The Ultimate Guide To Real Estate Investment In Singapore (4th Edition) by GMSPL Pte Ltd

• What are the different types of loans available to finance my property purchase? • What kinds of condominiums provide more stability in rental income? • How does the Master Plan affect the value of my property? • How much should I pay for Mickey Mouse apartments?

“Property purchasing is the most important investment decision in life. This book is invaluable not only for the extensive advice but also the personal insights of Ismail Gafoor which makes it compelling reading.” Mr Ian Macdonald, President Hong Leong Finance Ltd

• Can foreigners buy landed properties in Singapore? • Are Executive Condominiums (EC) for everyone?

• How much is fair to offer to sellers? • How do the new policies affect me? • Should I consider an old condominium? • How long should I hold on to my investment? • Should PRs buy HDB flats or private property? • Is it wise for me to buy an HDB flat when I can afford private property? • Should I do an Addition and Alteration or should I demolish and rebuild?

Real estate is one of the most important things in life, and it can either put you on the path to riches, or set you on the downward spiral to financial disaster. If you are unsure of the answers to any of the above, it is time to take action. This book is the ultimate guide to your real estate investment journey – it’s the only one you’ll need.

“For those who are looking for a book that helps, this is the book that contains simple yet comprehensive sharing of information on Real Estate Investing!” Ms Elim Chew, President and Founder 77th Street Pte Ltd “Essential reading for aspiring and seasoned property investors, written by one of Singapore’s most experienced and well-known industry veterans. Ismail Gafoor advocates a pragmatic and prudent approach to buying property and outlines easy-to-follow investment principles, advice, tips and sample agreements. This excellent book, combined with a passion for property plus online tools, will help you become a successful property guru!” Mr Steve Melhuish, CEO PropertyGuru.com.sg

102974 Ultimate Guide_Cvr.indd 1

ISBN 978-981-07-6086-1

9 789810 760861

In SInGaporE

But are you ready to invest in more? And are you confident if it’s your first property purchase? Try answering the following questions:

the ultimAte guide

As a good investment vehicle, and a favourite asset class of the rich, we need properties in our portfolio if we want to make it rich, not just to give us a literal roof over our head.

to rEal EStatE InvEStMEnt

SAyING

We’ve thought about it, worried about it, and wondered how we could use it to make it rich – real estate is more than just a home, it’s a hot political topic, and it concerns our livelihood.

Ismail Gafoor

here’s whAt others Are

About the

AUTHOR

ISMAIL GAFOOR At the helm of Singapore’s largest homegrown real estate company is a man of great stature – COL (NS) Ismail Gafoor. As the CEO of PropNex, Ismail brings with him a rare fighting spirit that built for him a career in the army as a regular officer. His passion to be an outstanding entrepreneur prompted him to start PropNex, a company that, through Ismail’s dynamism, grew from its tumultuous beginnings to become today’s industry leader. Ismail holds a Bachelor in Land Economics (Hons) from the University of Technology, Sydney. He acquired his first property at the young age of 22 and amazingly made his first million at 28. He is an investor, entrepreneur, and success coach to many Million-Dollar Club Producers in the real estate arena. A fervent advocate of training and lifelong learning, Ismail has institutionalised a complete series of learning programmes that include developmental seminars, workshops, consultancy services, and legal support for all his Real Estate Salespersons (RES) so that they can stay ahead of the competition and deliver the maximum value to their customers. “The Ultimate Guide To Real Estate Investment In Singapore” is an extension of Ismail’s desire to educate. This book is written for everyone who wants to invest in real estate, giving you the know-how and the confidence to start. Ismail’s noholds-barred discussion will benefit any investor who lays his hands on this book.

5/18/13 10:10 AM

THE ULTIMATE GUIDE TO REAL ESTATE INVESTMENT IN SINGAPORE

CHAPTER

My Storyâ&#x20AC;Ś And Yours How Ordinary People Like You And I Can Make Real Estate Investments Work For Us

Investment Tip

“What I am trying to show you is that it’s possible! Yes, if it is possible for me, a newspaper boy and a civil servant to invest and make money from real estate, it will definitely be possible for you!”

