Hi Singaporean,
Both existing condos and condos under construction offer different investment aims.
If you buy a condo under construction, you will be looking more for capital gains. The first owner who buys from the developer always earns, and is the one who makes the most in the shortest amount of time.
For example, if the condo costs $800k and takes two years to build, you will be paying 20% ($160k) as downpayment. Let's say the condo appreciates to $950k when it is ready after 2 years. You would have made $150k out of your initial $160k investment. That is nearly a 100% capital gain on your money. True, you will be paying some interest for the two years, since there is no more interest absorption scheme. But it will be minimal since the payment is gradual and progressive, and only for a short period of time (2 years).
You can choose to rent out after the condo is ready, but it will be wiser to cash out when the value appreciate just after TOP. You will be making the most profits, and you now have more funds to seek the next launch to invest in.
In the other scenario, you are buying a built condo. Let's assume you are the person buying the $950k condo at TOP. This investment route is more for rental yields, and steady passive income.
For a $950k unit, a 80% loan is $760k. At 2.5% interest over 30 years, the monthly mortgage is $3,002. If you rent it out at $3,500/mth, you will be having a positive passive income IN ADDITION of having the mortgage being paid for.
In contrast, if your aim is to buy a condo under construction for rental, you will be losing out of 2 years of rental, compared with ready condos.
The condo will still appreciate after TOP, but at a slower rate. The market forces may cause the price the suddenly soar, but to venture into such territory will be speculation. So, after renting out for 5-10years, the value of the $950k condo may be $1.2-$1.3mil.
If you have the money to invest, do consider which route you would like to take. I do not mean to say that condos under construction are ONLY for capital gain, and ready condos are ONLY for rental yield, but these two do have different investment aims.
If you have $1.2m to invest, I would advise you to split the capital up to invest in two smaller properties rather than one big property. You can choose the same or the two different investment routes, but the point of smaller size properties is that these properties have better capital gain margin and better rental yield.
Do contact me if you have any queries, or if you need me to the math in more detail and show you some properties to consider.
Thanks!
Regards,
Richard Wan
Black Diamond Real Estate
richardwan@live.com
94363793
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