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Buying A Second Property

Do you have plans to own a second property?

You have been eyeing that second property. You have been saving up diligently for the down payment and the addition buyer stamp duties and hoping you can enter the market when the time is ripe.  But the new cooling measures on the 6th July 2018 may have dashed your hope. 

Cooling measures on 6 July 2018
Cooling measures on 6 July 2018

You might have wonder if paying that 12% ABSD* make any senses? A back of the envelope calculation for a second property that worth $1 million would set you back by $250,000 (5%+20% down payment) and approximate $150,000 in taxes (4% BSD + 12% ABSD). That is a cool $400,000 in saving!

*For Singapore Citizen buying a 2nd residential property in Singapore.

Going forward, can you still afford to own 2 properties?

For Current Private Property Owners

If you wish to own a second property but yet do not wish to pay for the ABSD. Here, you can decouple the current property to your spouse as the sole owner. And you can proceed to buy that second property under your own name. In this way, you do not need to pay the ABSD. The ABSD payable for a $1mil property is a cool $120,000 if you are a Singapore citizen buying a second property. 

Decoupling

Here, you may ask. Is this worthwhile to go through such hassle?

Will I still have cash after selling and buying 2 properties?

What are the risks involved?

Give me a call for a FREE CONSULTATION now!

(65) 9297-3150

For Current HDB Flats Owners

You may wonder if you can decouple like the private property owner. Unfortunately, HDB do not allow decoupling unless you meet certain conditions.

In this case, you will likely need to sell your HDB flat if you chose not to pay the ABSD. You may proceed to purchase 2 properties under different names. The husband may proceed to purchase a resale condominium for your own stay. While the wife can proceed to purchase an investment property.

Sell Your HDB Flat

Consideration

Can the above be possible? The answer is still a YES. But there are certain condition…

  • Your financial status
  • The selling price of your current property
  • The cash proceed from your current property
  • Your age
  • Your risk appetite
  • Your relationship with your spouse

OPM

You may wonder why this can be done. You may still have doubt if this is still possible…

The beauty lies with using OPM (Other People Money) through leverage. For example, in layman terms…

  • Assuming you invest $200,000 to buy a $1mil property. Assuming that property return is $50,000 per annum. Your return of investment is ROI: $50,000/$200,000 : 25%
  • Assuming you invest $500,000 to buy a $1mil property. Assuming that property return is $50,000 per annum. Your return of investment is ROI: $500,000/$500,000 : 10%

Make sense? The less you invest, the higher your return. This is known as leveraging. This is basic investment fundamental by using other people money to generate more wealth for yourself!

Case study 1

Decouple private property and buy 2 condos separately

hazel park
hazel park
  • Mr and Mrs Ong have been contemplating for sometimes to unlock the value from their existing private property. 
  • This is their one and only property and it has been fully paid.
  • They have all the while plans to buy a second property for investment. 
  • However, the recent revision in ABSD to 12% from 7% on the 6th July 2018 has derailed their plans. 
  • They are unsure what they should do.
  • After I meet up with them and did a detailed financing calculation for them.
  • They felt that decoupling their current property is the best option and owning 2 private properties under individual names is more feasible. 
  • In this case, they potentially saved paying $120,000 in ABSD assuming they buy a $1 million property. 

Case study 2

Sell HDB and buy 2 private properties

Senja Green
Senja Green
  • Mr and Mrs Tan currently stayed in a HDB flat with a balance loan of $50,000.
  • Their HDB flat has a positive equity as they have bought directly from HDB.
  • Their household income is $11,000.
  • They have been saving up diligently for the past years to pay the down payment and the 7% ABSD. 
  • However, the recent revision in ABSD has derailed their plans. 
  • They are unsure what they should do.
  • After I meet up with them and explore their options with them.
  • The best alternative is to en-cash the equity from their current HDB flat and use it for the down payment for the next house.
  • Mr Tan will proceed to buy a private property on his own. This property will be for their own stay. 
  • Mrs Tan will proceed to buy a low quantum private property for investment instead. 
  • In this case, they have own 2 private properties without having to pay hefty ABSD.

The above are real case studies that I personally advise them based on their respective financial status and housing needs. All cases are different. Speak to me to explore your housing needs. Let me customize a workable retirement housing plan for you. 

Bonus!

Here during our meet up, I will also share with you:

  1. What type of property to buy?
  2. Where are the hidden gem to invest in?
  3. Which 99 years or freehold property should you consider.
  4. New launch or resale properties? Which is better?
  5. Share with you the different investment strategy you should adopt.
  6. Explore your exit strategy. When should you exit?
  7. Running through detailed financial modelling before you even commit!

Give me a call for a FREE CONSULTATION now!

(65) 9297-3150

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