Why “Good Advice” from Friends Can Still Leave Your Bank Account Crying
When it comes to buying property, even the most well‑meaning tips can backfire. Think of those suggestions that sound like gold nuggets but are actually just a bunch of half‑truths. They’re not malicious; they’re just oversimplified or straight out of a dusty old textbook.
Common Bad Advice & Why It’s a Financial Roadblock
- Lowest price per square foot is a win: Imagine a buyer who is all about the cheapest square footage. It may sound smart, but ignoring other factors—like neighborhood vibes, future development, or even the hidden costs of renovating—can turn that bargain into a money pit.
- Assuming a sweet, steady cash flow: “Rentals always pay more than the mortgage. It’s safe.” Wrong. Rental markets fluctuate, vacancy rates creep up, and unexpected repairs can wipe out your projected profit. If you’re not prepared for those bumps, you’re setting yourself up for disappointment.
- Obsessed with sheer price: “Buy the cheapest house you see.” You’ll end up with a fixer‑upper or a property in a declining area. Smart buyers look at all variables, not just the sticker price.
- “Everything’s go for a higher prime cost?” A prime cost figure can be deceptive, especially if the property has been altered or has unsaid structural problems. Hesitating to dig deeper may leave you paying too much.
Practical Ways to Dodge These Pitfalls
Being cautious isn’t about becoming a wallflower at the market; it’s about staying savvy. Here are simple steps to keep your wallet happy:
- Do a full financial audit: Gather data on local taxes, insurance, and maintenance costs.
- Check the market trend: Look at past sales, future development plans, and neighbourhood stability.
- Get an independent inspection: Don’t trust a single eye—let multiple experts weigh in.
- Build a buffer: Keep 10‑15% of the purchase price aside for the unexpected.
Bottom Line: Don’t Let Good Intentions Turn Into Bad Outcomes
Even if your friend’s advice is meant to help, ignoring key details can lead to big headaches—and a sagging bank balance. Keep your feet on the ground, soothe your confidence with thorough research, and remember: a little humor about the next “house call” can turn the whole journey into a smarter adventure.
Bad property advice 1: The Progressive Payment Scheme or Deferred Payment Scheme will make properties more affordable
What These Schemes are Really About
Ever notice how a few slick financial tricks can make a property seem like a bargain? Those schemes do their best at giving the appearance of a lower price tag, and they can even put a gentle cushion on those pesky cash‑flow hiccups.
But here’s the plot twist: they don’t actually make your property cheaper. The numbers stay the same – it’s just a glossy mask that dazzles the buyer’s eye and softens the accountant’s worries.
Why the Illusion Works
- Less paperwork = fewer headaches.
- Financial sleight‑of‑hand can smooth out those wild cash‑flow swings.
- Potential investors see the shimmer, not the raw numbers.
Bottom line? If you’re counting on these schemes to slash the price, you’re in for a surprise. They’re great for the look of affordability, but the real cost stays stubbornly real.
With the Progressive Payment Scheme (PPS), the loan repayment grows as the property is completed.
How the Loan Flow Washes Over Your Project
Picture this: Your construction loan isn’t a single lump‑sum. Think of it as a drip‑demo where money arrives when you finish each milestone.
Stage‑by‑Stage Disbursement
- Under 10 % goes out once you’ve laid the foundation.
- Another 10 % slides in after the concrete skeleton is up.
- And so on until the whole site is finished.
Why bother? The trick is the first payments are almost a pocket‑change.
Sample Numbers to Lighten the Mood
Say you snag a $1,125,000 loan at 1.3 % interest over 25 years. Your first–year payments could be a minuscule $292 to $888 a month — a whole lot easier on the wallet.
But after the bricks have dried, the numbers kick up to roughly $4,631 a month for the remaining 22 years.
Keep in Mind
- Builders can jump multiple stages at once, so your payments might spike faster than you think.
- Even with the PPS (Progress Payment Scheme) easing cash flow early, the big picture of affordability stays intact.
Bottom line: The staged roll‑out keeps your bank feed calm until the last stone, but the financial reality kicks in when the project is complete.
