To buy now OR Not... - dilemma..

[Petertan123]

Hi all Gurus,

I have a real headache here and it is driving me sleepless recently... Would sincerely appreciate some sound advise from all the pros here...

Background :
- I am Singaporean and is now staying in a rented HDB house, monthly rental at SGD2700, because of some past mistake make which I do not want to mention here for simplicity purpose.

- Our total savings(including all CPF) is only about SGD250K...not much actually..

- We have a family condo TOP in yr2014 meant for permanent staying, and it's monthly repayment to the developer will soon to be near SGD3000 in 7-8 months time later. Now is near one thousand only in monthly repayment.


Intention :
We would hope to buy one more condo(2 bedder - less than SGD1m) for mainly 3 reasons below.

1. Can soon(3 months later) offset the current monthly HDB rental cost of SGD2700 while waiting for the family condo to TOP in yr2014.

2. Can 'breathe' a little financially once we are require to pay the SGD3000 monthly repayment for the family condo 7-8 months later, because can then use the rental from additional purchase condo to offset the HDB rental SGD2700 liao.

3. Can use this additional condo for retirement purpose later(collecting rental) once we are able to pull it through altogether.



Dilemma :

1) Should we really buy another condo, given the current gloomy market and with such limited financial status of SGD250k ? Are we over our head, and should not think of buying at all ??

2) If buy now, the house prices are still much on the highside, comparing YTY..

3) If dont buy now, every month is just incurring SGD2700 in real cost with no return, ie, helping people paying their house only.

4) If we choose to wait for property prices to drop, will only incur more monthly rental cost only..To date, already paid 7 months rental(SGD18,900)....very heart ache. Additionally, property price may not drop at all....no one will know..

While I am trying to stay positive, i.e., the drop in property price is more than I pay for total retal to date...then it will be breakeven. But the question is WHEN will be that time ?? Or will it come at all ??


Really apology for such a long story above, and thanks for your patience in reading it to this point..

Please advise what should I do now ?? dilemma....

[Allthepies]

Hi I think it is not possible to buy a 2nd condo which need 40% downpayment which works out to 400k.

[Petertan123]

I can loan from bank at 80% for some reason...

[terence]

Wat reason bro?

[sotidy]

Wat reason bro?

Probably the loan for the family condo is taken by either the husband or wife and thus the other person is 'freed' to take another loan.

[kane]

I can loan from bank at 80% for some reason...

How's not the time to lever 80%.

[1000g]

Given you can loan 80%, and throw in all the 250K inclusive of stamp duty, which means you are in a very dangerous position. Just continue to rent. Just treat it as bad planning in the beginning. Money wasted on renting now is your amulet actually.

[Petertan123]

You are absolutely right.. The family condo is under my wife name..

I know I am in a very dangerous position if I chiong, but if not chiong also die by paying for the past costly mistake, which is real dollar and cents outgoing every month...

[sotidy]

1. You can consider trying to rent for a cheaper HDB flat...at least not so heartache till 2014.

2. If you really want to get another condo, try to look for those slightly 'undervalue' and you must also weigh your ability to repay the mortgage loan for BOTH the condo, base on your family income (salary, stocks, business, etc). Also factor in the scenario of ZERO rental income + 1 person job loss. If you can stomach all these w/o sleepless nights....then u can consider.

3. No one will know the market movement for sure...but if you will have greater chances of success if you have holding power. Else....I think you might have more than just sleepless night.

Cheers.

[sotidy]

You are absolutely right.. The family condo is under my wife name..

I know I am in a very dangerous position if I chiong, but if not chiong also die by paying for the past costly mistake, which is real dollar and cents outgoing every month...

My opinion: Right now chiong is very dangerous especially if you do not have the ammo to ride through the ups and downs. If you don't chiong, you *will not* die...as the money can be small (2.7k x 24=64.8k) when compared to a fall/downturn.
Personally I don't think the correction (in term of PPI) will not be more than 20% so assuming the resale EC or PC u r getting now is 1200sf*750psf=900k vs a fall of 20% which means 180k, the 65k rental you are paying could be 'peanuts'.

Again, it depends on how deep your pocket is (you need to understand your finance position) but don't put ur family into unnecessary risk.

