When you first hear of this “selling one and buying two properties” strategy, which is usually pitched to property upgraders, many a times the first thought that comes to mind might be “Is this safe?”. Let’s face it, by buying two properties, on the surface, it is literally servicing two loans for two properties. For most Singaporeans, even managing a single mortgage loan for their homes is already enough of a burden - taking a huge chunk of the take-home pay month after month. How could one dare to imagine the possibility of servicing two mortgage loan installments? Wouldn’t that be too speculative and highly-precarious?
The question remains – Why is this strategy still a growing trend among aspiring investors?
While you might be wondering, if this investment strategy still works in 2022, let us take a look to see how this strategy works. Before we continue, I would like to caution everyone reading this. It might be tempting to do-it-yourself but we have helped many clients get out of bad investment plans in the past - failed attempts to the “sell one buy two” strategy. So do be careful not to try it yourself unless you have adequate real estate investment experience or the help of someone experienced/trained in this area of expertise.
Before taking a dive into the strategy, we must first establish some basis of understanding for past HDB and private housing trends.
Based on a common concept passed down from the “baby-boomer” parents – buying a HDB flat as a matrimonial home and living there forever is the norm. A reader of this article like you would probably know that this is no longer what the younger and more educated Singaporeans have in their lifeplan. However, do not be surprised that there are still many Singaporeans subconsciously doing what their parents have done.
Now let’s take a look at the property overview of a typical baby-boomer, hardworking Singaporean age 65 - owns a flat in Ang Mo Kio and has lived there for over 29 years and another 1 more year to fully pay off the mortgage. You can see that this Singaporean has a potential profit of half a million dollars to pocket if he sells the flat! Perfect, right? Nah…! It’s far from being perfect!
At the age of 65, you may be able to enjoy a handsome profit of half a million in your bank if you choose to sell your ONLY property. However, what’s the plan after that? You would not be able to get another mortgage loan from the bank for another purchase. Therefore, there will only be 2 other options for you - Buy another flat with all that hard-earned profit or downgrade to a smaller flat if you want to enjoy life a little or pay off some debts. Is that the kind of retirement you want?