The Deferred Payment Scheme (DPS) allows you to defer loan repayments, usually for 24 months, if you buy a newly completed property.
What the DPS Actually Gives You (and What It Doesn’t)
TL;DR: It’s more about timing than pocket‑busting savings.
If your property got a Temporary Occupancy Permit (TOP), you’re in the “DPS club.” That means you can rent it out during the 24‑month window or move right in—no waiting for the full settlement. Sounds great, but a few red flags are in the mix.
The Upside: Convenience Over Cost
- Move‑in hassle? Gone. Upgrading from a flat? The DPS lets you settle into your new condo first, then focus on selling your old place—leaving you free from juggling two mortgage payments at once.
- Rent‑out potential. Some landlords find the 24‑month period a slick selling point to attract eager tenants.
The Downside: Hidden Price Tags
New and finished projects often go premium‑priced. You’re essentially buying the right to act sooner, and that convenience can jack your cost up by as much as 20% compared to waiting for standard delivery.
Plus, you shoulder extra risk: if your financial situation shifts—perhaps a job change or a sudden expense—those 24 months could turn into a money pit. And you might end up with the last picks, which tend to be the most expensive or least desirable units.
Bottom Line
The DPS isn’t a magic wand for cheaper homes. It’s a time‑saving tool that can make life easier, especially if you’re “greedy” for an early move. But buyers should manage expectations—expect convenience, not a cost cut.
Bad property advice 2: Landlords should buy units near (insert amenity X) to improve rental yield
Rentability vs. Rental Yield: The Real Deal
When you’re eyeing a new property, you’ll often hear two sticky terms: rentability and rental yield. The difference can feel like a subtle smack‑down – one sticks to the landlord’s success, the other to your bottom line.
What’s the difference?
- Rental yield measures how much money you pull in from rent compared to the property’s price. It’s essentially income divided by cost.
- Rentability is all about how easy a place is to sell or lease. Think of it as marketability. A property that’s right next to a MRT station or a shopping mall will typically score high on this metric.
Why proximity can be a double‑edged sword
Buying close to a hotspot sounds like a win‑win, but it can actually lower your rental yield. Why? Those prime spots get sold at a premium – you’ll pay more upfront, yet the rent you can command may not keep pace.
Case in point: The Orchard Residences
Armed with a thick list of tenants, because it sits belly‑up next to Ion Orchard & the MRT, the building has huge rentability. Plenty of folks want to live there – “Where’s my next lease?” is like a daily mantra.
Yet, the rental yield isn’t that impressive. At the time of writing, the average monthly rent caps at about $12,763. That’s great for the tenants, but the return on investment might feel a bit lukewarm.
Bottom line
Remember: a high‑traffic location guarantees tenants but not necessarily a high return on your investment. Always weigh the rentability benefits against the rental yield before making a purchase.
House Prices & Rental Yields – A Quick Bite of the Numbers
Ever wondered how much one could pocket from a high‑end property? Let’s break it down:
Average Price Snapshot
- The market sits at about $8,016,000 per property.
- Think of that as the cost of a private island (but it’s actually a beachfront villa).
Rental Income Basics
- Monthly rent tops out at $12,763.
- Multiply by 12 months: $12,763 × 12 = $153,156 per year.
Gross Yield – The Quick Math
To see how that stacks up against the price tag, just plug the numbers into the yield formula:
((Annual Rent ÷ Average Price) × 100) = ((153,156 ÷ 8,016,000) × 100) = 1.9%
The result: a 1.9% gross rental yield. It’s a tidy piece of math, but it also shows we’re in the realm of investment quality rather than quick flipping.
What Does That Mean?
- Low yield, high luxury: Luxury properties tend to have smaller rental returns.
- It’s a reminder that you’re looking at an investment with long‑term value, not just a quick cash grab.
- Keep an eye on market trends – small shifts in rent or price can tip the balances.
So next time you check the listings, remember the numbers: it’s all about that 1.9% and how it paints the picture of a high‑end, long‑term investment. Happy hunting!
