Email from Reader:
After going through financial difficulties over the past few years, I have been thinking of ways to build my wealth in quicker ways other than through the normal monthly wages. Minus personal & household expenses (I have 3 young children), insurances and bank loans, etc., there is nothing much left. I just want to get out of this cycle and gain financial freedom so I attended a free seminar “Owning 2 or more properties with little or no income” which caught my attention. After attending the seminar, I am even keener to embark on a property investment journey.
To cut it short, we were told that private properties are better investment than HDB flat. And to start off the private property investment, it is better to sell off our existing HDB flat.
But because of my family financial situation, I asked the speaker how possible and feasible it is for me to get a home loan to buy a private property. (A brief description of my financial situation, I took various loans years ago on behalf of my husband & his parents and incurred bad credit rating for they have been unable to service the loans. My husband has worse credit rating than mine. We still have outstanding debts.)
Hence I am sceptical about securing a home loan. The speaker said an option is to apply for the home loan using my mother’s name and there is a possibility of getting 80% loan and 30 years tenure although she is a 53 years old housewife because my parents do not own any property (they are staying in a rented place). My dad is self-employed and I supposed he has/had loans for business cash flow.
So the sugeested plan is to have my mother “own” 98% of the property and my husband & I 1% each so as to use our CPF for part of the 20% down payment.
I am wondering how is this possible and what repercussion/implication will there be?
What other factors do I have to consider?
I have many questions as it is easier to say than to really sell away my flat & buy a private property as any poor decision made will adversely affect my family esp. my 3 children in the future.
Because his 3 days’ workshop is pretty expensive & not affordable for me, I would like to clarify with him on my doubts esp. with my current situation, is it feasible for me at all to invest in any private property before I commit on the expensive workshop which may end up not applicable for my case. But disappointingly I have been unable to reach him…
After I came across your blog and read your article ‘4 Outrageous Claims Made by Property “Experts”’, I think it may be a blessing in disguise for not able to contact him. : ) Now I am even more sceptical about the effectiveness of his workshop.
After I came across your blog and read your article ‘4 Outrageous Claims Made by Property “Experts”’, I think it may be a blessing in disguise for not able to contact him. : ) Now I am even more sceptical about the effectiveness of his workshop.
Anyway, the objective of writing to you to get your opinion on his advice above and do you think with my current financial situation, it is a good idea for me to embark on a property investment journey? When is the right time and how can I kick start?
My Reply:
Hi Cersei, (Name Protected)
Thank you for sharing your problems and they are very real for some people in your shoes too.
Since your questions are many, I’ll break them up and answer them in bite size portions.
Sell your HDB flat and re-invest profits in private properties – Dangerous or Profitable?
I’ve explained many times and very clearly why people who are keen to learn how to invest, should NOT be attending property seminars that falsely claim anyone can own multiple properties with little or no money down – no matter how enticing it may sound. These seminars target newbies, ignorant and greedy buyers who have zero inkling the kind of consequences they are getting themselves into by believing or buying into such dangerous fallacies.
You can read more on this which I’ve written.
When someone ask you to sell your HDB without knowing enough about your personal finances, investment experience, investment knowledge, etc, so you can re-invest the profits into buying into a claimed “potential” property investment, you’ll want to question his/her personal agenda in doing so – what profit agenda does he or she has? You’ll know he/she is a snakes oil salesman – I call them Cons, BS and morally corrupted.
If you strongly believe you’ve deep knowledge, expertise, vision, and the mindset of being a successful investor, then perhaps the risk of selling your HDB and re-investing the profits might be proven right in risk/reward returns. But, in most cases for most ordinary people, they don’t know the difference between a horse’s ass from its nose. And if you think these “experts” are there to fill in those missing gaps for you, you’re in for fool’s gold.
The point is simple. People only wants to be rich and make more money. They don’t care about the hard road or treacherous path needed to get there. They don’t care about reading and learning. They want to get there fast. They close their eyes and ears if someone tells them it will take them a lifetime to be wealthy and rich. They want to enjoy instant gratifications and instant rewards.
Try explaining the technical term of a Bond to them and they will think a Bond is stocks and shares. Try instead saying they can make money from bonds and they perk up immediately.
Try explaining the history of real estate, booms and bust, they think history are for school children. Instead, they get really excited when someone tells them everyone can make money from real estate.
These seminars prey on these inherent weakness.
