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  • Joshua Tan

Prioritise Life Decisions First, Then Decide Your Property Route

Before you read on, this article is suitable for you if you've ever flirted with the idea of building capital through property, to secure your future goals & live a better retirement.

In recent cases, I have seen a trend of people wanting to grow and preserve their wealth by means of property upgrading, and at the same time safekeeping their funds in properties because they saw how banks pale in comparison when it comes to growing their money.

Another reason why they choose property is because it can serve as an inflation hedge for them.

People in such positions often venture to the internet, paid courses and advertisements to find information & advice, in an effort to make the best informed decision for themselves.

On one hand, after receiving advices and digesting all that they could, the solutions sounded viable.

On the other, they could not pin point how they exactly felt as it didn't exactly resonate with them, their needs, or their way of living.

When actually, the key is—Customisation.

Because in real estate, everyone's situation differs, and hence finding a solution from online resources to apply generally may not work in your favour.

Case Study on How Wealth Growing and Preservation can be done through Property

So, Jimmy and Helen have been working for some time, and through consistent savings over the years, they have increased their net worth.

They have touched some forms of investments, and realised that most of their wealth are stored in cash, CPF, as well as their current HDB property which appreciated in price over the last 5 years.

Initial Discovery Meeting

During an initial discovery meeting, here's what was found:

  • They have a combined net worth of $500,000—primarily in cash and CPF.

  • They have a household income of $16,000, and are both aged 35.

  • Helen is currently pregnant and due for delivery in 6 months.

  • They plan to have a family with 2 kids.

  • Their HDB was purchased from the BTO (Build-To-Order) scheme, at a subsidised rate.

  • It has been 5 years since their occupation in the current HDB flat, and it is finally ready to be sold into the open market.

  • Goal: They wanted a realistic plan that could help them retire with $2,000,000 in Cash and CPF, taking into account for inflation and increasing costs of living in the years to come.

  • Goal: After growing their wealth, they also want it to be sustainable with inheritance planning in mind.

Based on the above parameters based on their life goals, we then discussed the direction they should take in order to come up with a sustainable and workable plan.

Preliminary Check, Proper Planning

During a preliminary check, we found they were able to obtain a property loan of around $1,800,000 over a loan repayment period of 30 years.

(And because their loan repayment period is the maximum allowable of 30 years, they were able to minimise their monthly mortgage repayment amount, lowering their cash outlay for a higher return).

Now, considering their cash & CPF ($500,000), profits currently locked in the BTO flat (~$200,000), and a $1,800,000 loan amount, they have become eligible to enter the property market in the range of $2,300,000 and up.

We factored all these, coupled with their personal family considerations, and helped them look for suitable properties as part of their property route toward meeting their life goals.

Property Route: Steps toward their Life Goals

With the numbers and planning in place, they are able to enter a 3-bedder condominium comfortably.

A benefit of buying a 3-bedder would be its size, not just for liveability, but also from a wealth-growing view point. Because a larger-sized unit means greater potential profit to gain from—as the market moves by Per Square Foot (i.e. Multiply your unit size times the PSF price).

As for price gains, the below chart was one of those referenced, to plot a gain forecast of $300,000 for every holding period of 3-5 years (Holding period means: Holding onto the property until they swap to a next property).

Heritage View Condominium - Profitability - Joshua Tan Realty.jpg
Heritage View Condominium - Profitability - Joshua Tan Realty. Data Source: PropNex Investment Suite (Extracted on 23 Apr 2023)

As Jimmy and Helen are only 35, they can repeat each holding period cycle for about 6 times, until they are at or close to 65 years old.

If each move makes them $300K, 6 moves will make them $1,800,000. Coupled with the $500,000 in cash and CPF which they had in the first place, their $2,000,000 becomes realistically achievable. This is in line with their understanding that selecting the right investment property is part of their portfolio's vital element.

Additionally, with inheritance planning in mind, we also decided that the last stop of their property route would be aimed at settling for a freehold property, which could be passed to their future generations without worry of decaying lease.

If you are like Jimmy and Helen, and wish to plan out a property portfolio to reach your life goals too, then feel free to reach out non-obligatorily.

This is Joshua Tan, signing off.


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Disclaimer: While every reasonable cause is taken to ensure the accuracy of information provided or presented here, no responsibility can be accepted for any loss of inconvenience caused by any error or omission. The ideas, suggestions, general principles, examples and other information presented here are for reference and educational purposes only. This presentation is not in any way intended to provide investment advice or recommendations to buy, sell or lease properties or any form of property or financial investment. Joshua Tan Realty, Joshua Tan, its officers and successors shall have no liability for any loss or expense whatsoever, relating to investment decisions made by the audience. All copyrights reserved.


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