Sell 5 room flat and buy 2 condo units for better cash flow.

Recently, I shared on FB a conversation I had with a friend regarding a talk he went for:

Friend:
"I went for a talk on property investment recently.


"The person wants us to sign up for his course and he will teach us how to sell our HDB flat and invest in private properties for better returns. 

"What do you think?"

AK:
"He will make money from the course. 

"He will make money when you sell your flat. 

"He will make money when you buy the private property. 

"I guarantee that he will make money. 

"Can he guarantee that you will make money?"

Seeing that, a reader who went for the course shared her experience and thoughts with me:



Y:

Refer to this post. I went for the course. Paid abt 3k. Learn all the concept. N it's workable. 

Just we mostly will not take any action to sell Hdb n go buy two privates. 

Because most of us will scare. Any step goes wrong then just gone case.

But they after the course also will provide service to help u achieve your dream la. Eg. Help u sell n buy n also get loan n tenant etc. 

Total 8k help u turn from one HDB to two privates. 

AK:
Refer to the questions I asked my friends. My opinion has not changed.

Y:
Just share my experience only.

If not prepare to pay the almost 10k. Better don't go for the course. 

If hardworking enough. All info can get from Internet

AK:
Basically, the students bear all the risks. ;p

Y:

Ya
Speaker make the most. N easily buy properties for themselves

AK:
 that guru makes BIG $$$.

Y:
Risk here is. Risk of our market turning down. So. Property might not able to rent out easily

AK:

Interest rates rising. Oversupply problem. Rental falling. 

I think there will be many who are going to be caught swimming naked when the tide goes out...

Y:

In fact our govt has done good job

For the protection part

All the taxes or rule is not set for fun de
This is to avoid ppl too greedy n anyhow buy

Ppl just cannot explore too much. Except those real rich millionaire

AK:
Yes, problem is that the "guru" will not discriminate between the millionaire students and the not so rich students...

Those borderline cases will be the ones who suffer the most as they don't have holding power or the ability to take a big knock.

In the pursuit of greater wealth, we should not throw caution to the winds.
---------------------------------

Honestly, if we are after cash flow, why not rent out the spare bedrooms in our 5 room flat?

What? 

Bedrooms occupied by children? 

Then, how are we going to have enough space in a shoebox apartment?

What? 

You have seen a family of 4 living in a shoebox apartment after they sold their HDB flat and bought 2 private shoebox apartments?

You know, I believe you because I also know a family who did that.

Seriously mental.





Finally, when people tell us that we can sell our HDB flat and own 2 private shoebox apartments, remember that unless they are fully paid for, we don't have ownership. 

We might have control of the apartments but we don't own them.

(Remember, nobody cares more about our money than we do and don't ask barbers if we need a haircut.)


Related posts:
1. Should I sell my HDB flat to fund condo buy?
2. Buy that second property and pay the ABSD?
3. Disastrous investments in the property market.

He met the CPF minimum sum but has one regret.

Regular readers know that AK transferred all his CPF-OA money into his CPF-SA in the first few years of his working life. That provided a bigger base and a longer time for compounding to work its magic. Of course, I have shared the numbers here in my blog too.

Now, this was part of a chat this evening with a reader who is buying a HDB flat:

Reader:
do you mean that letting HDB wipe out the OA money first? My flat will be ready in 2019. So in this 3 years, do you have any views on what should be done using the CPF OA money?eg. Transfer abit to SA account? I will take your comments as opinions. Do not WORRY!"

AK:
That was what I told a friend. He transferred a large portion of his OA money into his SA about 10 years ago before he bought his flat and now his SA has already hit the minimum sum. But this will work for someone with an emergency fund on hand that would also cover the mortgage payment initially as his OA builds up again after the flat purchase.


The chat gave my memory a jog. I cannot remember exactly how many years ago but it was probably more than 10 years ago when a friend discussed with me what to do with his CPF-OA money. He was still single then and not buying a flat yet.

During a meet up a few months ago, he told me that he already hit the CPF minimum sum and to a large extent, it was thanks to the hefty interest payments received for his CPF-SA savings. He basically transferred all his CPF-OA money into his CPF-SA after the discussion we had and did nothing to his CPF-SA since. 

So, apart from the mandatory contributions from employment, the money in my friend's CPF-SA really grew through compound interest!

Did my friend regret anything?

Well, it was something like this:

"I should have transferred more money from OA to SA in the following years. Then, I would have received even more interest and hit the MS even earlier."

Alamak. If AK had done that, he would have even more money in his CPF now too. Aiyah.

Of course, all our circumstances and motivations are different. We have to question if this route is something that is good for us too.

This would work for someone who is not thinking of buying a property soon or is able to buy a property without using money in his CPF-OA. 

In the latter case, to be safer, he should have emergency cash on hand which also allows for 12 to 24 months of mortgage repayments as his CPF-OA savings is rebuilding.

For a more complete picture, please read the related posts below.

Related posts:
1. CPF-OA to CPF-SA transfer before buying flat?

2. If I had done this, I would have hit MS too.

3. A lot of my CPF-SA money...
...the interest I received in my CPF-SA has been higher than my mandatory contributions to it for many years by now...