Buying an Apartment – Mind the Finances!

“Property is organized robbery.”
– George Bernard Shaw

Property is organized robbery. I cannot concur with the above statement more.

When I told my family and friends that the 110 sqm flat that I just purchased costs slightly lesser than SGD$400,000 (USD $322,000), most actually exclaimed that the price of the flat is cheap and affordable!

This is a horrid consequence of being conditioned to the high & rising property prices in cities like Singapore, Hong Kong, New York, London, Sydney etc.

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High and rising prices driven by economic forces…perhaps some governmental policies and other factors that I have no clue of.

Whatever – this situation is just total Bull. Feel like I’m cheated somewhat.

SIMILAR to some jobs that work the employees really hard, and then paying them peanuts. And telling the employees that it’s not all about money..its about passion etc.

And then slap more sales targets on them.

Aside, some of my peers would argue that the purchased property one lives in is a form of investment. Well, only to some extent perhaps? What do you think?

  • You only reap the returns at the point when / if you sell the apartment at a profit, years down the road. It is highly non-liquid.
  • It does not generate any fixed inflow of income each month, unless you rent out a room to some stranger. It takes money from you each month instead.

But, there’s no point just moping over it. I needed a solution. So, other than relocating overseas or renting an apartment, which is paying monthly for a property that I will never get to own, how did I attempt to soften the damages to my finances? 

1)  Purchase comfortably within my means

Forget extravagance and vanity. Of course, this is obvious!

Just settle for a (relatively) more affordable residence with lower monthly mortgage payments. Save the rest of my hard-earned money for investments instead!

Remember that Warren Buffet still resides in the exact same modest house he bought way back in 1958 in Omaha, Nebraska, despite making billions of dollars since then.

That my friends, is wisdom displayed by Mr. Buffett – knowing the difference between purchasing things that are necessary, vs. things that are MORE than just necessary.

2) Embrace and learn to manage debts

I used to have an aversion towards incurring long-term debts and thus seek to clear any debts quickly.

However, I now believe that having liquidity is very important – for investments and earning returns with the amount currently held. Of course, I gotta be sure that the investments will generate higher returns that the interest rates of the loan.

Example: I have incurred a debt of $xx right now, and I do have the exact $xx of savings.

  • Option 1: Pay off the loan in full and have no savings left. Start saving from scratch. No money to invest currently 😦
  • Option 2: Take a loan with an annual 5% interest rate.                                                A prerequisite is already having an investment vehicle which can guarantee me an annual return of MORE than 5% annually.                                                                      This way, the additional annual returns from my investments will not only cover the interests of the loan, but also give me additional returns to grow my net worth.

This is a very abstract example of course!

Sometimes the interest rate of a loan is simply ridiculous, or the investment returns can fluctuate.

In this case, I would perhaps include a margin of safety on the investment tool (similar to a pessimistic projection on the investment returns) and set aside enough liquid cash as a form of emergency.

Stay Frugal, & Start Investing!

Cheers!

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6 thoughts on “Buying an Apartment – Mind the Finances!

    • Hey MInoellego, yes we all need to constantly to ‘protect’ our finances and our wellbeing… ALL for our loved ones 🙂

  1. Whenever I travel out of Singapore and get to see the vast landscapes, countryside and surbaban houses available, I sometimes check out the prices of housing in that region out of curiousity. That’s when I realize that for the exhorbitant amount we pay to merely to lease a ‘hole in the sky’ (read HDB, condo, high rise apartments…etc) for 99 years, one could possibly afford to build a house on owned land, surrounded by some pretty awesome scenery. Makes me rethink about value of housing here and some of the cities you mentioned as I look to save up for a new property.

    • Hi DY, thanks for your comment! Yes I totally agree with you and how property in some countries can be bought with a fraction of what is required in certain cities like Singapore etc. Like the phrase ‘leasing a hole in the sky’.

      Know of a few frenz who own properties overseas and aspire to be like them in the near future.

      Can you kindly share your website address if possible? Will love to read articles from like-minded ppl!

  2. I believe that is one of the so much significant info for me.
    And i am happy studying your article. However wanna remark on some normal things,
    The website taste is perfect, the articles is in point of fact nice
    : D. Good activity, cheers

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