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Thread: Advice pls?

  1. #1
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    Default Advice pls?

    Cost of ppty: $1m
    cash: 350k
    cpf: 350k

    what should buyer do?

    option 1:
    clear cpf+cash and take $300k loan

    option 2:
    pay $350k cash, take $650k loan, keep cpf for ~2.5% interest. if rates go up after lock in period (can assume fixed 3yrs for example), can use cpf do partial repayment.

  2. #2
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    some qns:

    1. pty is completed or still under construction?
    2. pty for ownstay or investment?

    generally, i go option 2

  3. #3
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    Quote Originally Posted by august
    some qns:

    1. pty is completed or still under construction?
    2. pty for ownstay or investment?

    generally, i go option 2
    assume completed / ownstay. is option 2 better off in terms of net position at the end of 3yrs end of loan period? Bearing in mind that is take 650k loan, cpf will be slowly drained to pay monthly installment.

  4. #4
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    Quote Originally Posted by stocker
    Cost of ppty: $1m
    cash: 350k
    cpf: 350k

    what should buyer do?

    option 1:
    clear cpf+cash and take $300k loan

    option 2:
    pay $350k cash, take $650k loan, keep cpf for ~2.5% interest. if rates go up after lock in period (can assume fixed 3yrs for example), can use cpf do partial repayment.
    Both options are not good. Only work in ideal situation. Either way, if you lose your job, you are screwed. Option 2 slightly better assuming you can live without spending. Pls make sure you have enough to hang there till you get a job in the worst situation.

  5. #5
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    Quote Originally Posted by fourth
    Both options are not good. Only work in ideal situation. Either way, if you lose your job, you are screwed. Option 2 slightly better assuming you can live without spending. Pls make sure you have enough to hang there till you get a job in the worst situation.
    Can leave the other assumptions out? I am trying to analysing this example purely from a cash flow point of view. Just interested to find out what the forummers think.

  6. #6
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    Quote Originally Posted by stocker
    Can leave the other assumptions out? I am trying to analysing this example purely from a cash flow point of view. Just interested to find out what the forummers think.
    Both options lock in your cash. What cash flow are you talking abt? Money in cpf cannot be part of cash flow right? I rest my case.

  7. #7
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    just pay 20% (5% cash+15% CPF) and keep the remaining cash/cpf =)

  8. #8
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    i would have my own Option 3 - 250k of each and loan 500k, or loan even higher amt

    leaving 100k in cpf will set as buffer to offset loan should the worst case happen ==> the big R (500k loan with 100k buffer should be able to last you somewhile)

    the remaining 100k in cash for any other opportunities fund + cash flow

    over the years, if the financial status improves, do partial lump sum repayment.

    anyway, since you say property is completed, meaning you got to start servicing loan right now. with so int rate so low, better to use money to invest wisely. CPF gives u better 2.5%, even higher than the loan rate.

    u cannot just look at cashflow in isolation, else sure bao-jiek. got to do a calculated risk analysis.

  9. #9
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    one impt parameter missing in ur cashflow ananlysis - the incoming 'inflow'?

  10. #10
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    Quote Originally Posted by stocker
    assume completed / ownstay. is option 2 better off in terms of net position at the end of 3yrs end of loan period? Bearing in mind that is take 650k loan, cpf will be slowly drained to pay monthly installment.
    for me option 2 bcos i will want to keep some cash in hand for other investments etc or simply for emergency or future repayment.

  11. #11
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    Thanks all for inputs.

  12. #12
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    my advice to you is buy a 600k property and keep 100k cash...

    Quote Originally Posted by stocker
    Cost of ppty: $1m
    cash: 350k
    cpf: 350k

    what should buyer do?

    option 1:
    clear cpf+cash and take $300k loan

    option 2:
    pay $350k cash, take $650k loan, keep cpf for ~2.5% interest. if rates go up after lock in period (can assume fixed 3yrs for example), can use cpf do partial repayment.

  13. #13
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    OK, thanks for all your inputs. Appreciate it.

    Just to clarify, this $1m ppty is just a hypothetical one. And this $350k cash/cpf is only the cash that buyer is potentially readily prepared to use, and constitutes a of his total holdings (deposits, equities, etc). He actually has more than enough to fully pay off this $1m, just that there are also other interesting investment opportunities on his radar screen.

    Sorry for not being clearer from the start.

  14. #14
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    You have so much money - be a Priority Banking customer (if you aren't already one) and get professional advice lah...

  15. #15
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    Quote Originally Posted by Allthepies
    just pay 20% (5% cash+15% CPF) and keep the remaining cash/cpf =)
    What a sensible answer, i thot cash is king right?
    Option 1 and Option 2 utilise all cash :-(

  16. #16
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    Quote Originally Posted by mcmlxxvi
    You have so much money - be a Priority Banking customer (if you aren't already one) and get professional advice lah...
    Have to be careful of this. They will want you to place your cash in unit trust, etc.... RMs have vested interest.

