Custom Search

Tuesday, August 18, 2009

Buy Property Cannot Go Wrong One?

If you thinking of entering into the property market, here are 6 flaws to take note.
I read it in today's paper, so just write here for those thinking of buying one.

1) Never do Homework

One 99-years lease mass-market condo outside D9, D10 and D11 priced at 1150psf! Those who rush in obviously didn't do much or zero homework. There are other condos priced around 900psf near vicinity. If they bought at 1150psf, how much they hope to sell?

2) Paying Higher than market valuation

Selling price doesn't equal to bank valuation. If you bought a property for$ 900k, hoping for bank to loan you the 80%, better check what is the bank's valuation first. The bank would only loan 80% of its own market valuation of the property you bought. In this case if they value the property at $800k, shortfall will occur.

3) Paying Deposit without Loan Approval

Its better to get a loan-in-principle from a bank before you place a deposit of 5%. A rough gauge, if your family income is $8000, then the maximum loan a bank could lend you is 100 times which works out to be $800,000.

4) No Ready/Backup Cash

Many of the specu-vestor/investor thinks that they can use the rental yield to offset the monthly instalment. In ideal case, it works if rental do not flucuate too much. If rental income falls or worse no tenants, you do need to have ready cash to tide through.

5) Interest do not stay the same

In fact housing floating interest based on SIBOR or SOR rates increase with economies. Low interest rate at 2% plus a fixed amount today will increase with a picking-up economy. At the peak of 2007, interest rate could go up as high as 4% plus a fixed amount.

6) Hat too big

Your monthly instalment should not be above 35% of your family income. A $1 million property loan should be back up be a $12,000 family income.

No comments: