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Secrets of Singapore Property Gurus
Finally… the Experts Reveal Their Top Tips
to Making Millions in Property Investing
Mr. Propwise, Propwise.sg
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Aktive Learning
10 Anson Road #21-02
International Plaza
Singapore 079903
E-mail: [email protected]
Web site: http://www.aktive.com.sg
Copyright © 2011 by Aktive Learning
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted, in any form or by
any means, electronic, mechanical, photocopying, recording or
otherwise, without the prior permission of the publisher.
ISBN (Paperback) 978-981-08-7891-7
ISBN (E-book) 978-981-08-7892-4
National Library Board, Singapore Cataloguing-in-
Publication Data
Propwise, Mr., 1980-
Secrets of Singapore property gurus / Mr. Propwise. – Singapore :
Aktive Learning, c2011.
p. cm.
ISBN : 978-981-08-7891-7 (pbk.)
1. Real estate investment – Singapore. I. Title.
HD890.67
332.6324095957 -- dc22 OCN696694642
Printed in Singapore
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ContentsIntroduction x
PROFITABLE INVESTMENT STRATEGIES
FOR TODAY’S MARKET
Rayney Wong
Lawyer, Property Investor and Bestseller Author 2
Investment strategies for the current environment 4
How to time your entry in the property market 4
The beneits of forming a company as an investment vehicle 6
Reasons to enter into a property sharing agreement 7
“Must do” property buying due diligence 8
The biggest mistake property investors make 9
Do residential or non-residential properties make better
investments? 10
How to lip a property for a quick proit 11My personal investment philosophy 12
My worst property investment 13
Getty Goh
Director, Ascendant Assets Pte Ltd 15
Two key trends that will drive the property market 18
Is property investment a good idea in today’s market? 19
Whether new or resale properties are better investments 20
Is there a right way to structure a property deal? 23
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Do residential or non-residential properties make
better investments? 24
How interest rates affect property prices 25
Are leasehold or freehold properties better investments? 26
My personal investment philosophy 27
Finding good investment opportunities 31
FINDING YOUR IDEAL INVESTMENT
PROPERTY
Mohamed Ismail Gafoor
CEO, PropNex Realty Pte Ltd 34
Trends I’m seeing in the market 37
Impact of the fourth round of measures and
forecast for 2011 37
How to ind a good and reliable real estate agent 39The biggest mistakes property investors make 41
Promising areas for property investors 42
Should you buy an HDB lat or private property? 44Should you do an Addition & Alteration (A&A)
or demolish and rebuild a landed property? 44
Investing in commercial property 46
How PropNex ensures the quality of its agents 46My personal investment philosophy 47
My property investment track record 47
Steve Melhuish
CEO, Allproperty Media Pte Ltd 48
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Trends we are seeing in the market 51
Online tools to help investors search for properties 52
The best way to ind an attractive property to buy 52The most promising projects and areas 53
Two golden tips for mortgage loans 54
Asian commercial property market outlook 55
Finding a reliable property agent 55
How PropertyGuru ensures the reliability of its site 56
My personal investment philosophy 56
My property investment stories 57
Kelvin Fong
Team Leader, Powerful Negotiators 59
Impact of the fourth round of measures and
prperty price forecasts 62
Should buyers go ahead with their purchase
despite the measures? 64
Should sellers sell their property now or
keep holding on? 65
How to ind the right agent for you 66How to make money in Singapore property 68
The best time to buy and sell property 70
Mistakes novice investors make 73
Promising areas and projects buyers should focus on 74
Negotiating tactics for buyers 75
How owners can maximize their selling price 76
Do residential or commercial properties make
better investments? 77
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My personal investment philosophy 79
My experience investing in property 80
SMART PROPERTY FINANCING
Dennis Ng
Director, Leverage Holdings Pte Ltd 83
Are banks still willing to do property lending? 85
Is it easier to get rich investing in stocks or properties? 85
When an opportunity presents itself… 90
My top property inancing (and reinancing) tips 90How to maximize your chances of getting a loan 95
How quickly should property owners pay off their loans? 95Should you get mortgage insurance? 100
