Is it better to buy a Freehold (FH) or Leasehold (LH) property in today’s market?

Many people always ask me – Is it better to buy a freehold property or leasehold property in today’s market? Therefore, I decided to write this article to share my thoughts with you so that you can have a better understanding when it comes to selecting your choice Singapore property.

If given a choice, I believe most people will prefer for a freehold property, but does it mean that all the freehold property will definitely make profit at the end of the day? We have witnessed many leasehold properties which made good profit margin too. Hence, it is always good to know how to determine the right property.

Do not always assume that freehold property will make profit. For me, I have never believed in emotion purchase. I prefer to do research and use that to make the right judgement when comes to buying a property.

At the end of the day, it is all about the entry price when it comes to deciding a FH or LH property to purchase.

I would like to share with you 3 important factors when choosing a freehold property and they are:

a. Legacy
b. Location
c. School

Why Legacy?

Here’s the scenario – A buyer took a 20 years loan, paid a 25% down payment and subsequently rented the property out. The tenant continued to pay for the rental and mortgage. Even as the buyer topped up the shortfall in the mortgage, the amount paid by the tenant will still reduce the principal at the end day.
 
I always take this approach as a form of forced saving into the property. Just looking at the chart below. After 20 years, all the rental proceed that you have collected will go to the next generation. This is why so many savvy investors choose to buy a freehold property as they are leaving it as a legacy for their children.

Location, Location, Location 

The second point will be location. If you can find a Singapore property that is freehold and near to MRT, it will be a super plus point as there are only 13% of such properties in the whole of Singapore. Using the law of demand vs supply, freehold property near MRT always hold its value and appreciate more too.

Near to Good/ Renowned school 

If you are a parent, will you also prefer to buy a Singapore property that is near to the good schools? I am sure that you will reply “YES” because we want the best for our children. Now, imagine if there is this freehold property that is near to good schools, isn’t that a bonus?
 
As a general rule of thumb, the profit margin of freehold which is near good schools is very high. Take a look at the chart below and you will realise that one of the owners actually made about $800,000 in profit. Do you ever wish that you own this Singapore property?

Hope you have enjoyed this article that I have prepared for you.
 
I did not create a long article on purpose as I am unsure if you will be keen to read more. In fact, I have another article which is extremely crucial where I will be sharing a case study on how I analyze whether the property is priced right. I have used one of the most important fundamental principles on how to determine the potential upside of the asset, similar as the Singapore property mentioned above.
 
I have seen people choosing the wrong asset and making very little profit. Therefore, it is important to do research to ensure that your purchase will be a safe one (as you can see from the chart below). Of course, there is no promise in making your desired profit, but we can minimise your risk to the lowest possible.

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