5 Bad Traits To Avoid For Beginner Property Investors

by - April 03, 2018

Singapore, what was once a swampy island that had transformed into one of the world’s financial  frontier. One of the richest nation which is located along the Straits of Malacca, openness to foreign investment, pro-business government that helped the country to leap forward over the past few decades. Singapore appears to be unique compared to it’s neighbor countries, having the most developed economy in the Southeast Asia’s region and the host for financial center. With the world’s recognition as one of the developed country, this has certainly boost the confidence in Singapore’s property market. Local investors and foreign investors has been investing in Singapore’s property over the past few years from investing in Woodlands Housing Development Board (HDB), condominium in Queenstownoffices in Central Business District to factories in Jurong West. So, the real question is what are the tips and guides for budding property investors to avoid when investing in properties?

1. Emotions over economics

Buying your first house is a life achievement, it involves emotions and excitements for unlocking your life achievement. 90% of making decision when buying home involves emotions and 10% logic applies. We get it because you’re going to raise a family and it is your sanctuary. But, being a property investor, emotions should not be in the lead to rule your decision making. This emotions-based decision making may cost you a bomb if it’s not been analyzed through in details. Often, the salesperson or agent will create the hype during the sales pitching and injecting emotions causing the buyer to make compulsive decision to buy, compulsive buying.

Buying property should always be property based analytical research. Couple of researches needed to be done and questions needed to be ask. Is this location strategic? How much is the capital gain from this investment? What is the quality of the property that will attract tenants?

If you’re able to pose those questions during the purchasing of property, it shows that you have placed logics over emotions. Now, you won’t considering buying your property because of the good aesthetic wallpaper.

2.  Overreact or overly cautious 

These two common traits could posed a threat for budding investors that will never make it beyond their first property investment. These categories are either acting over impulsive or being overly cautious.

The first one is being too hurry, eager to buy the hot property. They attended seminar and queue to buy the new Queenstown condominium thinking that they will make money overnight. When it didn’t happen, they lose heart and say property investment isn’t for them.
Then, there’s another crowd that’s overly cautious, a procrastinator that hoard all information but never act. They attended all seminars, reads all news and buys all property magazines, yet, they have not make a move ever since then. This is what we called paralysis by analysis or also known as overthinking that will never overcome their fears.

The advice here is there’s always a balance in between, though, learning as much as possible to make you comfortable with your investment decisions, but you can’t know everything without experiencing it. 

3. High speculations

What most newbie property investors are expecting they can be overnight millionaires easily by seeking short term gains in real estate is more about speculating than strategic investing. The cold hard truth about property investments is that the product is illiquid, and it takes time for the property to appreciate and even transact. In short, it takes time to transact and it will rarely make you super rich. You have to be patience when investing in property especially in Singapore where the cooling measures kicked in over the past few years. This even slowed down Singapore’s property market. But not to be worry because property is a necessity, everyone needs a house to be sheltered.

Advice here for this mistake is when you see the obstacles, see it is as a strength, property provides steady, long term gains through the power of compounding. Use the gains you made from one property to leverage into another property and then combined gains you make from those two properties, you buy more to add to your portfolio. If you add patience and persistence, you will definitely gain more returns and success.

4. Weak cashflow

This bad trait affects most of the budding property investors where they could not handle their cash flow during their property investment. They tend to overlook the hidden costs needed to cover their properties whether it is for capital gain or rental like stamp duty, legal fee or renovation works to upscale the property. These cause them to lose their holding power and sold it off to the bank for auction instead of making gains.

To avoid such misfortunes, the good rule of thumb is to always buffer about 10% of the property’s value for costs such as interest rates, insurance, maintenance fee, stamp duties and etc. It would be an eye opener when it comes to all out of pocket expenses you will incur along the way. Do not overestimate your financial strength and underestimate your property hidden costs.

5.  Check and inspect

Mostly, reckless property investors tend to rush in getting their property without asking the intentions in the secondary market. For example, if the previous owner sells off the condo because they needed money urgently, this is an opportunity for property buyer to bargain with the seller for a better price.

How about when gotten the property? Do you inspect and check for the defects or pest infestations? You will need to repair for the defects and get rid of pest infestations, that’s another hidden cost.

So, is the property liveable for tenants? Are the fittings and fixtures old? Do you need new paint for an appealing look on your property? Who are your tenants? Are they students or working adults?

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