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Investing or speculating in real estate?

Investing or speculating in real estate?

Tuesday, July 31, 2018

Reader says…
My friend bought 2 units private condo (District 9-10) last year and early of this year.

One for own use and one for investment purposes (still vacant as at to-date).




As recently all banks increase the loan interest.

Thus, I asked him whether it is stressful to service the two condos.

He told me…

AIM FOR THE CAPITAL GAIN. WHY WORRY IF YOU KNOW THAT YOU CAN MAKE 300K IN THREE YEARS TIME?




Any idea whether Singapore property sure will increase price?

See so many en bloc recently, I believe developer here won’t anyhow dump their money.

Isn’t it?








AK says…

Your friend knows for sure his recent D9 purchase can make $300K three years from now?

After all the costs that comes from holding it vacant for three years?



He probably knows something I don’t.





As for property developers, they have tons more money than we have and they probably have easier access to credit than us too.

When we owe a few hundred thousand dollars to the banks, we are at their mercy but when we owe  hundreds of million of dollars to the banks, they are at our mercy.



If things should go downhill from here, (most) property developers probably can weather the storm but can we?

It is only too easy to feel invincible during good times but we should stress test our finances to see if we are really invincible or is it all in our mind?







I know some people think I am against property speculation but, really, I am not.

It isn’t something I would do but I am not against other people doing it.

As long as the people who do it know that they are speculating and if they have more than sufficient ability to do so, go ahead.






The problem I have are with people who

1. are speculating but think that they are investing

and

2. are really not financially strong but have only enough spare cash to follow the herd.

Anecdotal evidence shows that these people are more common than not.





Those who expect property prices to double in the next 10 years like it did from the Global Financial Crisis a decade ago are more likely than not going to be disappointed.

We should not let the fear of losing out force us into following the herd.

Ask what are we really losing out on anyway?

What do we gain by doing this?

What do we lose by not doing it?








My experience has been that if we buy a property that is a decent investment (see related posts at the end of this blog), its value will likely hold and over time it could enjoy capital gains.

Of course, it is never my way or the highway.

I just don’t have much confidence in my power in speculation.





A blog published earlier today:
Condo investment has been a drag.

My own experience:
1. Property investment philosophy.
2. Affordability and value for money.

This content was originally published here.

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