[Petertan123]

1. You can consider trying to rent for a cheaper HDB flat...at least not so heartache till 2014.

2. If you really want to get another condo, try to look for those slightly 'undervalue' and you must also weigh your ability to repay the mortgage loan for BOTH the condo, base on your family income (salary, stocks, business, etc). Also factor in the scenario of ZERO rental income + 1 person job loss. If you can stomach all these w/o sleepless nights....then u can consider.

3. No one will know the market movement for sure...but if you will have greater chances of success if you have holding power. Else....I think you might have more than just sleepless night.

Thanks bro Sotidy,

Yes, am already sourcing for cheaper HDB to stay now....Are also looking for codos that preferably comes with tenancy with reasonable yield too.

You are abosultely right....I need to think hard again on the possibility of zero rental + one person possible out of job. This is daunting as no one knows what will happen in future.. hmm...

Tao Tia !!

[jwong71]

otherwise buy a etc 600-700k resale condo. mortgage more manageable

[Petertan123]

Yup, that is an option too...for a studio maybe... at least the rental can cover partial HDB rental..

[sotidy]

1. You can consider trying to rent for a cheaper HDB flat...at least not so heartache till 2014.

2. If you really want to get another condo, try to look for those slightly 'undervalue' and you must also weigh your ability to repay the mortgage loan for BOTH the condo, base on your family income (salary, stocks, business, etc). Also factor in the scenario of ZERO rental income + 1 person job loss. If you can stomach all these w/o sleepless nights....then u can consider.

3. No one will know the market movement for sure...but if you will have greater chances of success if you have holding power. Else....I think you might have more than just sleepless night.

Thanks bro Sotidy,

Yes, am already sourcing for cheaper HDB to stay now....Are also looking for codos that preferably comes with tenancy with reasonable yield too.

You are abosultely right....I need to think hard again on the possibility of zero rental + one person possible out of job. This is daunting as no one knows what will happen in future.. hmm...

Tao Tia !!

1. To prevent making 'further mistakes', do map out the various possible scenarios.
Scenario 1: BAU
Scenario 2: Source for cheaper HDB
Scenario 3: Source for cheaper condo to stay
Scenario 4: Source for cheaper condo to buy
etc...
Factor in scenario of zero rental (so as to understand what is your holding cost for that property) + 1 person out of job (understand your ability to hold the property).
2. Understand what is the shortest possible period you and your wife can complete both the mortgage loan. The longer it is, the higher the risk.

And remember, holding power is going to determine whether you have sleepless nights/depression OR you can sleep soundly every night.

[mkl22]

2. Can 'breathe' a little financially once we are require to pay the SGD3000 monthly repayment for the family condo 7-8 months later, because can then use the rental from additional purchase condo to offset the HDB rental SGD2700 liao.

am i mistaken here. you use the rental from the condo to offset the HDB rent.(people usually use the rent to offset the mortgage of the same property) then you pay mortgage on the 2 bedroom condo plus the 3k for the 2014condo. wont it be the same in the end? and if interest rates go up, it is going to be painful.

[maisonjai]

Now already sleepless, once u commit the 2nd unit & 0 ammo lagi cannot slp if the planning didn't work out.

2. Can 'breathe' a little financially once we are require to pay the SGD3000 monthly repayment for the family condo 7-8 months later, because can then use the rental from additional purchase condo to offset the HDB rental SGD2700 liao

Can offset, u need to pay 2 mortgages abt 5.8k? Cutting it too thin leh

[sotidy]

am i mistaken here. you use the rental from the condo to offset the HDB rent.(people usually use the rent to offset the mortgage of the same property) then you pay mortgage on the 2 bedroom condo plus the 3k for the 2014condo. wont it be the same in the end? and if interest rates go up, it is going to be painful.

Yup...this is a very valid point. And I guess the rental from the 2 bedroom condo will hardly be able to offset the 2700 rental for the HDB. Moreover, peter's cash/cpf will be 'locked' into this 2 bedroom condo with 4 year SSD! Quite a dangerous thought....unless of course peter & family can save say 200k per annum....then at least his ammo can be replenish fairly quickly

[kane]

Now already sleepless, once u commit the 2nd unit & 0 ammo lagi cannot slp if the planning didn't work out.

