Thanks again for sharing.
Personally I believe property investment like stock investments need to go thru a fair bit of analysis, location, rental attractiveness, conveniences, plot ratio etc. If anyone buys blindly I would really find that foolish. But unlike stocks property are much easier to read thank god cause everything is laid out.
The two investment properties you refer to are these the shophouses? Were they already tenanted when you bought them?
I'll be frank and say that I would only see that as your better investment. The other two condo's thought the yield is decent doesn't fit in what I look for in a property because I don't see capital appreciation there. (I target 70/100% ROI outside rental income), thought I do agree to keep the loan gearing as small and manageable.
Like you I got a lucky break when I acquired a row of industrial units at bargain price and rented them to a single company. The yield if I calculate is about 10 - 12% on original purchase price.
I do question if making money this way will continue for long (i.e buying on the dips) or will it one day turn stagnant but since I'm done okay so far I will continue to pursue property.
Be interested what areas you are focusing on in the downturn, I'm working on building my areas of interest as well.
Quote:
Originally Posted by Unregistered
Paralysis through analysis.
We are also into property investment. When we started with our first investment property (not our primary home), our immediate goal was to pay off the loans as early as possible.
But in 2008, we changed our mental model when the housing loan was drastically reduced to 1% thereabout. It stayed this low till now - a good 6+ years!
So for our 2 investment properties, we paid down about 30% each and for the rest of the money that we could have used to pay up for the properties, we left some of it in our CPF, invested in blue chips and bought some bonds.
This is what our returns are like:
CPF OA: 2.5%
Bonds : 4 - 5%
Shares dividends : 4.5% (average)
Rental income(net) : 8.5% (based on paid up amount)
Cost of housing loan: about 1.5% currently
Had we fully paid up the 2 investment properties, we would be just earning a net income of 3% pa.
The 2 investment properties were valued at $1.4m when we bought them. Now they're worth about $2.2m (down slightly from its peak)
Housing loans has the lowest interest rate in the market, because the property is the collateral the banks staked their claim on, so makes use of it to generate more money!
The caveats here are:
1. Ensure you can handle the loan payment during periods when you cannot find tenants
2. You are able to generate more returns with the money which you could have used to fully pay up for your property. With current low housing loan rate, this is very easy.
3. You must already have the money. That is, don't over extend yourself |