CNY Property Tip #3
Hope you have had many wonderful meals together with families, relatives and friends!
I had one Lo-Hei session with my colleagues at Vincent Chan Division (Powerful Negotiators Group, PropNex) where the food literally flew everywhere, including chopsticks! That’s how rigorous the Lo-Hei was 🤣 I apologised to the uncle (waiter) for what we did and asked if it was the norm. Apparently, it wasn’t uncommon for them. Phew!
As promised over the festive season, here is one of the tips to answer the question that I posted in my first post —— “Are you working to pay your house OR is your house working to pay you?”
Number 4: Identifying BMP
BMP means Below Market Price.
There are two principles to identify BMP properties:
1) Potential Upside
2) Calculated Risks
I would encourage us NOT to buy until we have applied these simple principles.
For example, take a look at City Gate Condo.
Characteristics:
- Located right outside CBD area
- About 1 MRT station from Bugis Junction
- 3 bus stops from Bugis
- No surrounding competitors when it reaches TOP (Temporary Occupation
Period)
- No oversupply issue
Note: If there are competitors when the project reaches TOP, you may face challenges when renting out the unit.
1) Potential Upside
In order to determine the potential upside, you have to look at the recent transacted prices of surrounding resale condos.
E.g. A resale 3-bedder unit at 'Southbank Condo' transacted at $2 million. But the asking price of a 3-bedder unit at 'City Gate', when launched, was about $1.5x million. Both projects are close to each other but the price gap is close to $500,000!
Can you see the high potential upside?
2) Calculated Risks
As both condos are in the same development, the rental price for a 3 bedder will be similar. Guess which one would give you a higher rental yield?
If the rental market is not good and we need to reduce the rental price in order to rent out the unit, which owner will be at a greater disadvantage?
You probably know the answer for the questions above.
In fact, this is just one of the tips I use to calculate the risks before buying a property.
Alot of people and agents like to say, "LOCATION! LOCATION! LOCATION!"
But as you can see, purchasing a property goes beyond a good location. There is a need to do proper research and find out the facts and figures before making any decision.
Hope the four tips have been helpful. Stay blessed!
P.S: Check out my previous post if you haven't read it.