  17. #17
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    Quote Originally Posted by mcmlxxvi
    You have so much money - be a Priority Banking customer (if you aren't already one) and get professional advice lah...

    You mean you trust the Rms to give professional advice?
    If i remember correctly, they are all sales man with quota to hit.

  18. #18
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    Quote Originally Posted by focus
    You mean you trust the Rms to give professional advice?
    If i remember correctly, they are all sales man with quota to hit.
    ya, i think the brothers here can give way better advice than my RMs

  19. #19
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    You need to be wary of lock-in period though. If interest rates changes, there may be penalties if you wish to repay using your cash/cpf funds.

  20. #20
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    Quote Originally Posted by chestnut
    Have to be careful of this. They will want you to place your cash in unit trust, etc.... RMs have vested interest.
    Quote Originally Posted by focus
    You mean you trust the Rms to give professional advice?
    If i remember correctly, they are all sales man with quota to hit.
    Quote Originally Posted by august
    ya, i think the brothers here can give way better advice than my RMs
    You are right man!

    Asking stocker to approach his RMs for "professional advice" is like asking Snow White to approach the Queen for an apple.

    Three times the Queen disguises herself and visits the dwarfs' cottage while they are away during the day, trying to kill Snow White.

    First, disguised as a peddler, the Queen offers colorful stay-laces and laces Snow White up so tight that she faints, causing the Queen to leave her for dead. Snow White is revived by the dwarfs, however, when they loosen the laces.

    laces = bonds = minibonds

    Next, the Queen dresses as a different old woman and brushes Snow White's hair with a poisoned comb. Snow White again collapses, but again is saved by the dwarfs.

    The Straits Times

    June 13, 2009
    POSB to hire seniors
    By Melissa Sim

    In the first initiative, the Active Neighbours Programme, it will hire about 60 people over the age of 45 to help older customers with transactions, for example, showing them how to use an ATM.

    The new hires will work five hours a day, twice a week, and earn $8 an hour.
    Finally, the Queen makes a poisoned apple, and in the disguise of a farmer's wife, offers it to Snow White. When she is hesitant to accept it, the Queen cuts the apple in half, eats the white part and gives the poisoned red part to Snow White.

    The New York Times

    Good Bank, Bad Bank

    January 31, 2009

    The other is the “bad bank” solution, under which the government would print enormous amounts of money to buy all these banks’ “toxic” assets and to put them into a huge new financial institution that would operate under federal control and sell them off over time.
    Last edited by jlrx; 01-10-09 at 23:27.

  21. #21
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    best case scenario is to own 2 ptys with one fully paid and the other paying barest minimum, keep all the other cash and use the fully paid pty's rental income to finance ur stay in the non-fully paid condo. Wait till mkt picks up, sell either one, whichever give u the best deal, buy another one later and continue renting out until ur pot of gold grows in the bank. do that a few time well and u might be living in a free property. i know a lot of people getting rich by this method...

    Quote Originally Posted by esurprise
    What a sensible answer, i thot cash is king right?
    Option 1 and Option 2 utilise all cash :-(

  22. #22
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    Quote Originally Posted by Regulators
    best case scenario is to own 2 ptys with one fully paid and the other paying barest minimum, keep all the other cash and use the fully paid pty's rental income to finance ur stay in the non-fully paid condo. Wait till mkt picks up, sell either one, whichever give u the best deal, buy another one later and continue renting out until ur pot of gold grows in the bank. do that a few time well and u might be living in a free property. i know a lot of people getting rich by this method...
    well said

  23. #23
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    Quote Originally Posted by Regulators
    best case scenario is to own 2 ptys with one fully paid and the other paying barest minimum, keep all the other cash and use the fully paid pty's rental income to finance ur stay in the non-fully paid condo. Wait till mkt picks up, sell either one, whichever give u the best deal, buy another one later and continue renting out until ur pot of gold grows in the bank. do that a few time well and u might be living in a free property. i know a lot of people getting rich by this method...
    I was thinking..... assuming both properties are investment properties.:-
    1) Pay 30-40% and loan the rest. The installment should be easily taken care of by rents (u can even surpress ur rent without hurting the cashflow) - (This one can get tax deduction from expenses incurred which will result in less income tax)
    2) The remainder of the cash go and buy safe corporate bonds that pay 5% yield (This one dont have to pay income tax). For the more adventurours, buy STI ETF or shares to get even more upside.


    As for myself, my actual implementation now is:-
    1) Invest everything into stocks/bonds that pays a yield of around 4%.
    2) Loan 50% from the portfolio and invest into more bonds paying 5% yield (To be implemented, still thinking whether want to take leverage)
    3) If this bull market does continue for a year or two, i will take out profits to pay for 20-30% of a house and loan the rest. (To be implemented) for every 30-40% portfolio gain.

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