When Is the Right Time to Make a Property Investment?
11 December, 2023 by
When Is the Right Time to Make a Property Investment?
Mindlink Groups, Admin

Already handling your home payments and not planning a move? Wondering if it's the right time for your first investment property?

Property is a classic investment in Singapore, traditionally appreciating the city's rapid growth. Despite recent measures to curb speculation, the market's buzzing with new launches and properties, even during the pandemic.

If you're eyeing a property for your investment portfolio, check these boxes to decide if it's the perfect time to start your property hunt.

MOP Mastery

If you've met the Minimum Occupation Period (MOP) of five years in your HDB flat, you're eligible to buy a private property. However, the MOP requirement doesn't apply if your first property is already private. Navigate those property moves with MOP mastery! 

You want to increase your capital or find a low-risk way to generate passive income.

Investing in property is generally considered low to medium risk, offering a tangible asset for potential returns. As a tangible asset, returns typically stem from two sources: passive income through rental and capital appreciation, the property's increase in value over time. While these returns are generally stable, they may not be exceptionally high. A healthy net rental yield falls around 2–3% for residential and 3–5% for commercial properties. Capital appreciation varies based on type and location.

What makes the property unique is its financing structure. Leveraging through low-interest loans, especially for residential properties, contributes to its popularity. This strategy has the potential to boost returns. However, actual returns depend on property characteristics and market strength.

You have additional funds in your CPF or available cash

Ready for a second property? Make sure you've got the cash!

Unlike your first property, buying a second one means a 25% cash down payment based on the property's valuation. Additional costs like Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD) at 17% (for second residential property) or Goods and Services Tax at 7% (for commercial) also add to the bill.

Under the Total Debt Servicing Ratio framework, you can only borrow up to 55% of your gross monthly income, covering all your loans. If you're still paying off your first property, your Loan-to-Value Ratio for the second property drops to 30% to 45%, compared to 75% for your first.

Cash or CPF (if residential) can cover the balance, but if your CPF is already used for your first property, set aside the Basic Retirement Sum of $93,000 before tapping into it for the second property.

In a nutshell, have enough cash for down payment and stamp duties. Your existing loans and first housing loan clearance affect the loan size for the second property. Plan wisely and ensure your cash and CPF savings cover the balance for that second dream property!

You're keen to become a landlord.

Ready to play landlord? Renting out your property can help cover the mortgage and bring in passive income. Being a landlord comes with responsibilities, though – unless you hire a property manager.

The level of involvement you prefer as a landlord might influence the type of property you invest in. Residential tenants often have routine demands for maintaining a livable space. In contrast, commercial properties may have diverse needs based on business nature, requiring quick responses to avoid disrupting day-to-day operations.

You're prepared to keep what you own for a very long time

Ready for the long game? Holding onto your property for the long term is key to significant profit. Unlike quick flips or cashing in on hot markets, property investment usually takes time to appreciate. Besides stable but gradual rental returns, the value grows as the surrounding area develops. Plan to keep your property for at least five years or more, with an eye on its remaining lease years, as it can impact its overall value.

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