I have been asked about this many times 🙂 – Is it better to buy a Freehold (FH) or Leasehold (LH) property? So, I decided to write this article to share my thoughts with you so that you can have a better understanding when it comes to selecting your choice property.
If given a choice, I believe most people will prefer a FH property over a LH property. But, does it mean that all the FH property will make profit? We have witnessed many LH properties which made good profit margin too. Hence, it is always good to know how to determine the right property.
Do not always assume that FH property will make profit. For me, I have never believed in emotion purchase. I prefer to do research and use that to make the right judgement when comes to buying a property.
At the end of the day, it is all about the entry price when it comes to deciding a FH or LH property to purchase. I would like to share with you 3 important factors when choosing a FH property and they are:
1. Why Legacy?
I always take this approach as a form of forced saving into the property. Just looking at the chart below. After 20 years, all the rentals proceed that you have collected will go to the next generation. Therefore, so many savvy investors choose to buy a FH property as they are leaving it as a legacy for their children.
2. Location, Location, Location
The second point will be location. If you can find a property that is FH and near MRT, it will be a super plus point as there are only 13% of such properties in the whole of Singapore. Using the law of demand vs supply, FH property near MRT always hold its value and appreciate more too.
3. Near Good/ Renowned school
If you are a parent, will you also prefer to buy a property that’s near to good schools? I am sure you will say “YES” because we all want the best for our children. Now, imagine if there is this FH property that is near good schools, isn’t that a bonus? As a rule of thumb, the profit margin of FH which is near good schools is high. Look at the chart below and you will realize that one of the owners made about $800,000 in profit. Do you ever wish that you own this property?
Hope you have enjoyed this article that I have prepared for you. I did not create a long article on purpose as I am unsure if you will be keen to read more. In fact, I have another article which is extremely crucial where I will be sharing a case study on how I analyze whether the property is priced right. I have used one of the most important fundamental principles on how to determine the potential upside of the asset, similar as the property mentioned above. I have seen people choosing the wrong asset and making very little profit. (see below chart) Therefore, it is important to do research to ensure that your purchase will be a safe one (as you can see from the chart below). Of course, there is no promise in making your desired profit, but we can minimize your risk to the lowest possible.
Where can you find this Freehold property with these 3 critical factors? It will be even better if you can get it at discount and below market value!!