CHAPTER 1: MY STORY... AND YOURS 2

T H E U LT I M AT E G U I D E T O R E A L E S TAT E I N V E S T M E N T I N S I N G A P O R E

Like most Singaporeans,

I was not born with a silver spoon in my mouth. In fact, if my childhood years were anything to go by, it would not be unreasonable to assume that I was destined for a life of pain and hardship. You see, I was born into a family of six; I have two elder brothers, two younger brothers, and my youngest sibling is a sister. My father was an immigrant from India who made the treacherous journey to Singapore because of overwhelming poverty back home. With little formal education, he could only find work as an assistant in a shop and fill in the shoes of an odd job labourer. Luckily for him, my dad had an entrepreneurial streak in him and started a “mama shop” (kiosk/shop selling provisions) stuck at the end of a building. On top of that, he also started operating as a newspaper vendor. If you haven’t realised, both businesses needed extensive manpower.

The Regime Like all my other brothers, I began helping my father from as young as seven. I would wake up at 4 am in the morning, and go on a two-hour newspaper distribution routine till 6:30 am before rushing to school. After school, my brothers and I

would take turns to go on three-hour shifts to help out at the provision shop. Things would finally end at 10 pm, when we would turn in for the day. This cycle would continue for 364 days a year, and the only rest day (if you can call it a day) was the 26th of December, Boxing Day, the only day when newspapers were not in print and I would have the benefit of not waking up so early.

The Revelation I would have thought that such was the reality of life had that moment of revelation not come through one of my buddies in the army. I was about 20 and was serving my National Service. We were on our way back to military camp on a cool, breezy Sunday evening and we were chattering on the bus as it travelled past Cavenagh Road. At that moment, our conversation turned, when my buddy commented that his uncle sold his house in 1982 for a profit of a quarter of a million dollars. The revelation simply blew my mind away! To a newspaper boy, the sum of a quarter of a million dollars was not just unimaginable; it was extraterrestrial and somewhat criminal! In my world, every newspaper that was sold yielded a profit of about 4 to 6 cents, and yet, some guy out there had made a profit of a cool quarter of a million dollars by selling a house! Without waking up at 4 am or working too hard!! Deep inside me, I felt that the world was unfair in its remuneration. Yet, as I passed Cavenagh Road every week after that, the impression of the humongous profit sank deeper into me.

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One day, as I once again passed that fateful street, I decided, without any rhyme or reason, that I wanted to own three properties. And of course, given my status and position as a newly commissioned officer, there was absolutely no logic to whatever I had just decided. But that didnâ&#x20AC;&#x2122;t matter. The idea was exciting, but more importantly, my paradigm had shifted. My world had changed. Property is the way to go.

The Beginning I started my career in the army and signed on as a pensionable officer in the armed forces. And since my pension was backdated to my recruit days, I was guaranteed one million dollars upon my retirement at the age of 45. Needless to say, life was secure, stable, and sometimes a little complacent. However, although I was enjoying the benefits of stability and security of a civil service job, I did not lose sight of my aspiration to own three properties. Keeping the goal in mind, I set out to acquire knowledge in property investment, and on 1st July 1995, I made the momentous decision to resign from pensionable service, forgoing every single cent of the onemillion-dollar pension that I would get had I stuck to my civil service job.

Our Firsts My journey of real estate investment started at the young age of 22. I was newly married, and my wife and I needed a roof over our heads. For the sake of convenience, and not having much savings, we bought a three-room public housing resale flat which was situated next to my in-laws. Two years after the purchase, we sold the flat and bought our first private apartment at Normanton Park in 1987 for a sum 5

of $95,000. For the uninitiated, only Singapore Armed Forces officers were entitled to purchase Normanton Park units then. I was a regular army officer, and together with my wife, we negotiated the purchase from the owner, who was none other than our current minister, Prime Ministerâ&#x20AC;&#x2122;s Office and Secretary-General of the National Trade Union Congress, Mr Lim Swee Say. Three years later, in 1990, we sold our Normanton Park unit for $133,000. From the small profit we made, together with some savings, we decided that we should acquire for ourselves a freehold inter-terrace at Guan Soon Avenue. And herein came our first dilemma.

