If you are looking for an property to invest in. Do you know there is a strategy to find the right investment property that can help you to generate the best returns. Firstly, let us go through the 8 criteria that i have personally curated before you embarked into your property investment journey.
1. Investment Objective
Let us identify what is your investment objective. Are you planning to buy for good rental yield or for good capital appreciation in value or for both?
2. Budget / Down payment
Next you may wish to consider how much cash do you have, CPF available that can be used to your mortgage ability and others.
Cash for Property
CPF Available For Property
Loan To Value
Total Debt to Services Ratio
Addition Buyer Stamp Duty Consideration
CPF available for 2nd Property
3. Type of Property
The type of property that you are looking at will depend on your own preference and Addition Buyer Stamp Duty consideration.
Property investment is all about location. It is important to look at location in perspective by factoring all other attributes. For example, a good location at unattractive prices may not generate good return. Whereas, a suburban location at attractive entry prices may lead to better return instead.
Tenure in Singapore include freehold, 999 years, 99 years or shorter lease. There are always the preference of buying a freehold property. But do you know that some 99 years leasehold property can give better investment return?
6. Future Plans
URA Master Plan offer insight to future development in Singapore. It is important to make reference to this Master Plan if you are investing into any property.
The exit strategy refer to when to sell your investment property. It also make reference to what trigger your exit. It is good to identify what is your reasons to exit in the first place decide what kind of property to invest into.
8. What Next After Selling
Lastly, we come to the end of the property investment strategy. You may wish to consider what next after you sell your investment property. Are you planning for retirement, are you planning to buy a bigger property or looking to re-invest again? Again, your next decision will determine whether you should sell your property in the first place.
In summary, you must look at the 8 criteria in a holistic approach. They are inter-connected and you must possess experiences and expertises to identify the best investment property.
There is always this argument of looking into the past transaction to forecast the future price movement of any investment property. Here, I would like to share with you a case study of the reserve. Assuming if you have a budget of $1-$1.3m and you bought a investment property between 2011 and 2013. Which property will generate the highest return if you sold it in 2020. Let us examine the following properties.
J Gateway is a 99 years leasehold condominium that is located at Gateway Drive in District 22. The project is a new launch condominium which is completed in the year 2017 with a total of 738 units. It is within minutes walk to Jurong East MRT station.
Natura @ Hillview is a freehold condominium development that is located at Hillview Terrace in District 24. This project is a new launch property and was completed in 2016 with a total of 193 units. It comprise mainly small 1/2/3 bedrooms.
Buying a investment property ultimately depend on a buyer objective. Whether it is for rental yield or capital appreciation. J Gateway is a good rental play with its superior location next to malls and MRT station. Natura@Hillview has failed to perform to expectation. Most of the transactions are not profitable after factoring in bank interest and stamp duties. Moreover, it is difficultly to sell such small apartment in a predominately owner stay area such as Hillview. Hillview Regency's psf is attractive but it is an aging 99 years old and with no special selling point. It also face competitions from newer new launch condominiums with fresh 99 years lease. Summerhill offer the highest return due to its freehold tenure and a good product on its own. This explain why Summerhill lead the rest in term of return. In short, it is important to own a good product!