What Those 2‑3% Numbers Really Mean
Back in 2021, you’d typically see condos pulling out a gross rental yield of anywhere between 2% and 3%. That’s the return you get when you own a property and split the rent you receive against the price you paid.
Enter The Orchard Residences: High Rentability, Low Yield
Think of this place as the “luxury sports car” of the condo world. With its super‑charged amenities and prime location, it can attract tenants who’re willing to pay more for the finer things in life. The trade‑off? The yield on the property is on the lower side.
Why Some Landlords Love the High‑Rentability Recipe
- Less Empty Space: Even during an economic slump, a desirable condo at a premium price keeps the occupancy rates high.
- Smaller Search Costs: When you’ve got a hot spot, you can find new tenants fast, so you’re not pouring money into endless ad blitzes.
- You Know Your Numbers: Smart owners do their homework before stacking up on property, making sure the mix of rent and location makes sense.
“Great Amenities = Great Rentability, Not Always Better Yield!”
Think about MRT proximity. It’s like putting a coffee shop next to a commuter train—everyone will peek over the door. However, there’s no guarantee those peepers will spill the beans on higher rent. They might just be rating their options against older, cheap‑price condos that sit near a different station.
The Hidden Cost of Perks
Even if you’re offering a premium gym, rooftop pool, or a slick concierge service, the yield still hinges on how much you actually get in rent, not just how cool the place feels. Competitors, local market caps, and neighborhood vibes can all skew your rates.
Bottom Line: Do Your Homework
Investment decisions are as much about science as they are about gut feel. Talk numbers, talk renters, talk your strategy. You can’t put a rubber stamp on it—just dive into the data.
Bad property advice 3: Living with your parents? Buy a shoebox and rent it out as soon as you can afford it, as an investment.
Buying a Shoebox: A Quick‑Guide to the Pros, Cons, and Some Smart Hacks
The Idea in a Nutshell
Sounds slick, right? But let’s break down why many people end up in a shoebox nightmare.
Why Shoebox Lenders Gets Messy
How to Avoid the Rollercoaster
*Only go for the shoebox if: 1. You’re not totally bleeding your rent into the loan, and 2. You’re sure you won’t need to sell it in the next three years.*Why the “three‑year rule”? Because Singapore’s Seller’s Stamp Duty (SSD) will slap you a penalty if you sell within that window.
Clever Alternatives
Bottom Line
Shoeboxes can be a smart entry into property, but they come with real lags and penalties.
Happy house hunting—and remember, planning beats surprise!
Bad property advice 4: Put down a cheque to book the unit first, you can extend the Option To Purchase (OTP) if you can’t get a loan on time
How to Avoid the OTP Heartbreak Trap
Ever tried to swoop the perfect condo by simply slapping a cheque on the table? Think again. Since September 2020, the OTP (One-Time Password) rule has gone through a dramatic makeover – developers can no longer re‑issue a lapsed OTP. The only cheat is to ask for an extension, but even that stretches the validity only to a generous 12 weeks – and you still need the URA’s thumbs‑up.
Why You Shouldn’t Play Chasing Games With Cheques
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Even if the unit’s yours, you’ll most likely lose a portion of that earnest deposit because the bank isn’t on board.
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Jumping into the worst loan rates “on desperation” might haunt you for years.
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At least 14 to 21 days for an OTP is a tight squeeze. Imagine trying to flatten a 3‑month purchase with a two‑week deadline!
Walk In With Confidence, Not Panic
Don’t stroll into the show flat until your bank gives you that “in‑principle approval.” Grab the “no‑debt” green light first, then take a trip through the market knowing your budget isn’t a trick‑question.
– We’re Here to Help!
Need a hand finding the cheapest bank, or the right in‑principle green flag? Drop us a line and we’ll walk you through the entire process: from pinpointing the best rates to getting the bank’s approval and, finally, to a confident house hunt.
Bad property advice 5: Dodge the ABSD by putting the home under your child’s name
Buying a Home for Your 21‑Year‑Old—The Real Deal
Thinking of slipping a brand‑new apartment into your kid’s name? It’s a smart‑looking idea, but the real world can trip you up faster than a toddler on a balance bike. Here’s the low‑down, no fluff, just plain facts—and a pinch of wit.
