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Secrets of Singapore Property Gurus

Finally… the Experts Reveal Their Top Tips

to Making Millions in Property Investing

Mr. Propwise, Propwise.sg


Aktive Learning

10 Anson Road #21-02

International Plaza

Singapore 079903

E-mail: [email protected]

Web site: http://www.aktive.com.sg

Copyright © 2011 by Aktive Learning

All rights reserved. No part of this publication may be reproduced,

stored in a retrieval system, or transmitted, in any form or by

any means, electronic, mechanical, photocopying, recording or

otherwise, without the prior permission of the publisher.

ISBN (Paperback) 978-981-08-7891-7

ISBN (E-book) 978-981-08-7892-4

National Library Board, Singapore Cataloguing-in-

Publication Data

Propwise, Mr., 1980-

Secrets of Singapore property gurus / Mr. Propwise. – Singapore :

Aktive Learning, c2011.

p. cm.

ISBN : 978-981-08-7891-7 (pbk.)

1. Real estate investment – Singapore. I. Title.

HD890.67

332.6324095957 -- dc22 OCN696694642

Printed in Singapore


ContentsIntroduction x

PROFITABLE INVESTMENT STRATEGIES

FOR TODAY’S MARKET

Rayney Wong

Lawyer, Property Investor and Bestseller Author 2

Investment strategies for the current environment 4

How to time your entry in the property market 4

The beneits of forming a company as an investment vehicle 6

Reasons to enter into a property sharing agreement 7

“Must do” property buying due diligence 8

The biggest mistake property investors make 9

Do residential or non-residential properties make better

investments? 10

How to lip a property for a quick proit 11My personal investment philosophy 12

My worst property investment 13

Getty Goh

Director, Ascendant Assets Pte Ltd 15

Two key trends that will drive the property market 18

Is property investment a good idea in today’s market? 19

Whether new or resale properties are better investments 20

Is there a right way to structure a property deal? 23


Do residential or non-residential properties make

better investments? 24

How interest rates affect property prices 25

Are leasehold or freehold properties better investments? 26

My personal investment philosophy 27

Finding good investment opportunities 31

FINDING YOUR IDEAL INVESTMENT

PROPERTY

Mohamed Ismail Gafoor

CEO, PropNex Realty Pte Ltd 34

Trends I’m seeing in the market 37

Impact of the fourth round of measures and

forecast for 2011 37

How to ind a good and reliable real estate agent 39The biggest mistakes property investors make 41

Promising areas for property investors 42

Should you buy an HDB lat or private property? 44Should you do an Addition & Alteration (A&A)

or demolish and rebuild a landed property? 44

Investing in commercial property 46

How PropNex ensures the quality of its agents 46My personal investment philosophy 47

My property investment track record 47

Steve Melhuish

CEO, Allproperty Media Pte Ltd 48


Trends we are seeing in the market 51

Online tools to help investors search for properties 52

The best way to ind an attractive property to buy 52The most promising projects and areas 53

Two golden tips for mortgage loans 54

Asian commercial property market outlook 55

Finding a reliable property agent 55

How PropertyGuru ensures the reliability of its site 56


My property investment stories 57

Kelvin Fong

Team Leader, Powerful Negotiators 59

Impact of the fourth round of measures and

prperty price forecasts 62

Should buyers go ahead with their purchase

despite the measures? 64

Should sellers sell their property now or

keep holding on? 65

How to ind the right agent for you 66How to make money in Singapore property 68

The best time to buy and sell property 70

Mistakes novice investors make 73

Promising areas and projects buyers should focus on 74

Negotiating tactics for buyers 75

How owners can maximize their selling price 76

Do residential or commercial properties make

better investments? 77



My experience investing in property 80

SMART PROPERTY FINANCING

Dennis Ng

Director, Leverage Holdings Pte Ltd 83

Are banks still willing to do property lending? 85

Is it easier to get rich investing in stocks or properties? 85

When an opportunity presents itself… 90

My top property inancing (and reinancing) tips 90How to maximize your chances of getting a loan 95