Why is Money Always Not Enough? 101
My personal investment philosophy 102
The worst and greatest property investments
I have heard of 102
Alfred Chia
CEO of SingCapital Pte Ltd 105
My biggest concern on the property market 107
Long term outlook on property in Singapore 107
The importance of proper asset allocation 108
Finding a proitable property 109Top tips for inancing your investment property 110How to maximize your chances of getting a loan 111
When should you take a home equity loan? 111Is home insurance necessary? 112
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My personal investment philosophy 113
The promise (and pitfalls) of property investing 114
AVOIDING LEGAL PITFALLS AND
OTHER MISTAKES
Amolat Singh
Partner, Amolat & Partners 117
The role of a conveyancing lawyer for the seller
and buyer 120
Does it matter which conveyancing lawyer you use? 125
The advantages of forming a company as a property
investment vehicle 125
Potential pitfalls of entering into a property
sharing agreement 126
Due diligence for the smart property investor 127
What a landlord should do to protect his interests 128
The biggest mistakes property investors make 129
Singapore property horror stories I have come across 130
My personal investment philosophy 132
Success in property investing – luck or timing? 133
Mark Chua
Partner and Head, Property Law Department,
Tito Isaac & Co LLP 135
How to ind a good conveyancing lawyer 138Does the purchase process differ for residential,
retail, ofice and industrial properties? 139
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The different ways property investment deals can
be structured 140
When should you set up a company to invest
in property? 140
What an investor should check before committing
to a property purchase 141
What landlords should check before renting to a tenant 142
How the recent government measures have
affected property inancing 143The biggest mistakes I see property investors making 145
When the IRAS label may label you as a
“property trader” 146
My personal investment philosophy 146
HOW TO MAKE MILLIONS FROM
EN BLOC SALES
Karamjit Singh
Managing Director of Credo Real Estate
(Singapore) Pte Ltd 149
Outlook for en bloc sales in Singapore 152
How the en bloc process starts 153
The common characteristics of en bloc properties 153
The top reason why an en bloc sale fails 153
The key factor developers need to have to buy
en bloc projects 154
The impact of changes in the en bloc legislation 154
How a property consultant such as Credo helps in
the en bloc process 155
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Should investors focus on en bloc properties? 155
Dillon Loi
Master Trainer, Real Estate Academy 156
How the en bloc process works 159
How to ind properties with en bloc potential 160Reasons why most en bloc deals fail 164
Economic conditions needed for the en bloc market
to take off 168
How changes in legislation will affect the prospects
for an en bloc sale 169
Where the next wave of en bloc is likely to happen 170
Are commercial properties attractive en bloc targets? 172
Real estate versus other investment products 173
Outlook on the Singapore property market 177
Parting Thoughts 179
Is property a good investment? 179
Downsides of investing in property 181
The smart investor 181
The shotgun versus the machinegun 182
Can you afford to make a mistake in property investing? 183
Investing under the shadow of government measures 184
Advice for those just starting out 185
Making the leap to becoming a property investor 186
About Mr. Propwise 188
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x
Introduction
Introduction
If you look at the list of the Forbes 40 richest people in
Singapore, you will see many who made their fortunes
developing and investing in real estate. Or just look
around you – the average Singaporean’s wealth probably
comes more from the appreciation of his HDB lat or private property than from any other asset.
My point? Based on my experience and what I have
observed, investing in property is the most common way
for the average person to build up a signiicant amount of wealth.
But if you want to invest you will constantly have to
grapple with the twin animals of greed and fear. Greed
and the desire to accumulate wealth drives us to take
risks in order to achieve a higher return, but fear of loss
holds us back from doing so.
It is perfectly understandable to be scared about
investing in property. You are making the biggest
purchase of your life, and are borrowing a large amount
of money to make this purchase.
