January 30, 2025 | Properties MoneyStory
This was our second home purchase. After discussing with my husband, we outlined two possible approaches:
Keeping the first condo had several downsides:
For these reasons, we ultimately decided to sell before buying and replace our current condo. We had purchased our first condo in 2017 when property prices were relatively low, and by selling at the peak in 2023, we secured a capital gain of over $300K. However, since we were buying another home at a high price point, this was not purely an investment return but rather an increase in cash flow flexibility. This additional liquidity allowed us to more comfortably select a home where we plan to live for the next 20 years.
❝ You should be aware that the real estate market is less efficient than the stock market. Hundreds of knowledgeable investors study the worth of every common stock. Only a handful of prospective buyers assess the worth of a particular property. Hence, individual pieces of property are not always appropriately priced. Finally, real estate returns seem to be higher than stock returns during periods when inflation is accelerating, but do less well during periods of disinflation. In sum, real estate has proved to be a good investment providing generous returns and excellent inflation-hedging characteristics. ❞
Real estate tends to appreciate more during high-inflation periods, but compared to broad stock and bond index funds, it carries higher risk as a single-asset investment. That said, I still believe that for most families, purchasing a home early is a wise financial decision, while investing in 2nd+ properties require a more cautious approach.
Whiling talking to different real estate agents, one interesting observation I made was how some real estate agents calculate “affordability.” Some agents calculate the mortgage based on the family’s total income and persuade the buyers to increase the budget, which, of course, benefits them—the higher the home price, the higher their commission. However, it is crucial to evaluate affordability based on personal financial conditions and investment goals rather than simply borrowing the maximum allowable amount.
❝ Like many Americans, you may think of buying a home as an investment. But one lesson we learned from the 2008 financial crisis is that buying a home is only an investment if its value appreciates while you own it. From a net worth perspective, think of it this way: We often say you ‘own a home,’ but unless you paid in cash, what you really own is a mortgage. Looking at it from this perspective, you’ll see that buying a home can actually have a negative impact on your net worth—at least in the short term. The house isn’t truly yours; it belongs to the bank. You owe them money. ❞
Many people unconsciously stretch their budgets when hunting for a dream home, sometimes taking on excessive financial strain. To avoid this, we followed these principles when planning our home purchase:
Ultimately, our cash payments came primarily from the gain from our first home sale, our “home upgrade fund” savings accumulated over the past few years, and a portion of CPF OA. By carefully managing our budget, we reduced financial stress and ensured that our home remained a reasonable proportion of our net worth.
To minimise costs and maintain financial flexibility, we structured our purchase as follows:
After months of searching, we finally found our ideal home—one that offers good educational resources, a convenient neighbourhood, and a pleasant living environment with greenery around. Next, I’ll be sharing our renovation budgeting, ID comparison and selection, and money-saving tips during the renovation journey!