How quickly should property owners pay off their loans? 95Should you get mortgage insurance? 100

Why is Money Always Not Enough? 101


The worst and greatest property investments

I have heard of 102

Alfred Chia

CEO of SingCapital Pte Ltd 105

My biggest concern on the property market 107

Long term outlook on property in Singapore 107

The importance of proper asset allocation 108

Finding a proitable property 109Top tips for inancing your investment property 110How to maximize your chances of getting a loan 111

When should you take a home equity loan? 111Is home insurance necessary? 112



The promise (and pitfalls) of property investing 114

AVOIDING LEGAL PITFALLS AND

OTHER MISTAKES

Amolat Singh

Partner, Amolat & Partners 117

The role of a conveyancing lawyer for the seller

and buyer 120

Does it matter which conveyancing lawyer you use? 125

The advantages of forming a company as a property

investment vehicle 125

Potential pitfalls of entering into a property

sharing agreement 126

Due diligence for the smart property investor 127

What a landlord should do to protect his interests 128

The biggest mistakes property investors make 129

Singapore property horror stories I have come across 130


Success in property investing – luck or timing? 133

Mark Chua

Partner and Head, Property Law Department,

Tito Isaac & Co LLP 135

How to ind a good conveyancing lawyer 138Does the purchase process differ for residential,

retail, ofice and industrial properties? 139


The different ways property investment deals can

be structured 140

When should you set up a company to invest

in property? 140

What an investor should check before committing

to a property purchase 141

What landlords should check before renting to a tenant 142

How the recent government measures have

affected property inancing 143The biggest mistakes I see property investors making 145

When the IRAS label may label you as a

“property trader” 146


HOW TO MAKE MILLIONS FROM

EN BLOC SALES

Karamjit Singh

Managing Director of Credo Real Estate

(Singapore) Pte Ltd 149

Outlook for en bloc sales in Singapore 152

How the en bloc process starts 153

The common characteristics of en bloc properties 153

The top reason why an en bloc sale fails 153

The key factor developers need to have to buy

en bloc projects 154

The impact of changes in the en bloc legislation 154

How a property consultant such as Credo helps in

the en bloc process 155


Should investors focus on en bloc properties? 155

Dillon Loi

Master Trainer, Real Estate Academy 156

How the en bloc process works 159

How to ind properties with en bloc potential 160Reasons why most en bloc deals fail 164

Economic conditions needed for the en bloc market

to take off 168

How changes in legislation will affect the prospects

for an en bloc sale 169

Where the next wave of en bloc is likely to happen 170

Are commercial properties attractive en bloc targets? 172

Real estate versus other investment products 173

Outlook on the Singapore property market 177

Parting Thoughts 179

Is property a good investment? 179

Downsides of investing in property 181

The smart investor 181

The shotgun versus the machinegun 182

Can you afford to make a mistake in property investing? 183

Investing under the shadow of government measures 184

Advice for those just starting out 185

Making the leap to becoming a property investor 186

About Mr. Propwise 188


x

Introduction

Introduction

If you look at the list of the Forbes 40 richest people in

Singapore, you will see many who made their fortunes

developing and investing in real estate. Or just look

around you – the average Singaporean’s wealth probably

comes more from the appreciation of his HDB lat or private property than from any other asset.

My point? Based on my experience and what I have

observed, investing in property is the most common way

for the average person to build up a signiicant amount of wealth.

But if you want to invest you will constantly have to

grapple with the twin animals of greed and fear. Greed

and the desire to accumulate wealth drives us to take

risks in order to achieve a higher return, but fear of loss

holds us back from doing so.

It is perfectly understandable to be scared about

investing in property. You are making the biggest

purchase of your life, and are borrowing a large amount

of money to make this purchase.

