Buying a new condo – 9 Steps buying process for Investors

New launch condo buying process – Savvy vs Normal ?

When it comes to buying a new launch condo, all buyers share a common goal. The goal of making money. 

But when it comes to the buying process, there is an obvious divide between the buying behaviour of a savvy buyer and a normal buyer. The savvy buyer knows the new launch condo investing game and plays it to win it. The normal buyer goes with the flow and hopes they make some money out of it.

The fact that you landed on this article. It is safe to say that you are seeking deeper knowledge that can give you an edge when buying a new launch condo.

For the next 10 mins, let’s dive into the savvy investors’ step by step process of buying a new launch condo.

Quick intro – Decoupling Expertise

We are decoupling expertise, a team of specialist realtors that specialise in helping Singapore property owners derive the best strategy to purchase their second investment property without ABSD.

Aside from decoupling property, we specialise in property research. Helping client that values owning high capital return property, shortlist and identify worthy condo developments to look into

Step #1 –  Building a solid financial plan

The process begins with plotting a sound and actionable financial plan.

This is an important first step as it gives confidence and focus in knowing what you can afford and hone in on actionable options, instead of random exploration.

Establish your budget

You will first need to inventorize your financial resources. 

If you are a first time home buyer, you will need to take stock of the following.

• your cash and cpf savings
• your spouse’s cash and cpf savings
• maximum loan you and your spouse can secure based on your monthly income

if you currently own a property, you will need to take stock of the following 

• Cash and CPF proceeds from sale of current property after paying off outstanding loan
• your cash and cpf savings
• your spouse’s cash and cpf savings
• maximum loan you and your spouse can secure based on your monthly income

Secure an IPA

On the maximum loan portion, to formalise things you will need to secure an in principle approval from a banker. This is an official licence to shop and remove any uncertainties in eligible loan quantum.

Preparing for the future mortgage obligation

For those that are uninitiated, a new launch condo is financed via a progressive payment scheme.

This means that the bulk of your mortgage payment is deferred till the 3rd and 4th year of ownership, as the new launch condo approaches completion.

When building your financial plan, it is important to anticipate the cost of the full monthly mortgage in 3 years time and ensure that you have sufficient monthly income to comfortably handle the income.

For those planning to rent the new launch condo out, you will then need to consider if you can comfortably handle the additional top up after netting off monthly rental income.

Why is knowing your budget so important ?

• It allows you to focus on new launch development that you can afford
• It allows you to know what unit type you can go for
• It allows you to know why district you should be looking at

New Launch Condo Payment schedule

If you are interested to learn more about the down payment required for buying a new launch condo at different price points and the monthly mortgage payment that comes with it.

Refer to dedicated article on Progressive Payment Scheme for New Launch Condo

Is working out your financial calculations and deriving your budget a challenge for you ?

Drop us a whatsapp text, and we can help you overcome that with a detailed financial calculation. 

Step #2 – Knowing the stakeholders at play 

It’s important to understand the different stakeholders in the new launch equation and their objectives.

New Launch Condo Developer 

Objective : to maximise revenue and profit by selling every new launch unit at the highest possible price

Aside from marketing the project, developers employ pricing tactics to maximise revenue derived from each unit sold. 

Pricing tactics comprise of the following 

• Utilisation of loss leaders to drive interest during launch, pricing some units at lower price points.
• Differential pricing of units with different facing, floor levels and layout.
• Price staging, increasing price of project gradually after launch da, if take up is healthy
• Decreasing price of project if take up is unhealthy.

Tagger 

Agent stationed at the new launch condo’s showroom. His or her job is to share all the project details with you when you visit the showroom.

Objective : takes a commission from developer when you complete a sale

Make sure the tagging agent shares with you both the pros and cons of the project when you are visiting the showroom. Focus on the cons as much as the pros. 

Note that it’s the tagger’s job to sell you the project, but it’s both your representing agent and your job to remain objective and compare the pros and cons across different projects.

