Loses money on every property he has bought

[abbby]

Call it bad luck or lack of research, I have a friend whom I spoke to recently. Who has bought several properties in the past years and either did not make money from it (breakeven) or lost money. I was rather surprised because with a reasonably decent location one should be able to make money from the investment. Some locations were in city but I would think the specific projects were just not as desirable.

[malcontent]

Not surprising. People usually underestimate the ongoing costs and overestimate the appreciation potential.

Last year I sold a home in the U.S. that I had bought 15 years ago for my brother to live in, and after all costs, the gain on the sale worked out to a measly 3% per annum. This was despite being a bank foreclosure bought during the great financial crisis at a fire sale price. Most of the appreciation happened in the last 5 years, but I would have been far better off in the S&P500. The only saving grace is that it helped my brother in a huge way.

[abbby]

Wow and only 3% per annum? It's almost the same as putting money in FD. But again, good that it helped your brother.

[NYY1]

If you do a chart of US housing prices and draw a trend line, values were (well?) below trend from 2009 to a couple/few years before COVID. Now, I believe the situation has more than corrected on the other side.

For the last 10-15 years, the S&P 500 return has been in the 12% - 15% range. That has been the opportunity cost of owning real estate over this period. With leverage, the returns on the down payment are probably similar. However, that doesn't account for all of the additional equity put into a property over time via monthly repayments (and what could have been earned instead).

[Max Headroom]

Hindsight is 20/20, peeps.

Results from the past have zero bearing on future performance.

Live it up lah.

[PNGMK]

Entry price into property is hugely important because of how illiquid the market is here. This is why looking for the 5D desperate and distressed sale combination to get a good price is important (Death, Disease, Divorce, Disaster, Debt). In my case the agent let slip that the owner had a bridging loan in place and was desperate to sell. Hence took a lowball offer.

[NYY1]

The best liquidity is around sought-after schools. Unless the unit (or development) has something very undesirable, you should be able to move it quickly.

[abbby]

and also near mrt

[sundaymorningstaple]

@PNGMK

I did much the same thing. In my case I bought at the tail end of the Asian Financial Meltdown of 1997~1998. The property market bottom out in Jan~Feb 1999 before starting to move up rapidly. I book the purchase of my resale 5I on the 27th of Jan 99. Got it for about 30% less that the previous figures in the estate prior to the meltdown AND no COV either. Paid it off with a 14 year mortgage as well to save a fair bit on interest as well.