Shophouses are a legacy that can be passed on for generations. However, to rightly invest in shophouses that generate hot cash flow, you must have a checklist to ensure when is the best time to buy.
Here are 8 checkpoints I recommend you to consult before deciding to buy shophouses.
- Check if Singapore’s economy is stable
- Check if Singapore’s housing policies are solid
- Can commit to keeping the shophouse for a long time
- Have enough cashflow
- Have scope of a low entry price
- Not driven by euphoria
- Not timing the market
- Can utilise shophouses to hedge against inflation (optional)
1. Check if Singapore’s economy is stable
Currently, Singapore is going through a lot of upgrades and transformations. It is becoming the key satellite for technology in Asia. A lot of multinational companies especially in the technology segment are setting up their regional offices here.
People from neighbouring countries consider it a safe haven to park their wealth. That is why the volume of family offices has doubled in 2021 as foreigners wanted to secure their investment somewhere safe.
Singapore’s economy is stable and growing at a healthy rate. In fact, with the Hong Kong political conflicts and China and US conflicts, more people are now finding Singapore a more attractive place to invest.
2. Check if Singapore’s housing policies are solid
Currently, the Singapore government has cooling measures to keep the housing demand and supply in balance. They have plans to implement more policies to attract foreigners and investors to buy Singapore real estate. It can be said that the country is a strategic spot for prospective real estate at least for the next 10 to 20 years.
3. Can commit to keeping the shophouse for a long time
Shophouses are not flip-to-buy kind of property. If you consider buying shophouses, you will have to commit to a minimum of 5 years to see its appreciating price and rental yield.
4. Have enough cashflow
Shophouses are long term investments. Hence, you need to have enough cash flow to purchase and maintain the property for the long term to see the results.
5. Have scope of a low entry price
Look at the rental price of the shophouse of your choice. See if it matches the current rental in the market but has a prospect of increasing in the future. Entering with the low entry price with the potential of future appreciation will ensure that you will have a healthy rental growth from your property in the future.
6. Not driven by euphoria
Don’t be caught in the chaos of euphoria and fear of losing out and start doing what other people are doing. Make your decision cautiously. Look over your cash flow and the fundamentals of shophouses before deciding to buy the property.
7. Not timing the market
Never buy or sell by timing the market. I have learnt it the hard way during the Lehman Brother crisis. Everyone was expecting the Singapore property market to be a U or L recovery.
My colleagues, even myself sold our property then and were looking to buy back at a lower price. However, within the next 3 months, the property price picked up by at least 30%. A lot of people who timed the market couldn’t buy back their property at that escalated price.
The same situation was repeated during the Covid situation. Everyone thought the market will crash. With the Russia-Ukraine conflict, people expected the crude oil prices to drop below $0. But now everything is in reverse. Inflation is rising which will push up the property price eventually.
Hence, make sure your property buying decision is not based on timing the market.
8. Can utilise shophouses to hedge against inflation (optional)
Take instance for now. Inflation in Singapore is at an all-time high. When Singapore’s inflation spikes up, it eventually drives up the property price as well as the rental. In other others, inflation has a positive correlation to property prices and rents.
If such a condition is present when you are pondering buying shophouses, use properties as a hedge against inflation. Rather than risking devaluation of money sitting in the bank, rising inflation can be a good time to invest them in properties.
If all the checkpoints above indicate a YES, then that is the best time for you to buy shophouses to generate HOT cash flow. To know more about timing and strategising to buy shophouses, subscribe for a free consultation with me.