The Dilemma When we decided to buy the house, many people advised us against the decision as property prices had appreciated 35% over the preceding three years. Many of our seniors told us that the purchase decision was unwise, and that we should wait, as prices would come down later. My wife and I did our calculations. Yes, our finances would be stretched, but being young and only 26, we felt that we could afford the house. Thus, we proceeded with our purchase of the Guan Soon inter-terrace house at $610,000 while it was still being built. Barely after the purchase, the US-led war against Iraq erupted. Property prices tumbled as developers were giving better discounts. For the first time, we thought we had failed to listen to the advice of our seniors. But as fate would have it, the war against Iraq was decisive and ended as soon as it started. It lasted less than 6 months, and over the next five years, property prices appreciated steeply. CHAPTER 1: MY STORY... AND YOURS 6

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However, my wife and I stayed in that house for a period of time before deciding once again to sell the house at $735,000 in 1992. At its peak, our $610,000 house was worth $1.6m in 1996. We made, once again, a little profit, and using the capital gains with some savings, we made a decision to buy two properties this time: a single-storey semi-detached house at Richard’s Place for $525,000 and a studio apartment at Mandarin Gardens for $390,000. We rented out the house at Richard’s Place because, at close to 4,000 sq ft, it was bigger than what my wife and I needed. We preferred and enjoyed the cosiness of our studio apartment in Mandarin Gardens, living on the 23rd floor with a beautiful city view.

Taking Stock It would be tedious – and somewhat boring to you as well – if I were to list all my property investments and transactions. So to make the process easier, I will fast forward the “tape” if you will, and take stock of the real estate investments in hand. I own a Costa Rhu condominium, an apartment and a bungalow with a swimming pool all at District 15. I have a private property in Kuala Lumpur, and a bungalow on an acre of land in Iskandar, Malaysia. I now live in a semi-detached house in District 11, and my monthly rental income from my four properties is approximately $20,000 a month, while the value of all the properties far exceeds 15 million dollars. Not bad for a man who started as a newspaper boy.

Am I Bragging? If you have been able to follow me so far, and I believe you have, you might be wondering why I am saying all this to you. Am I here to brag? Absolutely not! I would be nuts to be putting in so much effort to write a book just to feed my ego. And I do know that there are many others who have had greater success in their real estate investments. In comparison, my assets are humble. Instead, what I am trying to show you is that it’s possible! Yes, if it is possible for me, a newspaper boy and a civil servant to invest and make money from real estate, it will definitely be possible for you! You need to: • Acquire the necessary knowledge; and • Gain a foothold in the property market as early as you possibly can. My success story in property investment can easily become yours. This book was written with these twin purposes in mind. Having been involved in the real estate market for the past 25 years – whether as investor, Salesperson or CEO of PropNex, Singapore’s largest homegrown real estate company in terms of market share with over 4,000 Real Estate Salespersons – I am in a unique position to help you understand the nuts and bolts of real estate investment. And like how I have benefited from real estate, it is my desire that every ordinary man should be endowed with the knowledge of property investments. As such, let us begin writing your success story in real estate investment. CHAPTER 1: MY STORY... AND YOURS 8

T H E U LT I M AT E G U I D E T O R E A L E S TAT E I N V E S T M E N T I N S I N G A P O R E

NOTES

THE ULTIMATE GUIDE TO REAL ESTATE INVESTMENT IN SINGAPORE

CHAPTER

How The Rich Become Wealthy How The Rich Do It And Why Their Method Works

Investment Tip “Millionaires become millionaires NOT by saving pennies, BUT by investing in real estate.”