Mother “own” 98% of the property and my husband & I 1% each so as to use our CPF for part of the 20% down payment
Property wealth “gurus” do not make money from their investments. They make money selling expensive seminar seats AND from re-selling properties in tie-ups via kick-backs with property developers and other real estate sellers. They are compensated via hefty commissions or rewarded with “free” properties if the “guru” can convince more of his/her participants to buy into the property. That’s where all the brainwashing and marketing propaganda will occur during the paid seminar itself – NOT real learning. Show me a claimed “guru” and I’ll call out on his/her BS.
This suggestion of co-owning with parents reeks of desperation and unethical morals to try convincing you that anyone can be a millionaire property investor the “easy” way so you will gladly pay him/her $4,000 in seminar fees and eventually be brain-washed to buy a “cheap” property from them too.
This strategy sounds very amateurish and skewed in the legal sense. You can tell the “guru” in his/her face what I’ve said. I’m not a lawyer and don’t know enough about your family’s relationship with each other. Unless a proper legal document is drawn up, there may be legal implications in who owns what, who have majority say, when to sell, how to manage, etc.
I’ve never involve family, relatives or even my mum (My father has passed on) in any of my investment decisions because it’s very sensitive and tricky at the very least. For example, I personally find the notion of using own parents name to buy a property for investment obnoxious and amatuerish.
The only exception is my wife.
Anything might go wrong and who’s to blame? At the end of the day, preserving a family relationship is much more important than making money if any. You’ve probably heard many cases where own family members will sue each other in property and money disputes. My own family is one of such many common disputes. Typical issues are always between brothers/sisters suing brothers/sisters, fathers suing sons, mothers suing daughters, nephews/nieces suing uncles/aunties, vice verse, etc.
My co-investments are strictly for business associates – people whom we know and trust to be mature and sophisticated enough to understand the investment. NO Tom, dick or Harry’s are allowed to co-participate. We spent thousands of dollars on legal documents alone and everything is written black and white. Everyone understands the risk as well as the rewards. No complains if things don’t go as well as expected. We are mature to understand if the investment does not go well as planned, it’s our own individual fault and no one else to blame or point fingers at.
Is it a good idea for me to embark on a property investment journey? When is the right time and how can I kick start?
I’ve spent time speaking and sharing with younger buyers in their twenties and some in their early thirties. What they share with me is this….After leaving grad school, first find a good job with good pay, find a partner, get married, buy a car, buy a new BTO flat (bigger the better to fit in afuture family of 4), plan for 2 kids, work harder.
What is missing? Investing for their financial future and retirement. These are the last things on their mind if they are even thinking about it. Many do not start until their 40s/50s. Some never start at all. My mum never invested anything profitable in her 65 years of life. She made some money in the stock market, only to lose it back again every time. She blamed the government and everyone else but never herself. But this was the older generation. Today’s younger generation is different with the Internet.
Running a business or investing in property is always something like: “Oh, when I’ve enough money, then I start thinking or doing.” or “When the time is right.” My question is ,” When will this happen?” ” What time is right?” What a man can do and what a man will do are two different things.
Embarking on a property investment journey at age 25 years old was good for me. My peers back then were busy thinking how to work harder in their jobs, how to buy their first brand new car or how to buy that new house.
I was busy thinking how I can be “out of job”!.
If I’ve gone the path of what most young people who go to, I’ll not be the person I’m today.
So I’m going to throw the question back to you. “Do you think it is a good idea for you to embark on a property investment journey?” – I don’t know. Only you can answer the question.
Having a huge personal debt load on your shoulders is something you and your husband has to figure how to get out. My advice for most people who wants to invest is first LEARN to invest time on how to manage one’s personal finances. If you can do that well, you’ll make a better investor than those who can even screw up a simple financial statement of their own.
I would like to seek first your opinion on the feasibility for me to own a private property.
The investment is only as profitable as the skill of the investor. Apart from the ability to afford a private property, anyone who have the means to do so and with the right skills and mindset and make themselves better investors than the average ones.
Through an entrepreneurial mindset, expertise, in-depth knowledge, and sufficient investment savvy, most ordinary Singaporeans should be able to afford a relatively affordable private re-sale property in Singapore once the market corrects to its proper fundamentals.
Hope this helps.
Source: http://www.crei-academy.com/email-from-reader-sell-hdb-and-re-invest-in-private-property/
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