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6 Months Of Learning Before You Start Investing In Properties
You could be so excited to pump your savings into properties that you can already imagine your bank account hitting 7 digits soon. Now you just need to make a purchase to get the ball rolling. If this is indeed what you are going through, you have to stop. There are people who jump straight into property investments. But those people usually have already accumulated hours of learning about property investments through reading and conversations with friends and professionals. If you are totally new to investing in properties, you must take some time to learn about how to do it. One mistake can put you in a very bad spot. So it is best that you are prepared for everything.
It takes 3 years to get a degree. Thankfully I am not suggesting anything near 3 years to learn the ropes. 6 months or about 24 weeks is a very prudent amount of time to invest in learning about property investments. It is not too long or short. If you think that by the end of 6 months, all the best opportunities will be gone, you are exercising the very mentality that drives the herd. So sit back and plan your 24 weeks and execute the schedule with discipline.
Week 1 to 6 – Education, Networking And Credit
Make frequent trips to the library. Don’t just read up books on making money in real estate. Put a focus on reading up books on the processes of buying properties in the place that you are considering buying. Different countries have different laws and policies regarding buying properties. You don’t want to get into legal disputes in a foreign land that you are not familiar with. If you are only considering Singapore properties, learn about local property laws and the process of buying properties. At this stage, your objective is to absorb as much as possible without disrupting your personal lifestyle.
Start networking and talking to people who have invested in real estate. Call up your uncle who bought a second property last year, email your school mate whom you heard have bought a house in Phuket, post a message in Facebook asking those who have invested in properties to contact you, etc. Be wary of those who are trying to make money out of you. It is also at this time that you start calling up property agents and chat them up about your buying eligibility and CPF matters. There is no loyalty to any one of them. Just make as many friends as you would like. When you are finally buying in 24 weeks, use the services of the one that you are most comfortable with.
Start cleaning up your personal credit. All the banks in Singapore update and get access to a central database that tracks the payment records of everyone who owns some form of credit facility. It could be credit card, personal loans, car loans, cash lines, overdraft, etc. If you have some sort of credit facility, you are going to be in that database. When you apply for a mortgage to buy your property, your personal credit record will be retrieved and assessed for the loan application. Undesirable records can mean your application being declined or subject you to higher interest rates. To clean up your credit, start making full payments to your monthly commitments promptly. Do not delay payments that exceeds the due dates. When you make late payments, lenders may judge that you are already in a cash flow bottleneck and will worry about lending you money to buy properties.
Week 7 to 12 – Meet Professionals, Start Viewing
It’s now time to talk to the banks. In case you are wondering, it is never too early to talk to the bank. If you know that you had adverse credit, this is not the time to apply for a loan. You will also start looking for your financing channels if you are staying away from the bank. If you are using a company to buy properties or will be using complex sharing structures, you have seek out the advice of lawyers and corporate secretaries on how best to structure the company.
Take your car on a property joyride. Drive around the areas that you are interested in. Look out for land that are being developed or even “For Sale” signs hanging on the front doors. When you find these signs, give the agent a call and ask them on their views on the area. Take their opinions with a pinch of salt.
Since there are so many new launch condominiums around, visit them when you are free and learn about how a transaction goes, what to look out for when buying , and get a feel of the market. This could potentially be your biggest training ground. You will of course have no intention to buy. You have to wait till you get to the end of this 6 months.
Week 13 to 18 – Prepare Finances, Learn Negotiating
If you are using investment money from partners, it is time to ask for the money. When you are applying this type of investing, you must get the money on hand before making your property purchases. Having a promise is not good enough, get the money and don’t let up until you see those digits in the investment account.
Get approval in principle mortgage loans to find out how much you can loan. Getting to know this figure will give you an indication of the types of properties you can afford to buy. It will save you a lot of time by narrowing down your search.
Start going to the property viewings advertised in the Classifieds and make absurd offers after viewing. This will give you hands-on experience on negotiating and dealing with sellers and agents. You will no intention to buy. This is just training for the real stuff that will happen later.
Week 19 to 24 – Buying And Due Diligence
Now is the time where you are most serious. When you find a suitable property, make a fair offer and get the ball rolling. Making offers way lower than the seller’s asking price can be a time waster that leads nowhere. So make firm offers that communicate to the seller that you mean business. If requested, show you bank approvals to prove to the seller that you can afford it.
Conduct inspection on the property to find any major deferred maintenance issues that require immediate attention. You can also use these finding to negotiate on price. You don’t want to buy a property only to find out later that you have to spend thousands to repair a leaking ceiling.
Back To School
It may sound like going back to school when you have to follow a schedule and learn about something new. When you get more experience in properties, you may find instances where you can make a buy decision in an instant. You can then laugh about the 6 months you spent previously and wishing you were back in school.