My first property ended in a loss

As mentioned in my first posting, i will share with you my property investment journey. My first foray into the property market is via the most obvious and common one. The HDB. There weren't any HDB grants during my time and we couldn't afford one near our parents as we have only started working. We couldn't afford the Executive Condo either. My starting pay was only $1,850 per month to be exact. During our time, there were only 3 choices, Woodlands, Jurong or Sengkang. Not much of a choice, so we selected the "cheapest" location in the north zone as Sengkang was much more expensive.

The problem with picking the north zone is that it is very far from our parents' place and once the baby came, we have to move near to the care-givers. In the end, we hardly stayed in the flat there. The problem is that under HDB rules, we cannot buy any property within 5 years and cannot lease it out either. The rules were extremely strict even back then. In the end, we kept it empty for almost 5 years. To top up our stupidity, we spent $40k on renovations.

The picture shows you the various points where we buy our flat. We bought exactly at the peak and sold at the bottom. What "perfect timing"! 

We bought the HDB executive flat for $380,000, add another $40,000 on renovations = $420,000. We hardly stayed there. You can see the market was in a doldrums from 2001-2005. 

Lesson 1 - Buy a property only if you intend to stay in it or rent it out.

We couldn't stay in it and we couldn't rent it out due to the rules. It was basically a white elephant. We could have 'secretly' rent it out but it was illegal to do so. Having said that, if you own a HDB flat today and is eligible to rent it out, my advice is that you keep the goose that lays the golden egg unless the offer is too compelling and you have better use for the proceeds. The yield from HDB flat is one of the best you can find.

Lesson 2 - Don't buy a property that comes with so many restrictions

The second lesson I learnt was that try to buy a property with less restrictions. The fact that I cannot buy another property or sell within 5 years are restrictions imposed to ensure that I do not abuse the "market subsidy"which i supposedly received when i bought the HDB executive flat.

Lesson 3 - Don't be greedy when buying HDB flat!?

It was very funny to see the reactions when i tell people i lost money from HDB. They basically couldn't believe it. I have to tell you that i was greedy. I thought to myself, "HDB sure can make money if you buy directly from them". I cannot be more wrong. hahaha. I bought the biggest flat available to me instead of 4 or 5 room flats and as you know, executive flat received the lowest "market subsidies"from the government. After 5 years, i decided to sell my flat at a loss and move on but the joke was that there were many unsold units at my flat even after 5 years. At the time when i was selling my flat, HDB was selling the unsold units in my block for between $220k to $280k. It took me more than 10 months to finally find a buyer and the buyer was a PR family and they offered me $295k for my HDB executive flat. But the real joke was HDB writing a letter to me, wanting an explanation from me why i sold my flat for $295k when the valuation was $340k. I gladly replied that i would love to sell it to them for $340k if they are willing to buy. (As a side note, my bro-in-law bought a 4 room flat in Sengkang and after 5 years, sold it for a good profit).

Lesson 4 - Cut loss and move on

By 2005, i have lost enough money from the stock market to know how to cut loss and learn about market cycles. I wanted to free up my CPF to buy into properties at better locations and catch the next property cycle. The fact that I don't even stay there and couldn't rent it out provided the catalyst to do something about it. As you can see, my first foray into the property market is a painful one. Lost at least $100k if i include part of the renovations. Sigh. It was painful lesson which i will never forget but I will treat the $100k as an expensive school fees. There are no better schools to teach you about what life really is. Enjoy the life journey. 

Here it is for this round. Will update the chart with more pictures next time.