This is an interview with seasoned property investor, Getty Goh. Tap on Getty Goh’s knowledge on the Property Market in this FREE Seminar. Attendees will receive a complimentary Shoebox Unit Report. Register here!
Introduction of Getty Goh
- Director of three companies, Ascendant Assets, Migo Development and Sky Sanctuary Villa
- BSc and MSc in Real Estate
- Awarded Successful Entrepreneur 2012 – Platinum Award
- Promising SME 500 2012 – Platinum Award
- Trainer at Singapore Institute of Surveyors and Valuers
- Author of two bestselling books, Buy Bye Property and Buy R.I.G.H.T. Property
- Featured in Straits Times, Channel News Asia, SMART Property Exhibition, IProperty.com, Propertyguru.com, etc.
Tell us about yourself and how you get into property investing?
I did not come from a rich family and grew up in a HDB like most Singaporeans. My dad was a businessman and his business was not doing so well during the 1980s economic crisis. During those times, my mother was the sole breadwinner to tide us through the difficult periods.
While my family is doing much better since then, that experience taught me the importance of financial prudence and financial literacy. As a result, I have always wanted to own a property as soon as I could afford it. That dream became a reality in 2002, when I bought my first property in a matter of weeks after graduation and starting work. The property was a co-investment with my then girlfriend (now wife). Back then, we had just started work and did not have any savings, hence we borrowed the 20% down payment from friends and relatives. Although it was very risky, the main reason why I did it was because I saw owning a property as a form of forced savings mechanism. If I was unable to hold, the worst that could happen was for me to sell the property.
While I graduated with a degree in Building, I went with the conventional wisdom that “location” was the most important factor and bought my first property in District 9, thinking that I would make a small fortune rather quickly. Unbeknownst to me, SARS happened the following year and a similar unit in my development was asking for $50,000 less than what I had paid for my unit. Fortunately, I was able to hold and ride out the tough times. If I was forced to sell, I would have made a loss of $50,000 or more. That experience made me realize that as a consumer, I knew very little about the property market. That also made me interested to find out how the property market works and I have not looked back since.
But what got you wanting to study Building?
Honestly, it was serendipitous. I would be dishonest if I told you that I knew exactly what I wanted to do at the age of 18 – 19. Back then, I was just looking at a course that I qualified for and would enjoy. Looking back, I really enjoyed the course at National University of Singapore. I feel that it gave me a lot of exposure and opportunities. One of these opportunities was the Student Exchange Programme to University of California, Berkeley. Incidentally, that was where I met my wife.
You are a director of 3 companies. What kind of services do your companies provide?
Ascendant Assets is a research company that caters to consumers. There are presently big consultancy firms, however their target markets are mainly the developers. So in a sense, we are offering a niche service to the mass market. Slowly, I have noticed that there are other similar firms coming up. I think it is ultimately for the benefit of consumers as they are now better informed.
Apart from catering to consumers, we use our research for our own investments and small-scale property development projects. There is a synergistic relationship among the 3 companies. To illustrate, we use our research findings to look for good opportunities, which in turn validates and sharpens our research.
By offering training and dealing with a wide pool of seminar participants, we are also exposed to a variety of issues and concerns. Hence, we are able to have a good feel of what property buyers want to know and cater our research according to their needs.
What defines a good deal?
Well, I define a good deal as something with the following 3 characteristics. Firstly, it must be affordable. What is the point of attractive returns, say $1mil profit, but at a cost of $10mil? Not many Singaporeans have $10mil to invest and people of that category are already very well taken care of by the private bankers and wealth advisers. Hence, one important feature of a good deal is something that many Singaporeans can reasonably afford.
Secondly, the returns must be quick. Anyone who had bought a property 20-30 years ago would be making good returns now. However, one shouldn’t have to wait 20-30 years to get good returns. Hence a good deal is something that can give you profits over a much shorter period. I know that the government has put in a series of anti-speculation measures, however, that doesn’t mean that you cannot buy value-for-money deals that give you instant paper profits. If you look hard, there are many of such deals out there. I can say for a fact that we are able to spot value-for-money deals almost on a weekly basis. And lastly, the potential profits must be attractive.
I was lucky enough to come across such a deal in 2010, even though the market was quite hot. It was a landed unit that I bought for $650,000 and subsequently sold for $1.45mil after 1 year. I really believe I was lucky as there is a famous saying, “luck is what happens when preparation meets opportunity”. If I was not prepared, I would not have been able to seize the opportunity. So I think we must always arm ourselves with the knowledge so that we can be ready whenever opportunity arises.
The examples of property deals you gave are rather short term, about 1 to 3 years. Are these your typical investment timeframe?
