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Why Are HDB Upgraders Still Planning Like it’s 1990?

Our very first few HDB clients back in 2015 were retirees. Those aged 55 and above and downsizing to a smaller property.

They wanted to cash out and use the ‘profits’ for retirement.

They owned 4 or 5 room HDB flats, worth $400,000 to $500,000 in 2015 and 2016.

They bought the HDB flats for $150,000 or lesser for most of them back in the 90s.

When they finally sold off their HDB flat, after setting aside money into their Retirement Accounts, and paying off their gigantic, compounded CPF Accrued Interest, they are left with less than $100,000.

At age 55, half of them were still working, some of them still needing to pay off property instalments in cash.

There were many things wrong in their planning many years back. The quality of advise just wasn’t there in 1990.

Worse still, they didn’t understand how CPF Accrued Interest ate into their property value.

CPF board allowed the use of CPF savings for mortgage loan in 1993.

Basically for those who bought a property after 1993, they didn’t understand about amortisation, compound interest, inflation and so many other things we were not taught in school.

They didn’t understand how to take advantage of amortization, compound interest and inflation.

The crazy part. I’m still seeing how HDB and condo upgraders are still planning like it’s 1990. How do we know?

Because we are usually the 2nd or 3rd agent called in for an interview and we ask the sellers how their first agents conducted these planning sessions.

Why HDB Upgraders Should Get a 2nd Opinion

Now, Heikal and myself are already deep in the HDB and Condo upgrader’s world.

Most of them who contacted us have met 2-3 agents ahead of us. We should start posting more Tik-Tok videos to get people’s attention!

While I feel lucky that eventually most who meet us eventually want us to help them plan, I wonder how things could have turned out for those who didn’t get a 2nd opinion and went ahead with the 1st or 2nd agent they met?

An example of a problem:
One Instastory post I saw read: “Guys you can afford a freehold condo, just talk to xxxxx, he will help you”

and I see some HDB upgraders who buy Freehold resale condos in areas where prices have not appreciated over the past 15 years.

The key concern here is a private property generally costs $1m. The deposit is 5% in cash and 20% can be in cash or CPF. The Stamp duty of 3% can be paid using CPF as well.

For a $1m property, CPF accrued interest immediately starts on the $200,000 CPF deposit.

That means by the first year, that resale condo owner would have incurred $5,000 in CPF Accrued interest on a stagnant property.

I’ve not even talked about the installments, which I assume, is paid using CPF too.

This accrued interest is compounded against you. Not for you (if you leave it in your CPF). For most of these HDB upgraders buying into resale properties they are in for a surprise come 55 years old.

I’m sure by now you can imagine how much ‘hidden cost’ someone makes when they buy a property that will not increase in price.

The above is just one of the things that we address. If a client is positively sure on their choice then at least they can be prepared for retirement.

There are many myths running around. Freehold is better than leasehold. High floor is better than low floor. Resale condo is better than new launch. All new launch are good buys.

While the numbers and data say otherwise.

Here is How It Should Be When You Retire

I attended a course by a lawyer named Rayney Wong, he said something profound about real estate: “The reason I’m a lawyer is so I can have the income to take property loans.”

There is no other investment vehicle where you can own a million dollar asset without having a million dollars.

That is the power of leverage in real estate. The banks loan you money for you to acquire this asset. You pay the deposit and instalments.

Price appreciation is based on the value of the property and not the amount of deposit you made.

At 55 years old or younger preferbly, you would want to end up with a fully paid $1.6m property which you bought for $1.2m

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