Arcachon
01-06-18, 13:22
So the 5th book, I'm reading to learn more about investing in Residential Properties in Singapore. You can find the previous post here
http://az-ra-el.blogspot.com/2018/05/tibits-i-learnt-from-peace-investing.html
So off we go:
This book is more about renting than flipping it seems (which makes more sense and is less speculative to me).
Focus is on high yielding properties
Properties must already TOP so you can rent immediately
Make it easier to rent by pricing rents slightly below market
Property must generate positive cashflow like a business
Focus on acquiring cash cow properties
If rental income cannot service debt, try to borrow less until rental income can service debt. This provides safety during down cycles.
Author's calculation of ROE is Net Rental Income over Equity Invested.
For Equity portion:
Deposit amount + Stamp Duty (include any renovation, furniture and repairs for conservative cost?)
For Costs
Property Tax
Mortgage Interest+installments
Comissions
Replacement/Repair costs
Property Maintenance Fees
Target ROE for a property, looking for at least 10%.
To find undervalued properties, estimate replacement costs
check URA website on land prices of the area
estimate cost to be about 400$psf (my guess that it is about 30%?, not sure as I am not familiar with developers)
Add both together to get replacement cost
Generally, developers look to make at least 20% profit from sale price
If an older condo $psf is below replacement cost, it is most likely undervalued. However, cross check your estimation with ROE.
Keep appreciating properties but you may switch to properties with higher ROE. By buying undervalued and selling overvalued, this allows investor to acquire more properties. From there create enough cash cow properties to retire.
Manage property portfolio by
Looking for properties that generate consistent rentals
Selling underperforming properties
Selling when property value is very expensive and rental returns don't make sense anymore
Properties to Avoid
Properties that cannot produce decent cashflow and perhaps hard to sell
Properties that are costly to maintain and hard to sell (due to the property being outside of affordability range of many buyers)
Properties with very short leases left
Properties that are remotely located with very few neighbours (suggest hard to rent, low rental demand and slower price appreciation)
Mickey Mouse properties in a town full of families unless you are in a town with many singles
Do take note if property is near a developing MRT or mall, do hold it as a future catalyst for price appreciation (estimated of at least 20% upside).
Do realise that unrealised gains are illusions of wealth as it could be killed by oversupply.
Recommend only 20% of income to service home loan, this ensures you have funds to invest
Look for properties with at least 5% gross rental yield
Gearing from 50-70% depending on how much cashflow required
And that's all for this post.
Hope you enjoyed it.
http://az-ra-el.blogspot.com/2018/05/tibits-i-learnt-from-peace-investing.html
So off we go:
This book is more about renting than flipping it seems (which makes more sense and is less speculative to me).
Focus is on high yielding properties
Properties must already TOP so you can rent immediately
Make it easier to rent by pricing rents slightly below market
Property must generate positive cashflow like a business
Focus on acquiring cash cow properties
If rental income cannot service debt, try to borrow less until rental income can service debt. This provides safety during down cycles.
Author's calculation of ROE is Net Rental Income over Equity Invested.
For Equity portion:
Deposit amount + Stamp Duty (include any renovation, furniture and repairs for conservative cost?)
For Costs
Property Tax
Mortgage Interest+installments
Comissions
Replacement/Repair costs
Property Maintenance Fees
Target ROE for a property, looking for at least 10%.
To find undervalued properties, estimate replacement costs
check URA website on land prices of the area
estimate cost to be about 400$psf (my guess that it is about 30%?, not sure as I am not familiar with developers)
Add both together to get replacement cost
Generally, developers look to make at least 20% profit from sale price
If an older condo $psf is below replacement cost, it is most likely undervalued. However, cross check your estimation with ROE.
Keep appreciating properties but you may switch to properties with higher ROE. By buying undervalued and selling overvalued, this allows investor to acquire more properties. From there create enough cash cow properties to retire.
Manage property portfolio by
Looking for properties that generate consistent rentals
Selling underperforming properties
Selling when property value is very expensive and rental returns don't make sense anymore
Properties to Avoid
Properties that cannot produce decent cashflow and perhaps hard to sell
Properties that are costly to maintain and hard to sell (due to the property being outside of affordability range of many buyers)
Properties with very short leases left
Properties that are remotely located with very few neighbours (suggest hard to rent, low rental demand and slower price appreciation)
Mickey Mouse properties in a town full of families unless you are in a town with many singles
Do take note if property is near a developing MRT or mall, do hold it as a future catalyst for price appreciation (estimated of at least 20% upside).
Do realise that unrealised gains are illusions of wealth as it could be killed by oversupply.
Recommend only 20% of income to service home loan, this ensures you have funds to invest
Look for properties with at least 5% gross rental yield
Gearing from 50-70% depending on how much cashflow required
And that's all for this post.
Hope you enjoyed it.