. You must be prepared to have a min of $760K min upfront before even thinking about owning the 2nd property.
And we have yet to calculate the stamp duty and legal fee into this total sum yet.
Who agrees this is a huge sum of money?
If your current property is under two names, then the two properties you can purchase will still technically be your "first property."
Option 2
You don't need to pay the 12% ABSD and still be able to secure the full 75% home loan for each property. Instead of needing to pay 45% downpayment, you only need to come out with 25% instead.
Because this is considered as your 1st property, you can get a full 75% loan.
You still have to prepare the following
-Downpayment of 25%
-Stamp Duty of 4%
Which is doable? $290K VS $760K?
3. Property Worth Potential.
We know that investing in real estate is one of the most secure and profitable investments because its value continues to grow. We have heard so many cases where a property's value rose to more than double its original price in just three years!
Everything is not so rosy and there are always Risks too. Let's study them more.
In any investment, there are risks to consider. That is why (MAS) urges people to think twice and review their capabilities thoroughly before diving in. Here are some of them:
1. You need sufficient income.
It's better to assume that both of you will need to work and grow your income as a married couple.
We know that paying off one loan for years can be a substantial cut from the budget for an average citizen.
There have been instances where some suffer from debt or end up selling their properties for less because they can't cope with the finances.
2. The times are uncertain.
If there's one thing that the pandemic has taught us, it's that nothing is certain.
In the past two years alone, many of us have either experienced it ourselves or heard of a family member or friends who went through retrenchment or sudden unemployment.
Add to that the ever-changing dynamics of the economy. It's essential to think about your level of resiliency to bounce back in case the worst comes.
So there you have it!
The sell one, buy two scheme surely has its attractive wins, but every investment has a risk.
Therefore, it's best to ensure you have enough savings for emergencies and have an ideal cash flow for your household before diving headfirst into the scheme.
When evaluated right, and if you implement a good strategy, you will reap so much from what you sow.
Which is why here in Singapore Real Estate Insider, we always educate homeowners 1st with research, data and numbers to ensure financially, we have the capability to fund the property regardless of any market conditions.
Property is a long term asset we cannot take lightly in the calculations.
So before you jump into this strategy, speak to us 1st. We love to discuss what's the best strategy for you and your family.
Click here for a complimentary 20-min consult with us.