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T H E U LT I M AT E G U I D E T O R E A L E S TAT E I N V E S T M E N T I N S I N G A P O R E

How do the rich become

so wealthy? Are they like the old school miser who scrimps on every penny and hoards his money in a tin can, or do the rich know something that most laypeople have nary a clue about? Since success leaves clues, one just needs to take a closer look at the Top 10 Wealthiest People in Singapore and the answer will reveal itself. According to Forbes magazine, the top 10 richest people in Singapore for the year 2012 are all billionaires and their net worth are as follows:

Top 10 Richest People In Singapore For The Year 2012 NET WORTH ($ MILLION)

1 9,200

Ng Family

2 6,700

Khoo Family

3 4,700

Wee Cho Yaw

4 4,000

Kwee Brothers

5 2,900

Richard Chandler

6 2,400

Kwek Leng Beng and Family

7 2,300

Kuok Khoon Hong

8 2,200

Eduardo Saverin

9 1,700 10 1,600

Peter Lim Ong Beng Seng and Christina Ong

(Source: www.forbes.com)

And among the people in the list: • The late Mr Ng Teng Fong’s Far East Organisation and subsidiary Sino Group are developers of more than 700 hotels, malls and condominiums in Hong Kong and Singapore. • The Khoo family holds stakes in the Goodwood Group of Hotels. • Although Wee Cho Yaw chairs United Overseas Bank, a large portion of the family’s fortune comes from real estate holdings including a stake in property developer UOL Group, which Wee also chairs. • The Kwee brothers share ownership of privately-held Pontiac Land, which is a property developer and hotel operator. Its portfolio includes Singapore’s Ritz-Carlton, the Regent, and two office towers near Marina Bay. • Even though New Zealand-born Richard Chandler owns Richard Chandler Corporation, a company investing in emerging markets, he started his business by investing in Hong Kong real estate. • Kwek Leng Beng chairs City Developments, a property firm. • Kuok Khoon Hong founded palm-oil giant Wilmar International, a company that is involved with, among other things, providing storage services, developing industrial estates, property development, and rents storage facilities. • Peter Lim is an astute property investor who has also invested in property developer Yanlord Land. • Ong Beng Seng is the Managing Director of Hotel Properties, which includes Four Seasons and Hard Rock CHAPTER 2 : HOW THE RICH BECOME WEALTHY 14

T H E U LT I M AT E G U I D E T O R E A L E S TAT E I N V E S T M E N T I N S I N G A P O R E

hotels in Southeast Asia, while Christina Ong oversees boutique hotel operator Como Group. • Number 11 in the list are Raj Kumar and Kishin RK, a father and son team who have built a property empire including Royal Holdings and RB Capital. The answer is pretty obvious, isn’t it? The richest people in Singapore, and throughout the world as well, are in some way involved in real estate investment. And this leads us to the ultimate truth of wealth creation, and that is: Millionaires become millionaires NOT by saving pennies, BUT BY INVESTING IN REAL ESTATE.

Why Property Investment Is The Key You might be wondering why property investments have been so successful in creating millionaires out of the ordinary people like you and me. Well, as a property investor all my life – and rightfully proud of it as well – I can claim to know the answer, and that is, the fundamental nature of real estate is by itself the key to unlocking the doors to tremendous wealth and abundance.

Fundamental Characteristics Of Real Estate 1. The long-lasting nature of brick and mortar All properties are constructed with the aim of lasting through the generations. Houses, buildings and malls are constructed with solid materials that last at least 100 years and beyond. Though maintenance is necessary, the foundations of brick and mortar can last generations.

2. The ever-increasing cost of materials Taking into consideration the effect of inflation, together with the increasingly greater demand for steel and other materials due to the rapid urbanisation of emerging and developing countries such as China, India and the Middle East, the cost of materials used in construction is set to rise indefinitely. 3. Rising labour costs The cost of labour is also expected to keep pace with inflation and higher wages in matured cities, thus increasing the price of properties as time goes by. 4. Rising cost of land Over time, the cost of land also goes up. This is especially so for land in matured estates and commercial hubs, which can effectively drive the prices of real estate many-fold.

A 7500% Increase In Value In 50 Years â&#x20AC;&#x201C; Howâ&#x20AC;&#x2122;s That Possible? To witness first-hand how a piece of property can appreciate in value over a period of only half a century, you do not have to look far but to simply take a peek at the development of idyllic Siglap over the past 50 years. 50 years ago, during the 1960s, an inter-terrace located in Siglap would cost less than $20,000, while a 4,500 sq ft bungalow would only cost $40,000.

