Step By Step Guide To Buying Your Second Property

Synopsis

Buying a second property is an ambition to many. But how do you get there from a financial planning angle? The amounts are large and unless you have gotten a massive bonus (good for you) or struck lottery (great for you!), the budgets are going to be tight. Read on further if this resonates with you…

If you thought it was such a headache with your first house, you really don’t know what you are getting into.

This post quickly garnered more than 50 likes+comments from facebook in Sep2017

First words

Buying your first house was easy. You had spare capital and payment for it came from your first CPF savings. You were probably debt free. If you previously bought a BTO or an EC, it was only a matter of qualifying for the loan required. You didn’t even need to engage agents or negotiate terms yourself.

But at this stage, it is different.

 

Where are you right now?

Group A: Still under MOP (minimum occupancy period) guidelines by HDB

Group B: Cleared MOP guidelines/ Not restricted by MOP – have existing loans that you do not have enough to clear

Group C: Cleared MOP guidelines/ Not restricted by MOP – have existing loans >$500k BUT have at least $500k in cash+cpf now

Group D: Cleared MOP guidelines/ Not restricted by MOP – have existing loans that you should have MORE THAN ENOUGH to repay

Go to your section right away and don’t waste time.

 

Group A: Still under MOP (minimum occupancy period) guidelines by HDB

 

You are in preparatory years.

Steps

1) Avoid loans now. If you must, structure them to be short (such as taking a short car loan at purchase). Cut off some of your credit cards. They reduce your borrowing limit.

If your monthly base income is >$8,000 and you are stuck with a long car loan then never mind, keep the car loan first.

If income $5k to $8k, then yes, go clear your car loan because you cannot qualify for much mortgage loan without doing so.

If income less than $5k, invest in financial assets. Most likely you need to urgently build up your capital instead.

2) Cut back on expenses. You should focus on building your investment base. Invest in liquid financial assets for the next few years. Click on “5 figure dividends” to learn more on dividend investing.

Aim to get to Group D: Cleared MOP guidelines/ Not restricted by MOP but have existing loans that you should have MORE THAN ENOUGH to repay now.

 

 

Group B: Cleared MOP guidelines/ Not restricted by MOP – have existing loans that you do not have enough to clear

 

If you do not have enough to clear your existing loan, you are NOT READY to invest in a second property. There is almost NO WAY to get a private property with current rules. Don’t waste time, trust me, I’ve tried MANY permutations already.

Some property agents will tell you to sell your HDB and buy 2 properties. In my opinion, that is shortcutting the system and disregarding the expenses in your lifestyle. You may become over leveraged into property as you and spouse borrow to the hilt. Property as an investment is ILLIQUID and freaking hard when you need to sell. There is no guarantee of a tenant also.

The root of the problem is that you are not saving enough. A second investment property will put too much of your capital at stake.

 

Financial investments allow you to grow with much less stress. Aim to get to Group D: Cleared MOP guidelines/ Not restricted by MOP but have existing loans that you should have MORE THAN ENOUGH to repay now.

Steps

  1. Cut back on expenses.
  1. Focus on building your investment base. Invest in liquid financial assets for the next few years.

Do not need to repay home loan early. Bank interest rates are still low.

 

If you belong to Group C & Group D, subscribe to our content by filling up the information below. We will give further personalised tips.

 

REMEMBER: BUYING A SECOND PROPERTY IS ACTUALLY NOT THE GOAL,

GROWING YOUR WEALTH WITHOUT STRESS IS.

 

What you will receive

  1. How to calculate your actual return on investment from a property investment.

2. The “Six Step Check” that you need to do from now to the actual property purchase

 

 

Image credits: https://minimalist.sg

Josh Tan

I graduated with an Accountancy degree in from Nanyang Technological University but did not join an audit firm. Being keen on investing and personal finance matters, I started a journey in the financial planning industry and have been blessed to share what I am passionate about for the last 10 years. Currently, I practice in Promiseland Independent Pte Ltd, one of the reputable independent financial advisory firms in Singapore As a dad now, I have a new found perspective on financial matters concerning parents. I share many of the concerns that you have and as I search for answers myself, I'll share them through my articles.

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