No. It depends on the individual and the market. In the past, you can go in and come out in the same day – that was before all the anti-speculation measures. Now, with the additional stamp duty, investors are aware that they have to hold for a longer period of time. As a result, money has moved from the residential sector to other sectors such as the commercial and industrial sectors.
However, I am not really sure if they are good deals. People are of the opinions that commercial rental yield is higher but they forget that the tenure is shorter at 30 to 60 years. Apart from that, there are many more transactions for residential vis-a-vis commercial/industrial properties. As a result, it is harder to find good deals for the latter due to the small number of transactions.
In addition, commercial properties are more susceptible to market fluctuations. Companies can close down when the business environment can turn bad. On the other hand, most people would want to hold on to their homes for as long as possible.
I have a friend who likes to invest in property because he finds the market inefficient as compared to the stock market. He is able to find units going below market price. Do you agree?
Yes. Another point about the stock market is that you are competing against the institutions. You do not really have institutional players in the property market because they are restricted by government policies such as the Additional Buyer Stamp Duty. These rules favour property owners like you and I. However, when it comes to selecting properties, it should be done in a systematic way akin to stock selection. For stocks, you would probably look at PE Ratio, companies’ management etc. Once you have shortlisted a few suitable companies, you would wait for prices to come down to your desired point of entry before buying the stock. Likewise, such a systematic approach can be adopted for finding properties as well.
Can you describe the process of selecting a property?
I have developed a 5-step process called the R.I.G.H.T. approach. I came up with this to cover all the essential areas that investors have to think about before they make a purchase. R.I.G.H.T. stands for the following:
- Realities – Identify the market cycle and realities
- Investment considerations – Determine your budget and risk appetite.
- Goals – What do you want?
- Hotspot – Analyse past price trends in the area. Let me elaborate a bit more on this. Some people feel that using past trends to invest is akin to driving by looking at the rear view mirror. Past trends tell us what has happened and not what is going to happen. However, I believe that it is important to look at past trends for one simple reason – it tells us the price that someone had paid in the past. When you know what the price has been, you would know whether the unit is undervalued or if the price is at an all time high. Price and demand are inversely related. As prices increase, demand drops as the pool of potential buyers who can afford or who are willing to pay for the property becomes fewer. Hence if you pay a high price for a unit, the pool of persons that you can potentially sell to is limited. Conversely, if you buy it at a value-for-money price, the pool of potential buyers increases. This is why we look at past trends.
- Target price – Based on the filters above, what is your price target?
If you diligently follow these 5 steps, I will go so far to say that you will almost certainly not lose money. This is because there are so many layers of checks built into your selection process. You would have covered most, if not all, the considerations and be assured that you have done your due diligence. This is how we can find very good deals. Even if the market tanks and everyone loses money, you will likely lose much less as compared to someone who had simply jumped in to buy any property.
Where are your main sources of information?
We get our data from the Government directly and it does not come cheap. We do not get information from third party sources. In today’s context, it is not about the access to data or information, but the ability to piece things together, analyse trends and derive conclusions that matters. This is where we add value.
For example, a recent report had mentioned that private home sales had risen to 2,000 in January 2012 as compared to 670 in December 2011. We felt that this was not reflective of market sentiments, as the information did not conform to the seasonal property trend. When we checked, we found that 1,700 of the sales in January 2012 were new sales while resale numbers only hovered around 300. In other words, the market activity was predominantly made up of developers with big market budgets who aggressively launched their new units. In comparison, the resale market was very quiet and property owners who were looking to sell their units then would not have seen much interest.
This is what I mean by adding value beyond merely regurgitating facts and figures. When people realise this, they would be better able to make an informed decision.
Why do you conduct courses for investors?
There is plenty of information available on the Internet, but why do parents still send their kids to school? This is because the best way to learn is by having someone guide and teach us. There is so much information on the Internet and it would take a lot of time and experience to discern the relevant information. To draw an analogy, even the most gifted musician or sportsman needs a coach and someone to provide new insights or angles that were not thought of previously. Hence, I conduct courses for investors because I believe that I can share important information that can help them. This information may also not be easily found.
I also enjoy the experience of sharing. As part of the property investing course I conduct, there is an activity where participants have to pull together everything that they have learnt, come up with an investment proposal, and present it to a pseudo board of investors. It is heartening to see them able to apply their learning, working as a team to find information from various sources, evaluate properties and find good deals within the two hours allocated to them. Through this exercise, their learning is concretised and their understanding is clearly enhanced to a deeper level. It gives me great satisfaction to see participants achieving so much and this sense of satisfaction is not something that I can get from my consultancy work.
Can I say you prefer to offer consultancy to the rich and to educate the average earner?
