Thursday, November 6, 2014

My Notes and Views after watching Kelvin Fong interview at 3.30 A.M.

This is the video that I watched today at 3.30 A.M.
I would like to pen down some key takeaways and my personal views before I forgot.

The interview video link is here:

You might want to read this two news report about him. He is a very successful real estate agent in Singapore.

All right, these are my notes while listening. It is quite messy but I will point out the important points.

Let's straight to the points. Below are taken from the video interview.

Buying property must perform the financial status check and the stress test.

What is this stress test all about ? It is to know if the housing loan interest goes up to 3.5% or 4% , are you still able to pay for the monthly mortage?

Take one quick example, if you bought a private property of S$600K, it is rented out at S$2K, let say worst case scenario, if the rental drops to S$1.5K, are you able to afford to pay this S$500 cash by yourself ? If so, go ahead and buy. Take this S$500 as forced saving. Singapore asset long term definitely makes money. S$500 per month for an asset is good, even without the rental income (can't rent out) , the money is still a saved money.

Having hundred of thousands cash in the CPF is a waste. We should make money work harder for you. Let the property grows for you. You should trade CPF with cash (use CPF to pay for the housing loan and take the rental cash). Invest for saving, then you will feel sucure. Some treat insurance as forced saving, why not property?

Property purchase is a form of saving. It is not an investment for speculation else it will create fears in you. It is to let property saves money for you.

If you time the market, make sure you time your age as well. If possible,start young.

How to select the right property is important. It determines your results in the next 5 years or even next 2 years. How much salary should go for property? TDSR 60%.

HDB purchase does not require cash, private property  must pay 5% cash. Do you have 5% cash?

If you are capable, go for private property, why not HDB ? It is not easy to cash out for HDB. When time is good, private property can cash out and HDB can't. You only can cash out after you sold the HDB.

Financial planning for every customer is a must. Under worse case scenario, you cannot afford it, don't buy. Real estate agent must also know how to plan the growth for the customers. Should I sell now or keep?

If you cannot earn S$200,000 in 5 years time, then, you must grow through assets, follow the rich doing, but must still do proper financial planning / stress test.

Buy property with numbers, not with emotion.

Identify below market price properties.

Two criteria:
(1) What is the potential upside based on current situation?
(2) Can my yield cover the loan and under worst case scenario, am I able to top up the difference?

Entry price determines your profit margin, your end results. Check surrounding price , have a right entry price and the risk will be lower.

Affordability is the key now, no one is looking at PSF anymore.

Commercial property purchased under company name is better. Company can claim back GST.

The first property is important as it will let you roll to the second and third properties. If I sell the property now, how can I use the money next based on the fact and figure? If you don't know what to do with the money, don't sell.


All right, here are my personal views.

I like this guy. We are just about the same. We are Mathematic person. We love numbers.

In real estate investment, you must have a housing loan interest calculation template. You are able to get it FREE easily from any banks. I have one from OCBC and I use it every single time for my loan calculation. You can play with the tenure years, interest rate, checking exactly how much interest you are paying. You must have this template and basic understand is good enough. Then, you should know the basic formula how to calculate the stamp duty (3% of purchase price - S$5,400), Additional Buyer Stamp Duty (ABSD). Take note on the small legal fees, lawyer fees, etc. These are simple information available easily on the Internet. Once you know it, you know it forever.

Take note on CPF rules too (second property only can use the CPF OA to pay once you set aside half of the Minimum Sum for example). It is all important. I am puzzled if one wants to invest in real estate and he/she does not check the above tools. Those are great tools. You should not wait for the expert to tell you these in the workshop or seminars. You should fish yourself ! That is why some of my real estate friends told me that I should join real estate industry instead. I will, maybe when the time is right again.

I am curious why people keep asking if we should go for CPF home loan or private bank loan. The answer is very clear. The loan interest is low since year 2008 until now and it will go up gradually starting from year 2015 onwards. So, my advise to you is, if your housing loan only left about 10 years, go for the private bank , POSB! They have this great promotion right now that no matter how bad the SIBOR rate is, their rate will be maximum at 2.5% only, still 0.1% lower than CPF home loan rate of 2.6% and now they give you about 1.6%, just go for POSB bank loan and that's it. It does not add too much value to discuss this heavily.

Singapore assets surely makes money for long term. Don't time the market. I have some doubts on this. I witnessed my siblings purchase in Singapore and the economic revival in year 2007 (when COSCO was at S$8, remember?) and the economic crisis in year 2008, such statement I don't bite fully.

I think timing of the market is important. I know you guys are searching for the below market value properties but how much bargain can it be under such good economic environment now? I take Caspian condo at Lakeside as an example, if the owner bought in year 2009 at S$600K and they are able to sell it last year at S$1.2 million and now the selling price dropped to S$1 million, is this a good buy now?

Also, LakePoint condo at Lakeside (1,884 sq ft) also dropped heavily to S$300K before it shot back to S$900K and with current market of S$800K, is that a good buy? I know the price very well because I had stayed at Lakeside. 

My advice is, unless you have a lot of cash, you can afford to have multiple properties, that's different. If I have only enough to shoot for one. My advise is, stay put your money, build up your war chest, the good time is yet to come. I am sorry to say that the real estate price is following "closely" 6 months after the stock market performance for the entire history except for year 2009.

In year 2009, the real estate price followed exacly the same as stock market. Both index rebounded together in March 2009, starting with Caspian new launch, then Mi Casa, etc. then, Interlace came in September 2009 with S$850 psf.

So, does that mean these two prices index will be de-couple from now? It will not.

Look at Dow Jone right now, it is at history high . Look at STI index, it does not even challenge the new height just yet. We are all in good party mood. Will the stock  market come down? It has to come down.

If you don't like property market to crash, perhaps a meaningful correction of 30% is needed. If so, why can't you use the time now to prepare all the cash tightly and wait patiently for the time and shoot once BIG TIME. Guess what, there are many people waiting out there as well. That is why when the price dip for 10%, 20%, people start to enter and support the price and the price is stable or stagnant. But then, as I said, timing is still relatively important. Why are we not buying in year 2009?


It is because we don't have enough cash at that time? (That is why I emphasize to build up the war chest) Or you fear that it will go down further? (If you fear the property price will go down further in year 2009 BUT NOT in year 2014, I think we have a BIG problem here) Or you fear that you are next to be retrenched when you see DBS slashing so many jobs in year 2008, 2009?

I know we must have positive mindset. I fully agree. But, for big investment with a fees of ABSD, I don't think it is attractive at all at this moment. Anyway, I am building my cash pile now slowly and I am all ready to shoot a big one when the time is right. I sincerely wish all the investors winning big time !

By the way, for homestay purpose, by no means, please go and buy one instead of renting, helping others to pay for their housing loan.

No comments:

Post a Comment