And especially in the current environment where the

government has announced multiple rounds of measures

to control the market and prevent rapid price increases,

it might feel like a very risky thing to buy a property.

Wise investors will look at this situation from a different

perspective: For long term investors, the next one to two

years is likely to present you with a golden opportunity

to pick up a good property at a low price and make a lot

of money.


xi


Let’s not forget that any form of investing is made

riskier when it is backed by debt. The leverage cuts both

ways – while you can multiply your returns if prices go

up (and that’s what many people focus on), you can also

lose more than you have if prices go down signiicantly.The best way to manage that risk is to be prudent when

you are buying, to do proper research on what you buy,

and to learn as much as you can about property investing.

The problem I’ve found is that there are very few good

and objective sources of information out there to help the

budding property investor. While a good property agent

is certainly helpful, a smart investor cannot rely solely on

what an agent says as he has an inherent conlict of interest – his goal is to get you to transact, as that is how he earns

his money. That might explain the amusing phenomenon

of how many in the industry will say that it is always a

“good time” to buy whether prices are going up or down.

That was one of the main reasons why I started

Propwise.sg, a Singapore property blog dedicated to

helping you understand the real estate market and make

better buying, selling, renting and investing decisions

– minus all the hype and misinformation. You can ind most of the basic knowledge you need to get started

there.

This book brings it up a notch. I’ve gone out to

interview the top experts in the property sector, and bring

to you their invaluable insights on how to make your

fortune investing in real estate. It would cost thousands

of dollars to get one of these experts to consult on your


xii

Introduction

property purchase – if you could even get access to

them. This book is split into ive sections to match the specializations of these experts:

• Proitable investment strategies for today’s market• Finding your ideal investment property• Smart property inancing• Avoiding legal pitfalls and other mistakes• How to make millions from en bloc salesI am amazed by how generously they have shared

what they know, and truly believe that you will become

a better investor and proit greatly if you listen carefully and learn heartily.

To wisdom and beyond,

Mr. Propwise

P.S. Before you read further, go now to www.propwise.

sg/bookbuyer/ to get your free copy of my Singapore

Property Beginner’s Guide, Real Estate Buyer’s

Checklist, and other resources I have prepared specially

for buyers of this book.



1

PROFITABLE INVESTMENT STRATEGIES

FOR TODAY’S MARKET


2


Rayney WongLawyer,

Property Investor and

Bestseller Author

Rayney Wong Keng

Leong, LL.B. (Hons.),

is a lawyer, property

investor and author

of the bestseller

Secrets of Property Millionaires.

A lawyer by profession, he has been practising

Conveyancing and Real Estate Law for over 23

years. As his great passion has always been property

investment, he has over the years assiduously

acquired a wealth of experience and knowledge

on the “dos” and “don’ts” of buying and selling

properties.

A firm believer in lifelong learning, Rayney is always

willing to share his vast accumulated knowledge

and business acumen with anyone possessing a

keen ear to listen and learn. Through conducting

countless seminars, lectures, and talks, Rayney

has enlightened bankers, real estate agents,

financial advisors, and members of the public on

the intricacies of property investment. He has also

personally coached numerous real estate agents,

and on many occasions, saved them from more

than a few legal pitfalls.


3

“Never overstretch your financial

capacity. Buy only what you can

afford to hold. You must have the

financial capacity to ride out the storm

in a weak property market, and be

prepared to hold on to your property

for a few years.”

Rayney Wong


4


Investment Strategies For The

Current EnvironmentThe property market is at an all-time high and new

record benchmark prices are set on a monthly, weekly

and often even daily basis. In the current bullish and

toppish market, property investors must be thoroughly

educated to make wise investment decisions. I have

always advocated the principle that if an investor is

focused on the downside risk in property investment,

the upside proit will take care of itself. Each property that an investor wishes to acquire must meet stringent property analysis criteria.

