Thread by @SGGOODLIFE

#Singaporeans think #realestate makes for a great investment.

Many don't realise that taking a loan on a property is a form of leveraging.

It can work for OR against you.

Time for a thread 🧵👇

2/ 2nd property max loan you can take is 45%. Other 25% (cash), 30% (CPF/cash) = 100%

On a 1M property, that's $450k

If the property appreciates by $200k to $1.2M after misc fees, you've just made your money work for you.

In a recession, the reverse is true.

3/ Let's say the market crashes in a deep recession, the private property that you bought goes down by 30% from 1M to $700k.

You've lost your job and can't afford to service the loan.

You sell the property thinking "no worries".

Here's the truth 👇

4/ $700k - $300k (returns to CPF) = $400k

You pay $400k to service the loan of $450k (assuming some already paid off)

You'll be left with nothing or in cases where a higher loan granted (before July 2018) you could even end having to cough up extra.

5/ You've just lost 0 to $250k of your own money.

Don't laugh at others who play with options or futures;

Taking a housing loan to buy an investment property is itself a sort of futures, albeit one that you don't feel, till you lose your job.