Search the Community

This thread arises of a discussion initiate in the car/lifestyle section. However, some very interesting points came up as to how Singapore properties should be considered. The emphasis is deliberate as the model only works for Singapore. There are a lot of property gurus here, so please ignore this un-sophisticated newbie who is just venturing into property and trying to justify his purchases. Fundamental assumption : Singapore will continue to exist as a nation or if not, a quasi nation with independence and that the calibre of national leadership remain high. Let with with an analogy from Singapore/Malaya history; Rubber planting. As all Singaporean students knows from their history books, rubber tree takes 5 - 7 years to mature. So, any businessman intending to venture into this industry has to 1. Buy the land 2. Clear the land 3. Plant the cuttings and continue to care for the younglings These are the years where there are negative profits as the businessman has to continue to pour money into his investment with no guarantee on returns (storm blows down estate, commodity prices collapse, disease toll on trees, etc). However, if the plantation make it through and extraction starts, profits will start to flow in and can continue to flow for another 25 years or more. Also, the rubber estate itself also gain value as it could be sold to buyers with a risk premium for taking on the early year risk. One thing that a number of people keep telling me is rental margins and so on... but they always left me scratching my head, the time horizon they use is very short. Like rubber planting, buying property for me is for the long haul with time horizon of 30 - 40 years or more. Analogous 1. Buy the property 2. Do interior finishing 3. Continue to care for the property These are the years where profits may be negative (if you cannot find a tenant) as the investors has to pour money into the investment. However, once the mortgage is paid off, profits will start to flow in and continue to flow as long as you own that property. That is not in addition to capital appreciation if you sell off the property. So, the total cost and total profit that can be taken from the property over a time horizon of 30 - 40 years is actually more important then short term rental margins gained while the mortgage is still in force.