2. Can 'breathe' a little financially once we are require to pay the SGD3000 monthly repayment for the family condo 7-8 months later, because can then use the rental from additional purchase condo to offset the HDB rental SGD2700 liao

Can offset, u need to pay 2 mortgages abt 5.8k? Cutting it too thin leh

yeah, and what if you can't find a tenant for one of the condos? it's a very dangerous game to play.

[Petertan123]

am i mistaken here. you use the rental from the condo to offset the HDB rent.(people usually use the rent to offset the mortgage of the same property) then you pay mortgage on the 2 bedroom condo plus the 3k for the 2014condo. wont it be the same in the end? and if interest rates go up, it is going to be painful.

Yup, agreed this is a really serious concern...Please allow me to show you my calculations.. hopefully it is correct...

1. If chiong :
Assuming heng can get 3.5% rental yield of a SGD1m property = SGD3500
Less :
Mgt fee(assuming) = SGD200
Change to lower HDB rental = SGD2200(assuming)
Mthly repyt for SGD800K bank loan(assuming 1.5% for 30 yrs) = SGD2700
** Net outgoing cash = SGD1600

2. If not chiong :
Current outgoing cash = SGD2700(sunk cost)

Overall, I still attain net savings of SGD1100 if i chiong.....I think. Please let me know if I am wrong..

I understood that nothing are perfect, and the underlying risks are still interest rate, zero rental and loss of jobs.

hmm...have to weigh again...sighed.. cant move at all lehh...

[Petertan123]

Now already sleepless, once u commit the 2nd unit & 0 ammo lagi cannot slp if the planning didn't work out.

2. Can 'breathe' a little financially once we are require to pay the SGD3000 monthly repayment for the family condo 7-8 months later, because can then use the rental from additional purchase condo to offset the HDB rental SGD2700 liao

Can offset, u need to pay 2 mortgages abt 5.8k? Cutting it too thin leh

Agreed, but based on my calculations(if i heng), I should be only paying ard SGD4100 for all three properties..30% less than SGD5800..

* Underlying risks aside..

[sotidy]

Yup, agreed this is a really serious concern...Please allow me to show you my calculations.. hopefully it is correct...

1. If chiong :
Assuming heng can get 3.5% rental yield of a SGD1m property = SGD3500
Less :
Mgt fee(assuming) = SGD200
Change to lower HDB rental = SGD2200(assuming)
Mthly repyt for SGD800K bank loan(assuming 1.5% for 30 yrs) = SGD2700
** Net outgoing cash = SGD1600

2. If not chiong :
Current outgoing cash = SGD2700(sunk cost)

Overall, I still attain net savings of SGD1100 if i chiong.....I think. Please let me know if I am wrong..

I understood that nothing are perfect, and the underlying risks are still interest rate, zero rental and loss of jobs.

hmm...have to weigh again...sighed.. cant move at all lehh...

Urmm....dun really understand your calculation. I think there are probably many things you did not consider.
Don't forget if your property cannot be rented out, not only do you have to repay the mortgage loan, u will also have to pay the property tax and maintenance fee...and that will mean your monthly outgoing cash will come up to >3k+. You need to consider the full holding cost.

Also, do you have kids already and is your wife intending to work for life?

[Petertan123]

yeah, and what if you can't find a tenant for one of the condos? it's a very dangerous game to play.

The calcualtions in worst case scenarios will be :
HDB rental - SGD2700
Mthly pyt for first condo - SGD3000
Mthly pyt for 2nd codo - SGD2700
** Net outgoing cash is SGD8400
yup, on very thin ice... die liaoo...

Depends on how many months can i tahan without tenant..

[august]

Dilemma :

1) Should we really buy another condo, given the current gloomy market and with such limited financial status of SGD250k ? Are we over our head, and should not think of buying at all ??

2) If buy now, the house prices are still much on the highside, comparing YTY..

3) If dont buy now, every month is just incurring SGD2700 in real cost with no return, ie, helping people paying their house only.

4) If we choose to wait for property prices to drop, will only incur more monthly rental cost only..To date, already paid 7 months rental(SGD18,900)....very heart ache. Additionally, property price may not drop at all....no one will know..