A range of investment strategies will have to be

applied on a case by case basis. Using private limited

companies as an investment vehicle is advantageous,

and could result in a substantial increase in Return On

Investment. Property sharing agreements allow investors

to pull together their inancial strength so they are not stretched inancially as individuals. I will discuss these strategies in detail later.

How To Time Your Entry In The

Property MarketMany property gurus and agents will always say:

“Anytime is a good time to buy.” I disagree. Buying a

property at the wrong time can cause a lot of inancial pain and prove to be a long term burden for the uneducated

investor, especially if you buy the wrong property at the


5

wrong time (i.e. the peak of the market).

After studying the URA Property Price Index

carefully, I noticed a distinct pattern of property cycles

(1993-1998, 1999-2004, 2005-2009, and the current one

that started in the second quarter of 2009). I have gone through this analysis thoroughly in my book, Secrets of

Property Millionaires.

Basically my technique of timing your entry into the property market is to buy properties only during certain

“window periods”. This is when the property market just

begins to turn upwards (e.g. in the beginning of 1994,

1999, 2005, 2009) – those who bought at these times will

have handsome capital gains. Through timing my entry,

I have bought more properties during such “window

periods” than at other times.

Of course to know when the “window periods” occur

and what properties you should buy at what prices

during those times, you need to monitor the market and

be on the constant lookout for good buys and the irst sign of recovery. There are two signals I look at: 1) The

prices of properties you are monitoring must have fallen

close to or below the previous transacted prices during

the downturn and bottoming of the market in the last

property cycle 2) A marked increase in the number of

property transactions is usually the irst sign of an upturn and recovery in prices.

Proitable Investment Strategies for Today’s Market


6


The Beneits Of Forming A Company As An Investment Vehicle

The beneits of forming a company as an investment vehicle include:

1. All expenses incurred by the company in its

management of the investment property are

considered corporate tax deductible.

These include maintenance fees, property tax, utility

bills, renovation, and even furnishings. However this

book is not meant to be a guide on tax laws – you must

seek the advice of qualiied accountants to understand the intricacies of the prevailing tax laws and regulations.

2. You can apply for your company to be GST

registered.

This makes sense especially if you purchase

commercial properties that require GST payment – this GST will then be recoverable as GST reimbursements,

and is substantial at 7% of the purchase price.

3. You can enjoy tax beneitsThe Singapore corporate tax regime allows new

start-ups to enjoy tax exemption for the irst $100,000 of normal chargeable income for each of the company’s

irst three consecutive inancial years. Effectively, new start-ups with a net income of $300,000 in each of their irst three inancial years pay tax based on only $100,000 for each of their irst three inancial years (based on the


7

prevailing tax rate of 17%).

When buying with other investors, the beneits of forming a company include:

1. The terms of agreement between the property

investors can be easily stated in the company

shareholder’s agreement

2. There is no big fear of a stalemate in the event

of death, bankruptcy, illness, unsoundness of

mind or inordinate absence affecting one of the

shareholders.

Property investment is a business to help you generate

proit and cash low – you should not get emotional about it and should run it as a business. That’s why I

recommend forming a company to do it.

However, one practical challenge faced by a property

investment company is that of obtaining mortgage loans.

Bankers tend to look behind the corporate veil of the

company and conduct their due diligence on each of the

shareholders and directors. The credit rating and level of

experience of such individuals will determine both the

approval and quantum of the mortgage loans.

Reasons To Enter Into A Property

Sharing AgreementOne way to share the burden of having to pay huge

upfront sums of money towards property purchases is to

form property-sharing joint ventures. Each investor pays

a small sum of money (depending on their percentage



8


shareholding) to tap into big investment opportunities.

With a bigger investment budget, a group can also

bargain for better discounts in bulk purchase deals,

or buy costly properties like a coffee shop or eating-

house with high rental returns. Even small buildings are

possible to buy.

