Why Is “First Mover Advantage” Important in Property Investing?

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How Property Owners Make 6 Digit Profits

In this article, I will share with you an important concept when investing in properties in today’s market – the first mover advantage.

It is a concept which is easy enough to implement, and indeed many have done so knowingly. However, there are still some who don’t have this in mind before buying a property.

Below is a story about an owner whose recent condo purchase is being affected by this concept.

The Story so Far

Not so long ago, this owner purchased a 3-bedroom condo in the East for $900,000 – a relatively good value for an apartment which is just 5 years old. 

Being an experienced agent, this owner was able to do the necessary due diligence himself before the purchase. He found out that the:

  1. Apartment was bought at launch 8 years previously (which meant that the seller was the First Mover),
  2. Original cost was $720,000 (thus, an instant $160,000+ profit for the seller),
  3. Average profit for sellers of 3-bedroom apartments in the same development at that time was $160,000 – $180,000. 

Time will tell whether or not this owner made the right investment decision, but now is probably a good time for me to tell you that the owner is none other than…me (Heikal)! 

The Exit

I’m sure you would agree that $160,000+ in 8 years is quite a handsome profit. I hope to make the same when the time comes for me to sell, and consider this my ‘satisfactory profit threshold’ – everyone should have this in mind when they sell off their properties. This means that I would have to sell it in the range of $1.08 million. 

But can I actually achieve this? What could potentially impede me from pricing it with such a hefty tag?

The answer: My (nice) neighbours.

Because a large number of them purchased their apartments at launch, they have the first mover advantage. This means that if their satisfactory profit threshold were similar to mine (i.e. $160,000+), they would only need to sell at $900,000 – $950,000 (compared to $1.08 million for me), effectively spoiling the market for me.

That is the beauty of this concept.

First Mover in HDB Purchases

This concept is the same even for HDB Purchases. 

When someone purchases a flat through BTO (i.e. directly from the developer, the Government/HDB), they essentially become the first mover and command an advantage in the market.

As most of you would know, you can easily buy a BTO for $300,000, and sell it for $400,000 – $600,000 in a relatively short space of time to earn a cool $100,000 – $300,000 profit.

However, for the buyer who does not employ this concept, and buys second hand at say, $550,000, can they easily sell their 10-15 year old flat for $700,000 – $800,000 to meet our satisfactory profit threshold? 

From my experience, the answer is more likely than not to be a resounding “no”. Unsurprisingly, that kind of first mover advantage would have been lost many years ago.

The Takeaway

As you can see, this concept of the first mover advantage will allow you to maximise your property investment in a really easy way. Where possible, purchase directly from the developer (private or HDB) at launch.

Of course there are other things to consider to increase the likelihood of success. That is where experienced agents like myself can guide you to make the most informed property decisions. So if you are looking to make your next big move, feel free to contact me or my team for a no-obligation consultation.

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