And especially in the current environment where the
government has announced multiple rounds of measures
to control the market and prevent rapid price increases,
it might feel like a very risky thing to buy a property.
Wise investors will look at this situation from a different
perspective: For long term investors, the next one to two
years is likely to present you with a golden opportunity
to pick up a good property at a low price and make a lot
of money.
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xi
Secrets of Singapore Property Gurus
Let’s not forget that any form of investing is made
riskier when it is backed by debt. The leverage cuts both
ways – while you can multiply your returns if prices go
up (and that’s what many people focus on), you can also
lose more than you have if prices go down signiicantly.The best way to manage that risk is to be prudent when
you are buying, to do proper research on what you buy,
and to learn as much as you can about property investing.
The problem I’ve found is that there are very few good
and objective sources of information out there to help the
budding property investor. While a good property agent
is certainly helpful, a smart investor cannot rely solely on
what an agent says as he has an inherent conlict of interest – his goal is to get you to transact, as that is how he earns
his money. That might explain the amusing phenomenon
of how many in the industry will say that it is always a
“good time” to buy whether prices are going up or down.
That was one of the main reasons why I started
Propwise.sg, a Singapore property blog dedicated to
helping you understand the real estate market and make
better buying, selling, renting and investing decisions
– minus all the hype and misinformation. You can ind most of the basic knowledge you need to get started
there.
This book brings it up a notch. I’ve gone out to
interview the top experts in the property sector, and bring
to you their invaluable insights on how to make your
fortune investing in real estate. It would cost thousands
of dollars to get one of these experts to consult on your
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xii
Introduction
property purchase – if you could even get access to
them. This book is split into ive sections to match the specializations of these experts:
• Proitable investment strategies for today’s market• Finding your ideal investment property• Smart property inancing• Avoiding legal pitfalls and other mistakes• How to make millions from en bloc salesI am amazed by how generously they have shared
what they know, and truly believe that you will become
a better investor and proit greatly if you listen carefully and learn heartily.
To wisdom and beyond,
Mr. Propwise
P.S. Before you read further, go now to www.propwise.
sg/bookbuyer/ to get your free copy of my Singapore
Property Beginner’s Guide, Real Estate Buyer’s
Checklist, and other resources I have prepared specially
for buyers of this book.
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2
Secrets of Singapore Property Gurus
Rayney WongLawyer,
Property Investor and
Bestseller Author
Rayney Wong Keng
Leong, LL.B. (Hons.),
is a lawyer, property
investor and author
of the bestseller
Secrets of Property Millionaires.
A lawyer by profession, he has been practising
Conveyancing and Real Estate Law for over 23
years. As his great passion has always been property
investment, he has over the years assiduously
acquired a wealth of experience and knowledge
on the “dos” and “don’ts” of buying and selling
properties.
A firm believer in lifelong learning, Rayney is always
willing to share his vast accumulated knowledge
and business acumen with anyone possessing a
keen ear to listen and learn. Through conducting
countless seminars, lectures, and talks, Rayney
has enlightened bankers, real estate agents,
financial advisors, and members of the public on
the intricacies of property investment. He has also
personally coached numerous real estate agents,
and on many occasions, saved them from more
than a few legal pitfalls.
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“Never overstretch your financial
capacity. Buy only what you can
afford to hold. You must have the
financial capacity to ride out the storm
in a weak property market, and be
prepared to hold on to your property
for a few years.”
Rayney Wong
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Secrets of Singapore Property Gurus
Investment Strategies For The
Current EnvironmentThe property market is at an all-time high and new
record benchmark prices are set on a monthly, weekly
and often even daily basis. In the current bullish and
toppish market, property investors must be thoroughly
educated to make wise investment decisions. I have
always advocated the principle that if an investor is
focused on the downside risk in property investment,
the upside proit will take care of itself. Each property that an investor wishes to acquire must meet stringent property analysis criteria.