Property sharing will also provide you with a greater

inancial safety net to cushion you from the ups and downs of the property market. This will help you sit out

any lull period in a property cycle.

But before you do so, make sure all your partners

possess high integrity, and make sure you do not run

afoul of the rules relating to soliciting funds from the

public. Property investment is a business, and you can

only build a good business with honest people.

Property sharing ventures often take the form of

private limited companies, which I recommend unless

you are buying the property with a close relative. Despite

the hassle of legal procedures and operation costs, it is

worth it as forming a company will not only safeguard

your interests but also offer other beneits.

“Must Do” Property Buying

Due DiligenceYou should always make the effort to ind out about all the relevant details regarding a property, as well as its

seller(s). Never just believe what the agent says.

Important details to look out for include whether the


9

property is freehold or leasehold, its exact area, as well as

whether there are caveats or orders of court registered against

the property. Government plans for the area are also critical,

such as whether there are road or drainage line reserves.

Certain zones require special caution as they may have special government planning restrictions, including Geylang,

Changi, Serangoon, Balestier, Chinatown, Pasir Panjang and

Tanjong Pagar.

You can conduct some of your due diligence by doing an

online search (e.g. at www.inlis.gov.sg, www.lawnet.com.

sg, www.ipto.gov.sg etc), but consulting conveyancing and

property lawyers can save you much time and hassle. In fact,

getting professional legal assistance to go over the ine print can save you from losing heaps of money should something

go wrong during and even after the sale.

The Biggest Mistake Property

Investors MakeThe biggest mistake I see property investors making is

succumbing to greed and committing to properties beyond

their inancial capacity. This often happens during bullish markets when buyers aggressively bid for properties, and

many investors boast of the huge proits they make lipping or reselling properties.

I myself over-committed to properties during the epic

1995-1996 property boom, and when prices started to fall in

1997 I sold off some of the properties at depressed prices.

Worse, some of my co-owners started to default on their



10


commitment to pay the mortgage instalments, leaving me

to bear the burden. By 1998, most of my properties were

in negative equity, meaning the value had fallen below the outstanding mortgage. During that time, I lived under the

shadow of foreclosure and bankruptcy. Fortunately in 1999

there was an upturn in the market and property prices started

to climb.

What I learnt from this great inancial loss was this lesson: Never overstretch your inancial capacity. Buy only what you can afford to hold. You must have the inancial capacity to ride out the storm in a weak property market, and be prepared

to hold on to your property for a few years. Make sure you

set aside enough money for the incidental costs (stamp duties,

legal costs, GST etc) and have 12 months’ worth of funds to

pay for the maintenance, property tax and utility bills.

Do Residential Or Non-Residential

Properties Make Better

Investments?I have often been asked whether residential or non-residential

properties make better investments. My general assessment

is to buy residential properties for capital appreciation and

commercial and industrial properties for rental yields.

For example, I bought a 4-room unit in Martin Place

Residences off River Valley Close in the second quarter of 2009 at about $1,420 per square foot (psf). Within one and a half years, the property appreciated to $1,850 psf, an increase of more that 30%.


11

A month later a friend and I ventured to acquire a unit in an industrial estate known as Eunos TechPark. The price

has not appreciated much but we have enjoyed the very

healthy net rental return of around 9% over the last ive quarters.

How To Flip A Property For A

Quick ProitThe quick sale of a property after obtaining an option to purchase is often called a “lip”, so called because the entire purchase and resale process can happen in a matter of days

and weeks. Expert property investors are often on the lookout

for such opportunities because they can get quick proits with only a minimum outlay of 1% of the property price.

There are a few essential rules to follow when lipping:1. All sellers of a property must sign the Option To

Purchase (OTP), and every seller must have the

capacity to sell.

2. The title of the property must be in order, i.e. there

are no caveats, order of court, or other encumbrances

preventing the sale of the property.