Your agent 

The agent representing you. He or she takes a commission from the developer when you successfully secure a new launch unit. Your representing agent job is to guide you through the entire new launch purchase price, objectively evaluating the opportunities across developments. 

You – the buyer and investor 

Objective: Your goal is simple, to select the project that can best optimise for liveability and profitability. To do that you will need to remain objective and actively compare the pros and cons of each project.

Most importantly you need to have a very clear idea of who your future exit buyer is and what they value, and review every project using their lens right from the beginning. 

Step #3 – Selecting the right agent

Working with the right agent is half the battle won. In fact, you should be looking at a consultant more than an agent. A consultant is able to give your perspective and objective advice, while an agent’s job is to sell you stuff. 

Sharing experience from our own investing process you should be looking out for someone with the following capabilities

• Specialises in helping investor procure investment properties
• Experience with new launch condo developer’s pricing strategy
• Ability to help you conduct stack analysis to shortlist units
• Experience in helping you manoeuvre the launch day balloting process
• Has the integrity to tell you to walk away on launch day if pricing is not right

Try to avoid selecting a agent with the following traits

• Relies on emotional selling over research and investment thesis. Example of emotional selling – likes to ask your wife what your dream home looks like instead of sharing investment specs and numbers.
• Bread and butter business is in another area – eg hdb sales or buying and selling home stay properties.

Case in point is that different agents tend to have different strengths and areas of focus. When you are looking to gain an edge purchasing a new launch it helps to work with a specialist.

Step #4 – Doing your research or having your research done

The rule of thumb is to have your preliminary research done before visiting showrooms. The research process need not be elaborated or tedious, you simply need to cover the following points. 

#1 – Investment Attribute Checklist

Run through the specs of the new launch condo, consider if it ticks the fundamental attributes that you are looking for in an investment property. 

For 3 bedroom and 4 bedroom unit – targeting homestay buyers

For 1 bedroom and 2 bedroom unit – targeting investors, singles and married couple without kids

For more details on investment attributes refer to article Which condo is good for investment in Singapore ?

#2 – Entry price research

Finding a new launch condo that possesses the right investment attributes is important, but it is more important to get the entry pricing right. Getting a moderate spec property at an attractive entry price beats getting a blockbuster new launch condo sold at a record benchmark price. 

You will need to establish the following price benchmark, an undervalue price benchmark, a fair value price benchmark, and an over value price benchmark.

Conducting price comparison between the estimated launch price of the project vs its comparable new launch development, its comparable resale development forms the basis to establish this price benchmarks.. 

For more details and example on how to conduct a entry price research – refer to article on Emerald of Katong New Launch Condo Entry Price Research

Launch price will only be released on launch day 

It is important to note that launch prices will only be released on launch day, at this point all prices used for comparison are derived from reasonable estimates. 

Essentially using the breakeven price for the developer’s land cost and factoring in a 15% to 20% markup.

If research is not your cup of tea, the smarter way is to outsource it to someone who enjoys doing it.

Step #5 – Visiting the New Launch Showrooms

With your homework done, you are now ready to visit the showrooms for different new launch condos. To keep things efficient, I recommend scheduling a day in which you can cover multiple showrooms together with your agent. 

Things to look for when reviewing site plan

Your objective of heading down to the showroom is to review 2 items, the development site plan, the units layout and its showroom. 

• Information to gather as you are reviewing site plan
• Make a note to gather the following information from the tagger.
• Which is the premium stack, the stack with unblocked view or pool view. 
• Which is the stack with potential objection, the stack facing bin centre, main road or undesirable features.
• Which is the potential neutral and value stack, the stack with minimal objection.
• Find out about the URA master plan, if there are open undeveloped plots around the new launch condo, consider what is going to be developed. 
• Identify development’s unique features. eg. if there is a sky garden at a particular floor, consider if it compromises privacy and if you like to avoid it. 

Information to gather as you are reviewing floor plan

• Consider which unit type has the most efficient layout for the unit type that you are looking at.
• Consider if it makes sense to get a 3 + study over a 3 bedroom compact, review the showroom to see if the study is substantial or just a kink in the wall. 