A range of investment strategies will have to be
applied on a case by case basis. Using private limited
companies as an investment vehicle is advantageous,
and could result in a substantial increase in Return On
Investment. Property sharing agreements allow investors
to pull together their inancial strength so they are not stretched inancially as individuals. I will discuss these strategies in detail later.
How To Time Your Entry In The
Property MarketMany property gurus and agents will always say:
“Anytime is a good time to buy.” I disagree. Buying a
property at the wrong time can cause a lot of inancial pain and prove to be a long term burden for the uneducated
investor, especially if you buy the wrong property at the
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5
wrong time (i.e. the peak of the market).
After studying the URA Property Price Index
carefully, I noticed a distinct pattern of property cycles
(1993-1998, 1999-2004, 2005-2009, and the current one
that started in the second quarter of 2009). I have gone through this analysis thoroughly in my book, Secrets of
Property Millionaires.
Basically my technique of timing your entry into the property market is to buy properties only during certain
“window periods”. This is when the property market just
begins to turn upwards (e.g. in the beginning of 1994,
1999, 2005, 2009) – those who bought at these times will
have handsome capital gains. Through timing my entry,
I have bought more properties during such “window
periods” than at other times.
Of course to know when the “window periods” occur
and what properties you should buy at what prices
during those times, you need to monitor the market and
be on the constant lookout for good buys and the irst sign of recovery. There are two signals I look at: 1) The
prices of properties you are monitoring must have fallen
close to or below the previous transacted prices during
the downturn and bottoming of the market in the last
property cycle 2) A marked increase in the number of
property transactions is usually the irst sign of an upturn and recovery in prices.
Proitable Investment Strategies for Today’s Market
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6
Secrets of Singapore Property Gurus
The Beneits Of Forming A Company As An Investment Vehicle
The beneits of forming a company as an investment vehicle include:
1. All expenses incurred by the company in its
management of the investment property are
considered corporate tax deductible.
These include maintenance fees, property tax, utility
bills, renovation, and even furnishings. However this
book is not meant to be a guide on tax laws – you must
seek the advice of qualiied accountants to understand the intricacies of the prevailing tax laws and regulations.
2. You can apply for your company to be GST
registered.
This makes sense especially if you purchase
commercial properties that require GST payment – this GST will then be recoverable as GST reimbursements,
and is substantial at 7% of the purchase price.
3. You can enjoy tax beneitsThe Singapore corporate tax regime allows new
start-ups to enjoy tax exemption for the irst $100,000 of normal chargeable income for each of the company’s
irst three consecutive inancial years. Effectively, new start-ups with a net income of $300,000 in each of their irst three inancial years pay tax based on only $100,000 for each of their irst three inancial years (based on the
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prevailing tax rate of 17%).
When buying with other investors, the beneits of forming a company include:
1. The terms of agreement between the property
investors can be easily stated in the company
shareholder’s agreement
2. There is no big fear of a stalemate in the event
of death, bankruptcy, illness, unsoundness of
mind or inordinate absence affecting one of the
shareholders.
Property investment is a business to help you generate
proit and cash low – you should not get emotional about it and should run it as a business. That’s why I
recommend forming a company to do it.
However, one practical challenge faced by a property
investment company is that of obtaining mortgage loans.
Bankers tend to look behind the corporate veil of the
company and conduct their due diligence on each of the
shareholders and directors. The credit rating and level of
experience of such individuals will determine both the
approval and quantum of the mortgage loans.
Reasons To Enter Into A Property
Sharing AgreementOne way to share the burden of having to pay huge
upfront sums of money towards property purchases is to
form property-sharing joint ventures. Each investor pays
a small sum of money (depending on their percentage
Proitable Investment Strategies for Today’s Market
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8
Secrets of Singapore Property Gurus
shareholding) to tap into big investment opportunities.
With a bigger investment budget, a group can also
bargain for better discounts in bulk purchase deals,
or buy costly properties like a coffee shop or eating-
house with high rental returns. Even small buildings are
possible to buy.