1⃣ What Happens If They Do Their Own Thing?
- Sell The Property – They could flip the house for a quick cash jump. That might look great until you realize you lost your retirement nest egg.
- Home Equity Loan – Using the property as collateral could drown you in debt if they default.
- Other Moves – Anything that sparks your disapproval can instantly bite, especially if you build the house on long‑term expectations.
Bottom line: Letting your kid own the house is only safe if you’ve ironed out what they can and cannot do.
2⃣ “Own a Condo, Burn the HDB Ticket”
- Owning a property cancels their eligibility for an HDB flat entirely.
- If they want a BTO flat, they’re stuck waiting an extra 30 months after selling the house.
- When the time comes to tie the knot and start a family, this waiting game could push home ownership way beyond their teens.
It’s like buying a castle and then having to buy a campgrounds ticket to live in it later. Not ideal.
3⃣ “The GST Vouchers Are Real” (And They’re Not
- Government assistance such as GST offset vouchers or the latest Covid‑19 relief for the self‑employed is calculated using the Annual Value (AV) of a home.
- That means if your child shows up on the property list as the owner of a condo, the government will treat them like a high‑income bloke owed no help, no matter how golden your kid’s bank account looks actually.
Convincing your kid to keep the condo is like setting up a trap for “help” to walk away empty‑handed.
4⃣ Stamp Duties When You Pull It Back
Extravagantly, recollecting the property back into your own name is not a “reset” freebie. The stamp duty will kick in at both the initial transfer and the eventual reconveyance—essentially double‑handed taxes.
TL;DR: Think Before You Let No Room
- Make sure your kid can’t just sell or loan against the property.
- Remember, a condo purchase throws a wrench into any future HDB flat plans.
- AV and GST schemes don’t care if you’re rich or not.
- Re‑acquiring the house later will cost extra.
Before you write a deed, have a hearty chat with a conveyancing lawyer. You’ll be glad you did later.
Bad property advice 6: Buy based on low price; the lower the price the better the investment
Why It’s Easy to Overlook Reality
When people think of property investing, they often picture a single, tidy factor—price. In truth, buying a building is as layered as a lasagna, not a simple one‑layer sandwich.
Megaprojects: Big Size, Smaller Mice
Take Treasure at Tampines, Normanton Park, or Parc Clematis—these behemoths house over 1,000 units (2,000+ in the case of Treasure). The trick with such projects is that, because of sheer scale, developers can set a lower price per unit than their smaller neighbors.
- More units = lower price, but also
- More owners = more competition when you try to sell or rent
- Potential caps on your gains as the market gets saturated
In other words, the “low‑cost” advantage can also be the limiting factor.
The Old‑Timers: A Yikes, Actually…
Old buildings that pay a bargain make quick heads‑up for crafty investors. Think of a place like People’s Park Complex. It may flaunt an eye‑catching yield because its units live for less money than newer developments.
But that tidy picture evaporates once you factor in:
- Maintenance woes – older units require more upkeep.
- Lease decay – the lease on a unit might be in the final decade, limiting value.
- Owner hesitancy – senior owners in their 70s or 80s often won’t jump on an en‑bloc sale.
So, a low price alone can paint a rosy picture. To be honest, it could be a red flag.
A Well‑Rounded Checklist: More Than Just a Discount
- Location – a prime spot beats a bargain shop forever.
- Future Development – what’s on the URA Master Plan for the area? New schools, MRT upgrades, and parks can supercharge the property’s potential.
- Maintenance – avoid buildings that need a full renovation.
- Lease & Structure – long‑term leases bring stability; recent expiry may create volatility.
- Market Dynamics – more owners in one complex can shrink your upside.
Bottom Line: Don’t Let Price Be Your Only Follower
There’s undeniable glory in snagging a sweet deal, but the romance fades if other essential factors are ignored. Treat property investment like a full breakfast: you need a good balance of eggs, toast, and coffee—price is just one of the plates.
So next time you see a buyer’s flyer that promises an unbeatable price, remember to keep an eye on the whole menu before you bite. Happy hunting!
