I ended up living in Rental despite owning a Property in Singapore, and that is a good thing!

I know, it's been a super long while since my last post. That's because I have given up on stocks with current drawdown of, so screw that liquidate all and put in the bank to rot. 

Just Kidding, Equity is still my favourite investment class, just dealing with numbers, charts, probabilities, and the minimal need for HUMAN INTERACTION to profit! Unfortunately it's been painful to see the big drawdowns recently, with the current inflation scare + Ukraine - Russia War, my Portfolio is REKT. 

But fortunately I have holding power (Never invest with 'HOT' money) and convinced that I am invested in fundamentally strong company. So it'll be fine in the long run ( I hope).

 Anyway I've been busy with my property journey of late, and I am glad I diversified into property. Being middle income working class at my age, I essentially have 1 chance at any given time to own the right property with the help of BANK LOAN. And this window of opportunity diminish as I grow older, because Loan tenure are capped at 30 years/ age 65. The leverage that property can give me is too juicy to ignore, that's why I concluded that I MUST INVEST in PROPERTY as well.

I did more research on property as an asset class. By 'Research' I meant I paid thousands of dollars  to engage a professional to teach and attended a property class. Trust me on this, when MILLIONS are at stake. Paying few thousand dollars to get better understanding and experts' advice is a small price to pay, compared to the risk of buying the wrong asset without strategy. Remember Good things never comes for Free, But more importantly just because something is expensive, doesn't mean it is good. The key is finding the right 'Experts'. Fortunately I have Jessy to guide me and my wife along

Sooo despite my dislike of viewing endless number of properties (it's very draining for me), and having to go through the whole administrative process of dealing with Banker, Lawyer, Seller, Agents, etc... I came to the conclusion that having a property as part of my portfolio is very important! And for a struggling middle class like me, unfortunately it is not as simple as finding a home to stay in and hope to Huat big big when I sell next time.

And again thanks to Jessy!! I now own a Private Residential property; while Me and my family are staying comfortably in a RENTED Property paying rental every month! I know this wouldn't make sense to a lot of people, but I've double checked the Maths and numbers do not lie. At least for the context of Singapore. (This definitely won't work in Indonesia, interest rate is too  high and rental yield is much lower there).

Save you some time, TLDR:

1. Consult Jessy or any trustworthy Property expert with proven track record

1. Buy Property based on good fundamentals (Undervalued, Good location, potential gain, good rental market, etc.)

2. Engage HOMEY let them do their magic, achieve Gross rental income of at least 5%+

3. Choose where to stay and RENT long term

4. HUAT BIG BIG, rinse & repeat

Let me show you the Numbers, I need to accomodate for total of 6 people with spare room to accomodate occasional visit of my Family from Indo. 

Consider 2 scenarios:

Scenario 1: Buy a place for Me & Family to stay

Assuming Cash is not an issue, A decent 3 Bedroom Condo similar to my current residence would cost around $1,6 Million. 

Paying mortgage and other expenses like utilities, I'd end up with -$5k a month, or -$3.8k if I were to utilise CPF for Mortgage payment

Scenario 2: Buy a place, Rent the place out. Rent a place for Me & Family to stay

In this scenario, I bought a place in, Rent the rooms out for a Gross rent of $6,250 which works out to be about 5.8% rental yield. After deducting mortgage and expenses, I end up with positive $1.5k a month. Of course then there is rental to be paid which is close to $4k, and each month I will end up with negative cashflow of -$3.5k or about -$1,3k if CPF is utilised.

From here it is already quite clear scenario 2 is more advantageous. And of course I fully use my CPF, cause I don't really like the idea of someone controlling my own money. 

Side by side, For comparison:

Makes much sense?

Those familiar with Singapore property would've pointed a potential flaw in my calculation. That would be the estimated 5.8% rental yield, which most property agent will tell you is NOT realistic. Well news flash, that is ACTUAL gross yield I am currently getting. The secret sauce? CO-LIVING,  which is just another fancy word for subletting the rooms.

But I am not done yet. Here comes the next part of hoping I HUAT Big Big when I sell.

Sell at Year 5

Next let's assume I sell at year 5 with 2 possible outcome, 

(For simplicity, I will be Ignoring CPF interest, that I might need to return.)

Outcome 1: Price stays the same and Sold at bought price 

No surprise here, if price remains the same, I'd end up with nett loss. But I end up losing 3x the amount, if I insist on OWNING the place I stay in. 

In both scenario, My family still stay at the same place, enjoy the same environment and facilities and end up paying lesser. MIND BLOWN yet?

Even if property market Tanked, then I'll just hold longer and wait for a better exit price while collecting rental income. Of course knowing Singapore, the chance of property price going up is reasonably high. So let's look at another outcome. 

Outcome 2: Price increased by 15% (3% annually on par with reasonable inflation),

 

See what I mean? Despite Scenario 2 having larger quantum increase. The return is almost 4x for Scenario 1. So what if I Spent quarter million in rent over 5 years? I still end up with Profit with decent annual Return. Ok you can get Mind blown now.

Please let me know if there is a mistake or I've made wrong assumptions somewhere

So, unless you belong to the ultra-rich class who can buy multiple properties without loan, forget about the culture and belief that WE MUST OWN a place we live in.

I know, these are all easier said than done there needs to be Lots of research, calculations, finding the right property, renovation, finding tenant. Hey, Money never comes easy. And of course I must be aware and comfortable with the risks (Property market tanked, cannot rent out rooms, dealing with problem tenants, Home repairs, etc.)

Want to save time and minimise risk? Get someone like Jessy to advice & let Homey co-living do the heavy lifting for you. I tried doing it myself previously, lots more headache, time and money spent with much lesser profit (was getting barely 3% yield). 

Leverage on the correct experts, sure it will appear that I earn slightly lesser with all the consultation and commission paid, but doubt I would be able to attain close to 6% rental yield without their help.

Also, as of now we have just finished our decoupling process and in the process of getting our 2nd property! Looking forward to getting more passive income, and maybe just maybe My income will finally outweigh my expenses, and I can start saving money for my self again. (No kidding, my 2021 annual expenses was 30% higher than my annual income, it's crazy how expensive having a family with 3 kids a helper and a car can be.)

Of course I am barely scratching the surface here, the property world has lots more possibility like commercial, collaboration etc. etc. Everyone is on a different path and position in life. The way I do things might not work for others, but remember to always keep an open mind and explore the possibilities.  What most fail to realise is that they are dumbing themselves down by imposing self limitation or simply believing others when they said it cannot be done.

Find the right Yoda, ask the right questions, never stop learning, and MOST IMPORTANTLY TAKE ACTION!

Remember Ferry is not a licenced financial advisor, property expert nor a millionaire (yet!) so do your own due diligence! Provided data are purely based on historical records and may not guarantee future results. Follow my advice at your own Risk!