Property sharing will also provide you with a greater
inancial safety net to cushion you from the ups and downs of the property market. This will help you sit out
any lull period in a property cycle.
But before you do so, make sure all your partners
possess high integrity, and make sure you do not run
afoul of the rules relating to soliciting funds from the
public. Property investment is a business, and you can
only build a good business with honest people.
Property sharing ventures often take the form of
private limited companies, which I recommend unless
you are buying the property with a close relative. Despite
the hassle of legal procedures and operation costs, it is
worth it as forming a company will not only safeguard
your interests but also offer other beneits.
“Must Do” Property Buying
Due DiligenceYou should always make the effort to ind out about all the relevant details regarding a property, as well as its
seller(s). Never just believe what the agent says.
Important details to look out for include whether the
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9
property is freehold or leasehold, its exact area, as well as
whether there are caveats or orders of court registered against
the property. Government plans for the area are also critical,
such as whether there are road or drainage line reserves.
Certain zones require special caution as they may have special government planning restrictions, including Geylang,
Changi, Serangoon, Balestier, Chinatown, Pasir Panjang and
Tanjong Pagar.
You can conduct some of your due diligence by doing an
online search (e.g. at www.inlis.gov.sg, www.lawnet.com.
sg, www.ipto.gov.sg etc), but consulting conveyancing and
property lawyers can save you much time and hassle. In fact,
getting professional legal assistance to go over the ine print can save you from losing heaps of money should something
go wrong during and even after the sale.
The Biggest Mistake Property
Investors MakeThe biggest mistake I see property investors making is
succumbing to greed and committing to properties beyond
their inancial capacity. This often happens during bullish markets when buyers aggressively bid for properties, and
many investors boast of the huge proits they make lipping or reselling properties.
I myself over-committed to properties during the epic
1995-1996 property boom, and when prices started to fall in
1997 I sold off some of the properties at depressed prices.
Worse, some of my co-owners started to default on their
Proitable Investment Strategies for Today’s Market
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10
Secrets of Singapore Property Gurus
commitment to pay the mortgage instalments, leaving me
to bear the burden. By 1998, most of my properties were
in negative equity, meaning the value had fallen below the outstanding mortgage. During that time, I lived under the
shadow of foreclosure and bankruptcy. Fortunately in 1999
there was an upturn in the market and property prices started
to climb.
What I learnt from this great inancial loss was this lesson: Never overstretch your inancial capacity. Buy only what you can afford to hold. You must have the inancial capacity to ride out the storm in a weak property market, and be prepared
to hold on to your property for a few years. Make sure you
set aside enough money for the incidental costs (stamp duties,
legal costs, GST etc) and have 12 months’ worth of funds to
pay for the maintenance, property tax and utility bills.
Do Residential Or Non-Residential
Properties Make Better
Investments?I have often been asked whether residential or non-residential
properties make better investments. My general assessment
is to buy residential properties for capital appreciation and
commercial and industrial properties for rental yields.
For example, I bought a 4-room unit in Martin Place
Residences off River Valley Close in the second quarter of 2009 at about $1,420 per square foot (psf). Within one and a half years, the property appreciated to $1,850 psf, an increase of more that 30%.
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A month later a friend and I ventured to acquire a unit in an industrial estate known as Eunos TechPark. The price
has not appreciated much but we have enjoyed the very
healthy net rental return of around 9% over the last ive quarters.
How To Flip A Property For A
Quick ProitThe quick sale of a property after obtaining an option to purchase is often called a “lip”, so called because the entire purchase and resale process can happen in a matter of days
and weeks. Expert property investors are often on the lookout
for such opportunities because they can get quick proits with only a minimum outlay of 1% of the property price.
There are a few essential rules to follow when lipping:1. All sellers of a property must sign the Option To
Purchase (OTP), and every seller must have the
capacity to sell.
2. The title of the property must be in order, i.e. there
are no caveats, order of court, or other encumbrances
preventing the sale of the property.