While I am trying to stay positive, i.e., the drop in property price is more than I pay for total retal to date...then it will be breakeven. But the question is WHEN will be that time ?? Or will it come at all ??

1. price now is peakish so should not buy.
2. see point 1
3. source for cheaper rental once current tenancy is over
4. dun forget if property prices do drop it also mean rental rates are dropping too.

so there is no dilemma. if u "chiong", to me the risk undertaken to gain that little reward or savings is not worth it.

[kane]

few things:

$1m property, maintenance usually about $250-$300.
secondly, where is the sum for property tax and income tax?
thirdly, $3,500 is monthly rental, what about agent fees for securing say a 2 year rental?
fourth, expenses to bring the property to a tenantable state
five, instalments for the initial period when you've taken over the property and you're looking for a tenant.

it all stacks up, so be very very careful.

[cl0ver]

calculations are never accurate... so many hidden costs..
stamp duty, property tax, maintenance fee.
do you have kids? then later you will have to pay child care, maid service, extra curriculum activities, healthcare, escalating insurance premiums etc.

250k just put in high yield dividend stocks paying 7% and you will be better off.

you didnt mentioned what is your combined income? if you take in 250k p.a. then still got chance, but market next year is going to be tough.....

[kane]

haha, lots of seasoned bullish gurus with a lot of good level-headed advice.

[sotidy]

The calcualtions in worst case scenarios will be :
HDB rental - SGD2700
Mthly pyt for first condo - SGD3000
Mthly pyt for 2nd codo - SGD2700
** Net outgoing cash is SGD8400
yup, on very thin ice... die liaoo...

Depends on how many months can i tahan without tenant..

Don't forget all the miscellaneous stuffs like maintenance fee, property tax. Also, mortgage rate can also increase ur cost too. This is especially so if all the banks agree to increase their spread in tandem.

Better be kiasi than kiasu

[Petertan123]

Urmm....dun really understand your calculation. I think there are probably many things you did not consider.
Don't forget if your property cannot be rented out, not only do you have to repay the mortgage loan, u will also have to pay the property tax and maintenance fee...and that will mean your monthly outgoing cash will come up to >3k+. You need to consider the full holding cost.

Also, do you have kids already and is your wife intending to work for life?

Many apologies for the confusion.. Please allow me to clarify again, as below :

1. If chiong :

Income :
Assuming heng can get montly SGD3500 rental income for 2nd condo = SGD3500

Cost :
Mgt fee for the 2nd condo(assuming) = SGD200
If i can change to a lower HDB rental hse soon = SGD2200(assuming)
Monthly repayment of SGD800K bank loan(assuming 1.5% for 30 yrs) for 2nd condo = SGD2700(gotten from property guru)
** Net outgoing cash = SGD1600

2. If not chiong :
Continue stay at current rented HDB hse = SGD2700(sunk cost)

Overall, I still attain 'net savings' of SGD1100 if i chiong, by paying SGD1600.....

Of course, the above are just simple calculations..

[kane]

Many apologies for the confusion.. Please allow me to clarify again, as below :

1. If chiong :

Income :
Assuming heng can get montly SGD3500 rental income for 2nd condo = SGD3500

Cost :
Mgt fee for the 2nd condo(assuming) = SGD200
If i can change to a lower HDB rental hse soon = SGD2200(assuming)
Monthly repayment of SGD800K bank loan(assuming 1.5% for 30 yrs) for 2nd condo = SGD2700(gotten from property guru)
** Net outgoing cash = SGD1600

2. If not chiong :
Continue stay at current rented HDB hse = SGD2700(sunk cost)

Overall, I still attain 'net savings' of SGD1100 if i chiong, by paying SGD1600.....

Of course, the above are just simple calculations..

relook at your potential cost figures, i've pointed out some missing items.

[cl0ver]

better dont chiong.
enjoy a peaceful life with your wife, take her on holidays so she wont nag at you on financials! lol

since you are vested, if prices goes up, your property appreciates, but if prices fall, then you can re-negotiate your HDB rent.
there are many opportunities to grow your wealth but plunging into property now after already being vested is a BADDDDDDD IDEA!