CHAPTER 2 : HOW THE RICH BECOME WEALTHY 16

T H E U LT I M AT E G U I D E T O R E A L E S TAT E I N V E S T M E N T I N S I N G A P O R E

This bungalow, with a land area of 4,500 sq ft located in the eastern part of Singapore, cost about $40,000 50 years ago. Today, in its original condition, this property is worth at least $5.5 million.

However, if you take a look at the same two properties today, you would have realised that their prices have skyrocketed. The inter-terrace in its original condition would cost a hefty $2m while the same bungalow would cost $5.5m. How many times have the properties gone up in value? The inter-terrace has appreciated by 100 times or 10,000% while the price of the bungalow has gone up 140 times or 14,000%. Which other investment would have yielded such a phenomenal return? Plus â&#x20AC;&#x201C; and it is a BIG plus â&#x20AC;&#x201C; you also need to remember that those investors / home owners who bought their properties 50 years ago did not pay the full amount; they took bank loans to finance their purchases. Donâ&#x20AC;&#x2122;t you now wish that your parents had done the same? Acquiring properties at a good price in the past and unearthing the gold mine today for a comfortable retirement?

So If I Invest In A Property, Its Price Will Increase 10,000% Over The Next 50 Years? Am I saying that if we buy a property now, its property price will definitely increase 10,000% over the next 50 years? Absolutely NOT! We must remember that 50 years ago, Singapore was a developing nation with no stable government to boot. And in the example given above, Siglap in the 1960s was relatively undeveloped by todayâ&#x20AC;&#x2122;s standards, with almost no amenities and a much smaller population. Today, when we look at the same estate again, we find development, amenities, and greater density with an increased population. Naturally, with such growth, the price of land would have to increase.

Siglap in the 1960s. (Photo courtesy of Mr Kho Seow Chew.)

CHAPTER 2 : HOW THE RICH BECOME WEALTHY 18

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Siglap in 2010.

The phenomenal increases in the prices of both the interterrace and the bungalow are prime examples of how property prices can appreciate dramatically in value when growth and development arrive. In fact, you can say that the growth and development of the two properties we were talking about actually mirrored that of the growth of Singapore.

Will Real Estate Investment Help Me Find My First Pot Of Gold? While Singapore is unlikely to replicate the astounding rate of growth enjoyed in the years after independence, an astute investor will still discover that there is much to be made in real estate investment. This is especially so when we take into account the fundamental characteristics of real estate which were mentioned earlier, namely the long-lasting nature of real estate; and the ever-increasing costs of materials, land and labour.

That said, I am confident that anyone investing in a good property today can expect its price to increase four- to fivefold within the next 50 years. This is certainly possible if you factor in a compounded inflation rate of 3% per annum and the costs of all other contributing factors such as the cost of land in the future. And this leads us to the fundamental principle of all real estate investment: if one is disciplined enough to invest in property with a long-term perspective, one will realise the benefits of real estate investment and be well on the way to becoming the next millionaire.

In A Nutshell • Millionaires become millionaires NOT by saving pennies, BUT BY INVESTING IN REAL ESTATE. • The fundamental characteristics of real estate – unlocking the doors to tremendous wealth and abundance • Long-lasting nature of brick and mortar • Ever-increasing cost of materials • Rising labour costs • Rising cost of land • If you are disciplined enough to invest in property with a long-term perspective, you will realise the benefits of real estate investment and be well on the way to becoming the next millionaire. • Property investment is for you and everyone else!

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NOTES

• Can foreigners buy landed properties in Singapore? • Are Executive Condominiums (EC) for everyone?

102974 Ultimate Guide_Cvr.indd 1

ISBN 978-981-07-6086-1

9 789810 760861

In SInGaporE

But are you ready to invest in more? And are you confident if it’s your first property purchase? Try answering the following questions:

the ultimAte guide

As a good investment vehicle, and a favourite asset class of the rich, we need properties in our portfolio if we want to make it rich, not just to give us a literal roof over our head.

to rEal EStatE InvEStMEnt

SAyING

We’ve thought about it, worried about it, and wondered how we could use it to make it rich – real estate is more than just a home, it’s a hot political topic, and it concerns our livelihood.

Ismail Gafoor

here’s whAt others Are

About the

AUTHOR

5/18/13 10:10 AM