3. The OTP must be addressed to an individual, a

company, or a legal entity with the capacity to purchase

the property.

4. The words “and/or nominee(s)” must appear after

the name of the original purchaser that the OTP is

addressed to (this is critical).

5. The original purchaser, whose name is on the OTP,



12


will hand the original copy of this, together with a duly

signed nomination letter, to the inal purchaser.To execute a lip, after you have paid the 1% option money

and obtained the OTP from the seller, you market the property

aggressively and hope to ind another inal buyer within 2-4 weeks. The inal buyer will then pay you a proit (equal to the difference between the purchase price agreed upon between

you and him, and the original purchase price) in exchange

for the OTP and a nomination letter nominating him to be the

buyer.

Note that if you lip under construction projects from developers you will have to execute the sale and purchase

agreement and thus be liable to pay stamp duty, but if you lip resale properties you do not need to do so.

A word of advice from me: lipping carries the risk of forfeiture of your option money and liabilities, so rather

than being too greedy you should be lexible when receiving offers, and only lip during bullish markets.

My Personal Investment PhilosophyI can never over-emphasize the importance of inancial prudence. In my network we carry out what is known as

“the stress test” – we ask ourselves whether we are able to

comfortably pay our monthly mortgage instalments in a worst

case scenario when interest rates skyrocket and mortgage

instalments increase. To make matters worse, our tenants may

leave and a suitable tenant may not be found easily. Rental

payments are not always dependable and we may have to go

without rental collections for months on end.


13


I allocate half of my investment funds to property and the

other half is invested in stocks, options, unit trusts, bonds,

commodities and currency. I do my own analysis for all my

property investments, but for the other asset classes I also

listen to the advice and recommendations of the experts in

those ields (such as my stock broker or private banker).

My Worst Property InvestmentIn my book Secrets of Property Millionaires (published in

the second half of 2010), I illustrated the many mistakes I

had made in my property investment journey. They were

costly mistakes and I had learned to spot the tell-tale signs of

possible pitfalls.

In 1996, I purchased three semi-detached houses at Limau

Garden, each costing $1.8-1.9 million. Though those houses only had 99-year leases, they were part of the prestigious

Kew Vale collection of landed properties sold by Kew Park

Pte Ltd. I thought the houses were a bargain, as I obtained

them at bulk purchase discounts of up to 18% off their listed

prices. The land area for each of the three-storey split-level

houses was decent at approximately 2,800 square feet, with huge built-up areas of about 3,770 square feet.

Back then, it seemed like a great buy. However, as it

turned out I had bought the three houses close to the peak of

the 1993-1998 property cycle.

Two years after the purchase, the economic downturn hit.

Rentals for each semi-detached house plummeted from about

$7,000 per month to a low of $2,600. Despite this, I held on to all three houses. Surely the prices would recover one day.


14


Another year later, in 1999, I sold one of the houses at

$1,225,000 taking a loss of $655,000 on that unit. It was indeed a very painful decision. Unfortunately, I had little

choice but to dispose of the house at this depressed price as

the property market was worsening by the day. I had sold in

a buyer’s market, in the hope that with the reduced liability

I could hold on to the other two properties until their prices

recovered.

The next property boom came in 2007. I inally sold my remaining two semi-detached houses at $1.2 million each. Despite having sold at what was supposedly a peak, my total

loss on both houses amounted to slightly over $1.3 million! Prices had simply not recovered even after a holding period

of more than 11 years. Had I held on to the houses till today,

the prices might have increased marginally to just touch the

$1.5 million range. This would still be a far cry from the over $1.8 million I paid per house in 1996.

To sum up this hard lesson learned, I had bought the wrong

properties at the wrong time – a sure formula for the typical

property investment disaster.


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Review copy - Please do not circulate - All the Latest ...thefinance.sg/wp-content/uploads/2011/03/Secrets-of-Singapore...International Plaza Singapore 079903 ... How PropNex ensures