5 Things You Should Take Note if Your BTO Has Hit MOP

I recently received this enquiry:

The article she was referring to was this: “Staying in a Resale HDB Flat for the Past 5 Years? Then Read On…”

If you been following Second Property Investors for awhile, you will know that I always advocate for:

• Monitoring your own property portfolio – check whether depreciation has taken place!
• Always being aware of the significance of various government rulings
• Consider the negative financial impact of letting your funds stay stuck in your HDB flat
• Shifting those funds to a better performing property
• Doing due diligence on whether the property can INDEED perform better

And… I always receive criticism about my writings. I accept it all though – even the negative comments. It forces me to always remain on my toes. 🙂

So to receive this enquiry was a validation – that my posts are indeed educational and helpful.

However in this case – I couldn’t help this person.

Nothing much can be done as the profits from the 1st flat has been transferred to the 2nd flat. And unfortunately, the 2nd flat has instead depreciated in value.

Hence nothing much can be done.

This is what I mean when I say your “funds” are stuck – selling the flat would only bring losses. Some people accept the losses and just sell – to CUT future losses.

Some people don’t accept and instead choose not to do anything. There is no right or wrong choice here.

So here, I like to highlight some of the issues or traps you MUST be aware of as a HDB homeowner.

With rising awareness on 99-year leases and more discerning knowledge, here are 5 things you must take note of regarding your HDB flat AFTER you have passed your Minimum Occupation Period (MOP).

#1: The Buyers Mindset

Buyers will ALWAYS like new things.

Whether they are buying furniture or properties – there is a strong preference for something brand-new. For a start, they will always check out the newest flats.

For resale flats, this means the 5-year old HDB flats. When they see something new, they will start to “condition” themselves.

“Wah the garden so nice, the lift lobby so clean, the corridor so neat.”

They will see everything as being at its best.

Then their mind will start to search for something older to COMPARE with. We can’t help it – our human minds are conditioned to work this way.

The problem when we start to do comparison – we will start to find faults. Even when the flat is only 1-2 years old older.

You will start making remarks:

“Why the garden so dirty? Why so messy.”

“Aiyo the lift lobby so dirty. Why got a smell? You see the corridor – got so many things.”

So when come down to actually putting down their money:
Which one will they be happier to pay MORE?

And which one will they try to convince themselves to buy at a much LOWER price?

This buyer’s thought process reminded of what happened when I bought a used car few years ago.

We went to look at both new and used cars. And my family members will start to compare.

Wah the headlight is nicer…
How come the gear stick is still in the center console – block up the space to put things.
The water bottle holder so small.

Even car plate number – they also can comment.

That is how the human mind works.

#2: Moving Out Is Not As Troublesome As You Think

Have you heard of Newton’s First Law? It is called the law of INERTIA.

Objects at rest will tend to remain at rest.

A common objection I receive from homeowners is that “Moving out is very troublesome.”

My reply will be “Going to work is very troublesome. Waking up, taking a shower, getting dressed also sounds very troublesome. But we have trained ourselves to not view it as troublesome.”

Packing up, cleaning and tidying our place to sell it – can be done without being viewed as troublesome… especially if we focus on the BIGGER picture.

Extracting our gains before it starts to depreciate.

Do not be so comfortable in your comfort zone until it becomes too late.

By then, the comfort zone becomes VERY uncomfortable.

#3: “I don’t want to give up my larger HDB for a smaller private property!”

I have covered this before in a previous article – “Why Do People Still Upgrade To Expensive Properties Even In Cooling Measures?

There is a realization that while there is a mental burden of holding a large mortgage loan – the potential payoff of much larger capital gains is also an incentive.

It is realistic to expect 6-figure gains from private property due to its leveraged nature.

But it is also a tradeoff – you also give up the chance to stay in a large and spacious HDB flat.

Is it a worthy compromise?

I leave it to you to decide.

 #4: Difficulty In Sourcing For The “Correct” Property

There is another group who are way beyond the MOP.  They have been staying in their HDB for 15-20 years.

And now they are in their 40s. They find that they face a lot of trouble sourcing for the correct property.

Many people give up along the way.

For this age group, I know it not easy with both children and parents around.

But have you tried your best?

Did you manage to figure out HOW to achieve your goal?

Have you asked people who might know what to do?

This is NOT the time for you to relax yet.

Because the period between 40-50 years old is your WEALTH GROWTH stage.

It is a chance for you to set a good example for your children to follow.

I understand we come from all walks of life. We cannot always compare….

And you might even feel very uncomfortable reading this. Angry maybe. But that is good.

This means you are thinking.

I don’t want to write such posts that makes people angry with me too. But sometimes we really need to look at the truths of life. Someone has to be the bad guy to tell you all this.

We don’t know what we don’t know.

But at least once in awhile…. we must look at the fine financial details – so we really understand where we stand.

#5: What If I Make a Wrong Decision?

It is so easy to obsess about a big decision and then fail to act.

Rather than letting emotions overwhelm you, learn what you can about the problem.

Some steps I propose to you:

• Check on the most recent transactions around your estate of properties similar to yours. Have your property depreciated? Or appreciated? Or remained stagnant for the past 5 years?
• Ask someone who has upgraded to a private property.
• Ask someone who has bought a second flat after disposing of the first.
• Ask someone who has done dozens of buy/sell property transactions
• Ask someone who has analyzed the property market in depth

Of course, you can always ask me for a detailed financial assessment on what you can do next. 🙂

Conclusion

On 12 Sept 2017, the Straits Times published a report by Morgan Stanley that stated private home prices will start to rise by 10% by end 2018.

In March 2018, I wrote an article about what you can do in a rising market – where I asked private homeowners to begin thinking about selling their properties to extract their gains.

By Jan 2019, URA gave a flash estimate that private property prices has already risen 7.9% over the whole of 2018.

7.9% increase was not so far off the mark of the predicted 10%.

Looking back, hindsight is always 20/20.

More than that, it is the importance of knowing what decisions to make  – in spite of whatever market conditions.

A good principle to always follow whether in investments, business or life:

Your goal is to find the best answer, not to give the best one you have.

Feeling uncertain regarding your existing HDB or property portfolio?

I invite you to contact me for a no-obligation consultation.