Don't we all want a good deal? Especially for a big ticket purchase like property, we look for all the possible tips and tricks to find a good deal. Some scenarios theoretically seem possible and you can almost marvel at the simplicity of it. But is it true? Are good deals really easy to come by in the Singapore property market? Check out what Aaron has to say.
Summary:
3 theoretically ideal property purchase related scenarios that hardly happens in reality:
A good unit with high rental yield, low quantum
Borrowing a high amount of money from banks with an average income
Buying a property that is big, cheap and has capital appreciation
Read on for a detailed analysis regarding the 3 scenarios!
In the Singapore property market, data regarding transacted prices, market value is easily attainable by any competent property agent. With that, buyers that are hunting for an ideal unit needs to realise that getting a good deal sounds far easier and attainable than it is in reality.
We examine 3 ideal buying scenarios that Aaron has come across from buyers and seek to explain why they are all improbable in the property market today.
1. High Rental Yield, Low Quantum
Imagine this scenario, a unit bought at $400-500k yielding $3k+ rent and paying a low mortgage. You might have heard of such feel-good stories and how someone is laughing their way to the bank at having pulled off such a deal.
Perhaps, it set you thinking of how you can find such a unit too. Sorry to disappoint you, there are details you are missing. If the unit is around $500k, it is very hard to get rental yields of $3-4k and you really need to find out what is the lease left on the property.
Here's the catch: When there are such properties that seem to fit the bill, be it in the industrial or residential market, either the lease left is low (10-15 years) or it is a very old property which has its set of problems. So, look into the details before you believe in such deals!
2. High Bank Loans with average income
Isn't it great to use someone else's money to make money for yourself? This is usually how bank loans for property purchases are framed. The real question is, is it really possible?
For someone with an average income, the clear answer is, 'No. It is not possible'. Banks requires collateral or some form of guarantee to approve your property loan. This comes either in the form of a high income or assets that can be pledged. Without these assets in the first place, the bank naturally would not loan you a high amount of money. Therefore, without a high bank loan, you would not be able to purchase any property with low down-payment.
Buying with low down-payment is only possible if you are already very rich or are able to pledge collateral with assets such as other properties. In this case, you are leveraging and possibly overleveraging yourself.
Thus, on an average income, it is not possible to take advantage of high bank loans to buy properties with low down-payment.
3. Big unit, Low Price, Capital Appreciation
Aaron often has potential buyers coming up to him and asking him to inform them once he knows of any 'good deals'. What is the common definition of a 'good deal': Big unit, cheap with low $psf, and capital appreciation.
Simply put, such a request is next to impossible. The property market prices in Singapore is transparent, with data easily found on the URA database or on agents' systems which are easily accessed. An agent with the right tools will be able to get this info, right up to unit numbers and transacted prices, with a couple of clicks. In such a transparent environment, finding a 'good deal' is highly improbable.
A general rule of thumb is that good things don't come cheap. When you come across cheap properties, there is almost always a caveat and reasons why. Possibilities include a low remaining lease, or a land lease that has started a decade before TOP. There are many underlying factors to be studied and understood.
Conclusion
Buy wisely, by considering all relevant factors, and prevent yourself from overlooking details when you come across the abovementioned ideal scenarios when purchasing your property. If it sounds too good to be true, it probably is!
Watch how Aaron dissects these 3 scenarios and hear of his personal experiences below!