How To Theoretically Amass $10m Worth Of Properties Outside Singapore

By on July 21, 2013

The act of acquiring, managing, and selling properties is one of the proven ways average individuals have applied to build a retirement portfolio any guru would be proud of. The process of going about it can take years. Why that is so, is because of your ability to purchase property. This is also why for the purpose of this article, you have to do it outside Singapore.

Properties are too expensive in Singapore for the average person to built a sizable wealth pot. If the average working adult makes SG$70,000 a year, how many properties can he buy in a year? In the current market, maybe he can buy a shoebox apartment in the Northeastern far end at 80% loan to value. We leave out HDB flats as they are not meant for investments. And if this individual saves up all his salary without having a meal and foregoing all leisure, maybe he can buy another shoebox apartment in 5 years at 50% loan to value. This is hardly the lifestyle that motivates someone to become an investor.

The key to amassing great wealth in real estate are acquisitions. And since you will not be able to go on an acquisition spree in Singapore unless you are already rich, the obvious alternative is to turn to overseas markets. This can actually play into your hands due to the strength of the Singapore dollar and the high average income of Singapore workers. Singapore GDP per capita was about US$56,000 in 2010 as reported in Forbes.

You might argue that since properties in Singapore are going up like there is no tomorrow, why venture overseas into unfamiliar territory? Well imagine that you can buy 4 properties overseas for the price of one in Singapore. You diversify your risk and multiply your income streams. Putting all your eggs into one basket is not really a good way to hedge your investments. And let’s admit it, Singapore is not a place for an average individual to mess around with properties. Among an exuberant price monster that is ever eager to grow bigger like a teenager during puberty, there are also substantial stamp duties for buying and selling, lower loan to value for multiple loans, and crazy sales launches that never fail to bring in the crowd.

property acquisition budgetThis is the reality that we have to face. Singapore has limited land and a growing population. And while the government is relentless in keeping prices in check, we know deep inside that prices are going in one direction barring any unforeseen detrimental events.

For the purpose of this article, let’s just assume that taking your investment overseas is the only option for an average person to amass millions of dollars in wealth. Success in real estate is seldom due to chance or coincidence. You might get lucky with an apartment. But to get a lucky break for 10 apartments is probably more suited in a computer game.

You have to determine what you want and how to get there. And the first step of getting to $10m is by acquiring multiple properties. Building a $10m property portfolio is not going to happen overnight. If you set a goal of buying $200,000 worth of rental properties each year, you will quickly realize you need a bigger basket for your assets within just a few years.

At this point it is important to distinguish between rental properties and glamour properties. New launches with fancy names does not necessarily make the best rental properties. You could by all means buy up a slump of an apartment and make a profit out of it. Remember that for investment rental properties, a fancy cyber-looking new condominium can lose out to a run down apartment in terms of rental yield.

This means that if the average property in the area you have identified cost $100,000, you are going to buy 2 each year. If it costs $50,000 each, you are going to buy 4 of them each year. With a more relaxed mortgage market, you can easily get financing for your purchases. Creative financing options are also more rampant overseas.

Be realistic and look for properties that fall within your budget. Even if a potential buy is not visually appealing to you, the important thing is that the projected cash flow is positive. And it falls within your budget. Luxury condominiums that look the part are not necessary investments for success in real estate. You won’t be able to afford multiple purchases of glamour apartments anyway if you have an average income.

Because we are so used to investment properties in Singapore that are 10 times our annual salaries, we can sometimes forget that properties overseas are much less costly to buy. Target cities fringes like those Bangkok, Ho Chin Min City, Manila, Kuala Lumpur, Guangzhou, Shenzhen, Jakarta, etc. Even explore good buy in Europe and America. You will have to conduct your own diligence checks, property assessments, and calculations. These are the required job descriptions for a real estate investor.

After building up your real estate basket with muscle over 10 years, you can stop. If we just take a prudent annual appreciation of 5%, your holdings will generate for you over $1m worth of capital gains by year 12. This is without taking into account your rental gains, reducing mortgage liability, or the tax benefits. If you continue to hold, you will be looking at about $2m worth of gains by year 17. It will go up to over $4m by year 25. You will hit $10m around year 35. By then you will have also long paid up your mortgage and rental income is nett.

For calculation purposes, just take a look at this example. A $200,000 property at 80% loan to value with a 20 year mortgage at 5% will give you an equity gain of just below $250,000 after 20 years if the annual rate of appreciation is 5%. Using you annual personal income to acquire these properties each year, you will perpetually compound your gains. You will of course use rental income to pay for your mortgage. For your information, many countries allow 90% or even 100% financing.

Remember that achieving financial freedom through real estate takes time and effort. But if you have a specific goal in mind, you can plan out what is required to be done to attain those goals. The above stated is just a simplified example that looks so easy on paper. Going about it requires a lot of hark work and time. Hey, nobody says real estating is easy. If it’s easy, everyone will be a millionaire in no time.



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