Tuesday, September 20, 2011

The real meaning of undervalued property

There has been a big misunderstanding when it comes to the meaning of undervalued properties. I mentioned in my post on 5 September, http://investwithjac.blogspot.com/2011/09/jac-strikes-at-property-market-again.html , I have bought an investment property in East Coast. My friends and relatives were shocked that I actually bought a unit at around $1450 psf. They were askng, "Why did you buy such an expensive property? Why didn't you wait for the price to drop?"

Then I felt that they had actually misunderstood the meaning of undervalued properties, that I have mentioned in my book, Route to successful property investment in Singapore. Undervalued does not mean low price. The meaning to the word is "value below the real worth".

I would like to emphasise that investment should be timeless. There is no need to time the market. Just take Vibes@East Coast for example, I, too, have a personal valuation of the properties in that area. When I bought this unit, I know that this property can give me rental yield of between 5% to 8%. This was calculated using my own formula. It is not the same formula that real estate agents use. All factors were considered in a short span of time? No. In fact when I went home on that Friday, I went to the Internet to search for the location, using One Map. That was when I realised that it was a good property to invest in. The reasons that I bought this unit can be found in my earlier post. You can click on the link above to take a look.

However, I did not just snap up any of the remaining units. These units do not have good facings. Hence, I just thought, I will just get everything ready and strike when there is a chance to. To my surprise, the agent called to tell me about the re-released unit. That was when I made the decision in a short span of 10 minutes, and bought the unit.

What if there isn't such a case? Well.... I will just forgo this project. It's that simple. Forgo this one and look for the next undervalued one.

When you are looking for a property, have a personal valuation of each and every property that you are interested in. Go around and view showflats and for sale units. Out of the many houses viewed, there must a one or two that are selling below your expected price. Patience is the key to investment.Take your time, do not rush into just any property. Once you stumped upon a chance, open your warchest and strike.

Cheers and happy investing.

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