I think we all have been flooded with ads that mentioned you can afford homes with no money down. Is that possible? Can one purchase properties in Singapore with $0 or no money as a down payment. Today I will share with you all the info behind this!
In Singapore, purchasing a property definitely need some form of down payment. Right now, with the current measures, some properties require 10%, 25%, or even more down payment depending on your loan criteria. Indirectly, no money means not coming out with Cash or using other people’s money (OPM) to pay for the down payment.
borrowing money for property down payment
In this instance, borrowing money to do the down payment for the purchased property. The buyer can borrow from friends, relatives, or closed ones. However, if the tide turns against you, the buyer will have serious debt obligations!
Using OPM (other people’s money)
This is something that is very real in our current situation and sad to say, there are very few people practicing this method. From age 30 to 60 years old, we should be concentrating on doing wealth accumulation for our retirement days. Therefore, buying and selling properties, capital appreciation should be our main focus.
So how it works is basically, when a seller bought his property at $500,000 and sold it off for $900,000, he made a good profit of $400,000. However, this $400,000 is not inclusive of the original down payment that he paid off using his own money. So moving forth, he can now purchase 2 properties using the $400,000 which the buyer paid for.
co-share with other investors
This is very common in the commercial and industrial sectors. This is because, for these 2 sectors, there is no ABSD involved in commercial properties. Also, the rental yield is higher for these kinds of properties, they can easily reach up to 7% yield. However, offloading the properties and capital appreciation for these properties might be way more difficult compared to residential properties.
Co-sharing with investors usually means pooling funds together to purchase a property. It can be an individual name or corporate account. Hence, in this case, you can opt to look for investors who are okay with you just contributing the CPF portion for the down payment. Alternatively, if the above doesn’t work, you can look for investors who do not need your down payment. However, they might need you to contribute to the monthly installments of the housing loan.
As you can sense it already, it is a big risk factor. This is because, the other investors that you co-share with, they are not within your control. So if one day they decide to pull out of the property, you might have to manage all these by yourself. Even worst, the property might even be sold at a loss.
conclusion – How to afford homes with no money
In the end, can you afford homes with no money? It is the perspective of looking at things. Of course, if you borrowed the money, then yes, the money effectively does not belong to you and you are risking other people’s money. However, in reality, if you were to purchase properties under your name, whether is it profit or CPF monies, in the end, it is all your money! The next question you might ask might be, is property then a good investment in Singapore?