We usually provide consultancy services for high net worth clients for a fee of $10,000 to $12,000. The service includes producing feasibility reports, coming up with investment proposals, etc. Under certain circumstances, we may also provide a guaranteed target return rate or amount for our clients, failing which, we will refund them the fees charged.
However, I would also encourage high net worth clients to attend the seminar so that they are equipped with the skills to look for good deals, or at least to understand the selection method we use, however, they are usually too busy and hence unable to attend. We have come across seminar participants with an excess of $1m in liquid assets though. They want to know the right way to invest and they come to us because they know that we depend solely on hard facts and figures, and not gut feel or heresy. I always make it a point to tell people that they can trust my advice, not because of my credentials, but purely because the facts never lie. Our R.I.G.H.T. approach is clear, systematic and robust such that participants can easily apply it. If they follow the process accurately, they will likely end up with similar conclusions.
Should HDB be the first property?
Broadly speaking, there are 200,000 non-landed private properties. The number of HDB units is approximately 4 times of that. Naturally, HDB is something that most people would buy as their first property.
However for someone who can afford it, I would like to share this little information nugget with them – one of the most expensive flats in Queenstown ever sold was $890,000 in 2008. The owner bought the unit in 1992 for about $300,000; hence he made about $600,000 from the deal. In comparison, we came across an investor who paid $350,000 for a private property in 2005 and sold it for $1.375mil in 2007, making more than $1mil in about 2 years. We have the evidence data to back these findings up. This example clearly shows that the private property owner made more money faster.
Based on such examples, I know that it is possible to make more than $800,000 in a single deal. Even today, such opportunities exist if you know where to look.
However, let me caution that properties are not sure win deals and we found unprofitable transactions as well. Even some properties in Singapore’s hottest district are not spared and some investors had lost close to $1mil within a short period of time. So while people should look to buy properties that can make them good returns, they should also find deals that can minimize their losses if things do not go as planned.
Do you think shoebox units are hype or are there real investment value in them?
There is a function for shoebox units; they serve well for down graders, aged persons looking for a smaller place to live and young singles or couples. When such units were first launched, they posed a very attractive investment alternative as they were going for only $200,000 to $300,000. However it has become an unsustainable option these days, especially when prices of some new shoebox units has gone up to more than $3,000 psf.
From our research done in November 2011, we found that there is a resale price ceiling of $1mil for shoebox units. So if you buy a unit at $950k or $1.2m, how likely are you to profit from it? People are now jumping into shoebox units due to hype and affordability. The assumption is that the rental market is there to support their investments. However, would they be able to hold if there is no one to rent their properties?
Do you see a concern with the introduction of 50-year housing loan?
The intention of introducing the 50-year loan may be right but aggressive investors might try to game the system. I do see some benefits of a 50-year loan because you are putting less stress on someone who is starting out and buying a property. With property prices so high, it does go a long way. In fact, with a smaller installment, it is easier to get a positive cash flow. On the other hand, the risk is that new or aggressive investors would think that they can easily afford properties and jump onto the bandwagon without much thought, giving rise to them taking on more risks, and potentially introducing greater speculation into the market. In additional, the longer term means more interest payment. So like any other initiative, there are pros and cons.
Do you think Singaporeans are savvy in property investing generally?
I do see Singaporeans getting savvier in property investing. It is due to a wide variety of factors: stronger regulation of standards; more professional representatives/agents; and availability of investment courses to educate the public. Nonetheless, I feel that there is still scope to improve general awareness in property investment.
What do you think are the common skills or knowledge that people lack?
They are not clear about what they want so they often go with recommendations from friends or agents. However, the recommendation may not suit their investment profile.
Do you have any advice for Singaporeans investing in properties?
What we are advocate is the typical Singaporean Dream – own a house and upgrade to bigger units progressively. If they can buy the right first property, it would make a significant impact on their financial outcome as compared to those who have not made the effort to try. A right property can make them several hundreds of thousands dollars richer and when they understand what they are doing, they can do it time and time again.
We are trying to help as many Singaporeans as possible to achieve their Singaporean Dream faster. What I would like to emphasize is that we are not telling people to speculate, but telling them to take action by buying the right property with a margin of safety. Gone are the days when we can simply expect to make money from any property that we buy. We cannot do what our parents did in the 1970s and 1980s when properties were being sold for only $10,000. It is a very different situation now.
Tap on Getty Goh’s knowledge on the Property Market in this FREE Seminar. Attendees will receive a complimentary Shoebox Unit Report. Register here!
Co-Founder. Believer of the Factor-based Investing approach. Running a Multi-Factor Portfolio that taps on the Value, Size, Profitability and Momentum Factors. Quant at heart. Believe the financial industry can treat their customers better. Wants to change the world.