Be the first to visit new launch showroom

Step #6 – Walking the ground

From a ground work perspective, note that the showroom is often not situated at the actual site where the new launch is to be built. In addition to that, if you are looking to buy into a district that you are not familiar with, it helps to make a trip down to the actual site and walk the ground.

As you walk the ground look out for the following to prove or disprove your investment thesis. 

• Are there really lots of HDB surrounding the development, if you are targeting HDB upgraders. 
• Do you see lots of expats living there, and what’s the profile of these expats like ? if you are looking to purchase a 1 or 2 bedroom unit
• How does the surrounding condo look ? Do they look new or old ? 
• Does a district feel like a thriving one or does it get overshadowed by its neighbouring district? Think Sengkang to Buangkok, Bedok to Simei. 

Step #7 – Shortlisting the right units 

Having done all the prep work and research work, it is now time to shortlist units within the new launch development that you will be interested in. 

This is an important step, as units are available during launch day on a first come first serve basis, based on your balloting number. 

So it is important to have a reasonable number of units on your shortlist and make a decision to select the one that is still available when your balloting number is being called during launch day.

How to shortlist the best unit for a new launch condo ?

The first port of call is to filter out unit types and units based on your budget. 

Next, you would want to select some units that you think would be priced at good value by the developer and some units that you think will be priced at a premium. This helps give you a sense of the pricing differential that developers are pricing in for the premium units vs the value units.

You will then make your unit selection based on your shortlist from there. If the price difference is minimal between premium and non premium units, then you can consider paying a little more for the premium ones.  If the price gap is significant, then getting the non premium unit could be a safer bet. 

We have written extensively about unit selection strategies in the article ” How to select a unit in a new launch condo ?”

Need some help with unit selection ?

Drop us a whatsapp text and we will seek to clarify your doubts in 24hrs

Step #8 – Executing on launch day

Submitting a cheque beforehand to participate in balloting process

To participate in the balloting process held during launch day, you must first submit a blank cheque addressed to the developer. This merely serves as an indication of interest. There is no obligation to purchase and you will not risk any financial penalty if you do not select any units. 

Keeping track of units that are balloted off

As you sit through the balloting process, units start getting sold.  At this point pricing still remains opaque, as you will also be able to review the specific units pricing when your ballot number has been called. 

Booking a unit with 5% booking fee

Assuming your ballot number is being called and your shortlisted units are still available. You can then proceed to book a unit by filling up the cheque with the necessary amount.

Note, once the cheque is being submitted to the developer and you are presented with an option to purchase. You are liable to forfeit the 25% of the 5% down payment, if you do not follow through with executing the option. 

If like to find out more about the cash and cpf required for downpayment and its respective payment timeline, refer to the following article: New launch condo payment schedule.

Be ready to walk away

As a concluding note for this section, always be ready to walk away from the ballot if the launch price is not right or your shortlisted units are no longer available. 

Keeping the capital on hand to deploy on another new launch is a better option than purchasing a sub optimal unit or purchasing at a sub optimal price. 

Step #9 – Building the right exit plan

Congrats, if you make it to step 9, you would have secured a unit in the new launch development of your choice. 

As the last section, it helps to conclude the article setting the right expectation for the exit plan. From a time frame perspective, you should not be expecting to sell your unit immediately after it TOP. 

You should expect to live in it or rent it out for 1 to 2 years before marketing it for sale. 

Ideally, you would like your neighbours to start selling off their units at a profitable price first. This allows the benchmark price to be established for you to sell your unit at an optimal price. 

Sounds like a lot of work ? – Outsource it to a specialist

Yes, doing it right when purchasing a new launch condo is not an easy feat. 

Consider having it taken off end to end by a specialist. 

• First to know project launch price updates via whatsapp
• Multiple new launch showroom visit appointment
• Unit selection and stack analysis
• Financial calculation and planning
• Launch day execution 

Drop us a whatsapp text and ask us any question. 

More Read Regarding Condo Investment

• How to make the most money off your first private condo ?
• Progressive Payment Calculator – Singapore New Launch Condo