Disclaimer: This article is merely providing an opinion and not an advice to buy or not to buy.
If there is a way to turn your CPF into cash legally, would you be interested?
Recently, I had a conversation with a young investor who is considering to invest in a pte property and he wanted a better idea comparing investment in shares vs property investment. My answer to him…Can I show you how you can potentially DOUBLE or even triple your CASH with property investment?
From my observation, investment in local pte residential property is about the only way you can do so, because you are allowed to use your CPF to purchase local residential property and the profit generated is in cash. For all other approved investments using your CPF, your profits or dividends are stuck in your CPF account. The other key difference is in terms of leveraging.
Now, what is the impact?
Is the following even possible?
Investment in property: $60,000 cash ⇒ $193,000 cash.
Investment in shares: $60,000 cash ==> $69,600 cash
Let’s take a look at the following illustration.
In this example, we will take a look at a Singaporean investing in a $1,200,000 property, taking a 75% bank loan, for a loan tenure of 30 years, buying a first property.
5% mandatory cash: $60,000
20% CPF: $240,000
Normal Buyer Stamp Duty,CPF: $32,600
Total Cash upfront: $60,000
Total CPF upfront: $272,600
This will be the initial down payment required.
Now, before we go any further, let’s take a look at some of the profit margin made by owners in Coco Palms and High Park Residences.
Coco Palms
High Park Residences
From these examples that cover various locations, we see profit as high as $450,000. However, for this illustration, let’s just be very conservative and assume $250,000 profit in 4 years time. Of course, there are transactional costs involved. Let’s just take into consideration the more significant amount;
Buyer Stamp Fee; $32,600
Selling Agent Fee; $25,680
Legal Fee; $2500
Estimated interest; $30,000 (Interest are much lower during progressive payment stage for BUC)
Total Cost: $90,000 (Est)
You made a profit of $160,000. Accrued interest incurred which has to be returned to CPF is approx $27,000. Profit in cash is $133,000.
Suppose, the same amount was invested in shares with a 4% return annually, a total of 16% over a period of 4 years;
Can you see the impact?
Investment in property: $60,000 cash ⇒ $193,000 cash.
Investment in shares: $60,000 cash ==> $69,600 cash
The key difference I am trying to illustrate here is not which investment made more profit, rather, which one can grow your cash faster! Property investment seems to be the only investment you can make with CPF, yet the profit is in cash. For the rest of other investments, whatever you invest with CPF, the profit will be returned entirely to CPF.
Personally, I prefer cash 🙂
So, what makes High Park and Coco Palms profitable? In Fact, High Park Residences looks an unlikely winner at first glance. Where exactly is High Park Residences?
Why did I said High Park is a very unlikely winner?
X location, quite “ulu”.
X Not near any MRT Station.
X Not near major shopping Mall.
X Not near town (It is located in Sengkang, near, Jalan Kayu)
X Developer. It is developed by CEL instead of big name Developers
X Project sizes. 1390 units. No of units probably freak a lot of buyers out!
Coco Palms on the other hand, is developed by re-known developer CDL and is within walking distance to MRT/ Mall.
So why are these 2 projects profitable?
Let’s take a look at some of the similarities and we might discover several factors that might attributed to the stellar performance of High Park and Coco Palms.
- Both are positioned to take full advantage of the biggest group of buyers in today’s market, the HDB upgraders.
- Both are hugh projects. High Park Residences with 1390 units, offer a huge range of facilities to buyers. It has no less than 118 facilities. On Top of the usual stuff that most new condos have, there is flying fox, jamming rooms and even a boxing ring. Coco Palms with 944 units offer residents with a host of full condo facilities including a huge playground, karaoke/ movie room, pool table, soccer tables etc. These vast facilities might have enticed buyers to pay a higher price.
- Being large also means it is much more prominent and much “louder” profile compared to the small projects. These might have helped in creating a hype and more transactions at TOP.
- Both were launched when market sentiments are poor (Between 2014 and 2015 after 2013 cooling measures) and developers are more concern in clearing their inventory then having a big profit margin.
- The most critical of all, is probably still the right entry price. High Park and Coco Palms were launched at a price, very comparable to the price of executive condominium of that period.
Launch Prices over similar period
Do note that apart from choosing the right project, choosing the right unit is equally important.
All the best to your investment journey 🙂
Feel free to call me for a chat should you have any questions or would like to find out more about projects in the market with similar characteristics and potential. I do offer a 1 hour no-obligation sharing session and I look forward to hearing from you.