3. The OTP must be addressed to an individual, a
company, or a legal entity with the capacity to purchase
the property.
4. The words “and/or nominee(s)” must appear after
the name of the original purchaser that the OTP is
addressed to (this is critical).
5. The original purchaser, whose name is on the OTP,
Proitable Investment Strategies for Today’s Market
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12
Secrets of Singapore Property Gurus
will hand the original copy of this, together with a duly
signed nomination letter, to the inal purchaser.To execute a lip, after you have paid the 1% option money
and obtained the OTP from the seller, you market the property
aggressively and hope to ind another inal buyer within 2-4 weeks. The inal buyer will then pay you a proit (equal to the difference between the purchase price agreed upon between
you and him, and the original purchase price) in exchange
for the OTP and a nomination letter nominating him to be the
buyer.
Note that if you lip under construction projects from developers you will have to execute the sale and purchase
agreement and thus be liable to pay stamp duty, but if you lip resale properties you do not need to do so.
A word of advice from me: lipping carries the risk of forfeiture of your option money and liabilities, so rather
than being too greedy you should be lexible when receiving offers, and only lip during bullish markets.
My Personal Investment PhilosophyI can never over-emphasize the importance of inancial prudence. In my network we carry out what is known as
“the stress test” – we ask ourselves whether we are able to
comfortably pay our monthly mortgage instalments in a worst
case scenario when interest rates skyrocket and mortgage
instalments increase. To make matters worse, our tenants may
leave and a suitable tenant may not be found easily. Rental
payments are not always dependable and we may have to go
without rental collections for months on end.
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13
Proitable Investment Strategies for Today’s Market
I allocate half of my investment funds to property and the
other half is invested in stocks, options, unit trusts, bonds,
commodities and currency. I do my own analysis for all my
property investments, but for the other asset classes I also
listen to the advice and recommendations of the experts in
those ields (such as my stock broker or private banker).
My Worst Property InvestmentIn my book Secrets of Property Millionaires (published in
the second half of 2010), I illustrated the many mistakes I
had made in my property investment journey. They were
costly mistakes and I had learned to spot the tell-tale signs of
possible pitfalls.
In 1996, I purchased three semi-detached houses at Limau
Garden, each costing $1.8-1.9 million. Though those houses only had 99-year leases, they were part of the prestigious
Kew Vale collection of landed properties sold by Kew Park
Pte Ltd. I thought the houses were a bargain, as I obtained
them at bulk purchase discounts of up to 18% off their listed
prices. The land area for each of the three-storey split-level
houses was decent at approximately 2,800 square feet, with huge built-up areas of about 3,770 square feet.
Back then, it seemed like a great buy. However, as it
turned out I had bought the three houses close to the peak of
the 1993-1998 property cycle.
Two years after the purchase, the economic downturn hit.
Rentals for each semi-detached house plummeted from about
$7,000 per month to a low of $2,600. Despite this, I held on to all three houses. Surely the prices would recover one day.
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Secrets of Singapore Property Gurus
Another year later, in 1999, I sold one of the houses at
$1,225,000 taking a loss of $655,000 on that unit. It was indeed a very painful decision. Unfortunately, I had little
choice but to dispose of the house at this depressed price as
the property market was worsening by the day. I had sold in
a buyer’s market, in the hope that with the reduced liability
I could hold on to the other two properties until their prices
recovered.
The next property boom came in 2007. I inally sold my remaining two semi-detached houses at $1.2 million each. Despite having sold at what was supposedly a peak, my total
loss on both houses amounted to slightly over $1.3 million! Prices had simply not recovered even after a holding period
of more than 11 years. Had I held on to the houses till today,
the prices might have increased marginally to just touch the
$1.5 million range. This would still be a far cry from the over $1.8 million I paid per house in 1996.
To sum up this hard lesson learned, I had bought the wrong
properties at the wrong time – a sure formula for the typical
property investment disaster.
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