Playing the property game (part I)

Different people play the property game differently.  However, I saw six strategies commonly adopted by property investors in Singapore.

Strategy One: Buy low sell high

Buy or sell, timing is the key.

Think Warren Buffett’s famous saying to the shareholders in 1986,

To be fearful when others are greedy and to be greedy only when others are fearful.

Below are three most recent scenarios:

1. BUY in 1998 after Asian Financial Crisis and SELL in 2000 during technology bubble.
2. BUY in a slow market between 2003 and 2006 and SELL in the 2007 property boom.
3. BUY after US financial crisis end of 2008 or first half of 2009 (and selling now?)

Strategy Two: Buy and never sell

This type of players aims to build a portfolio of high quality properties at good locations, usually bought after a major market correction.  The properties often generate satisfactory rental returns over the years. 

Backed by strong holding power, they are unaffected by market sentiments and always maintain status quo.

Transaction costs are only paid once at the time of purchase.  Units never change hands with exceptions like en-bloc or passing onto next generation. 

Looking at how property prices have climbed over the past decades, this group of players is the biggest winner so far.

Strategy Three: Fix-and-sell

Players are usually architects, contractors or businessmen in the construction industry.  Some are small property developers themselves. 

They go around looking for old and run-down properties (mostly landed ones).  These properties will undergo major renovations, A&A (Addition and Alteration), or being rebuilt into modern-looking houses.  

The resale profit margin can be very attractive if:

1. They can keep the fixing costs down from their connection;
2. They maximize the size of the new house;
3. They tear down the old house and build a few small ones; or
4. They convert old terrace houses into semi-detached or bungalows.

For me, I am enjoying the fruit of the first strategy.  I would also love to be the second type one day. 

What about you?