Adventures of a property investor

By
/ EdgeProp Singapore
|
September 1, 2018 8:30 AM SGT
Singaporean Victor Ng talks about his approach to investing in the local real estate market and his forays into the US, Cambodia and just across the border to Puteri Harbour, Iskandar Malaysia as property cooling measures took hold over the years
Chocolate croissant, Bak Kut Teh, Kong Bak Bao, Ribeye Steak and Taiwanese Spicy Beef Noodles — these are some of the dishes that Victor Ng excels in and enjoys making for friends and family. The 47-year-old father of three (two daughters and a son) has been seriously honing his cooking skills over the past two years, although he has been “the unofficial cook” for his extended family’s Chinese New Year reunion dinners since the age of 26. “I find cooking destressing,” says Ng.
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Ng: You have to know your own investment objectives, risk appetite and motivation (Credit: Samuel Isaac Chua/EdgeProp Singapore)
With two of his three children taking important exams this year — his second daughter is doing her Primary School Leaving Examination (PSLE) and his son, his GCE O-levels — Ng chauffeurs them to and from school, tuition lessons and study sessions with friends as well as cooks their favourite meals. “The children have enough pressure from school work and big exams,” he says. “Coming home to a nice dinner on weekdays or a good lunch on weekends with the whole family does wonders for their morale.”
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Ng is not just a skilled cook or a stay-at-home father. He is founder of SAASH Capital, a private investment consulting firm. He advises companies that want to build their businesses in Asia. Clients include Detecon Asia-Pacific, the wholly-owned subsidiary of Deutsche Telekom, and several telecommunications companies (telcos) in Vietnam. Notably, he is also an investor with a real estate portfolio as diverse as his cooking repertoire.
In Singapore, he owns a strata terraced house at The Silver Spurz at Brighton Avenue, strata shops in Bugis Cube and industrial units at Gordon Industrial Building and Bizlink Centre. In Malaysia, he has invested in two serviced apartments in Somerset Puteri Harbour in Iskandar Malaysia under a lease buyback scheme.
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Investments include industrial units at Gordon Industrial Building (pictured) and Bizlink Centre (Credit: Samuel Isaac Chua/EdgeProp Singapore)
Investments in Cambodia range from a townhouse and shophouses in a new development to a pepper farm. In the US, Ng has invested in single- and multi-family houses primarily in Indianapolis, with Florida and Missouri in the pipeline.
With the latest round of property cooling measures on July 6, more Singaporean investors would be looking beyond the private residential market, and beyond the shores of the city state. “The cooling measures are clearly targeted at investors,” says Ng. “If investors are unwilling to fork out the additional buyer’s stamp duty, they will naturally turn to commercial, industrial and overseas properties.”
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Ng started investing in real estate 12 years ago. He learnt mainly from reading books by investment gurus. “The gurus [on contrarian investing] tell you to buy when there’s blood in the streets,” he muses. “But I’ve learnt that when there’s blood in the streets, you have to watch out for falling knives too.”
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The townhouse in Phnom Penh, Cambodia that Ng purchased (Credit: Victor Ng)
Own neighbourhood
In 2006, when he was looking to purchase his first investment property, one of the books he read said that “the best place to start investing in is your own neighbourhood, a place you’re familiar with”, he recounts. Ng lives in The Rivervale, an executive condo (EC) in Sengkang, which he purchased when it was launched in 1998. The project was completed in 2000.
EC properties can be sold to Singaporeans or Singapore permanent residents (PRs) five years after completion. When Ng was looking for an investment in 2006, the unit directly below his at The Rivervale was available for sale. The purchase price was $413,000, but the agent wanted $2,000 as commission. So, Ng’s total investment was $415,000.
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The unit was rented out at $2,500 a month, or a gross rental yield of 7%. With a mortgage of $1,200 a month, Ng was pocketing $1,300 a month. He felt that it was a safe investment. Even so, “my hands were shaking when I handed over my cheque”, he says. “That was my very first investment.”
To him, what counts most is to be cashflow positive. It was also very convenient for Ng. If the tenant complained about anything, he could just run downstairs to fix it.
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With the latest round of property cooling measures on July 6, more Singaporean investors would be looking beyond the private residential market, and beyond the shores of the city state (Credit: Samuel Isaac Chua/EdgeProp Singapore)
‘The itch’
Six months later, another investment opportunity came knocking. This time, Ng purchased a one-bedroom unit of 614 sq ft at Tanjong Ria Condominium in Tanjong Rhu for $365,000 ($595 psf) in May 2006. The project was also a 99-year leasehold property and completed in 1997. “At that time, it didn’t matter whether it was 99 years or freehold,” says Ng. “I was more [concerned] that it should be cash-flow positive, and that meant buying at a bargain and in places where tenants want to live.” He sold the unit in late 2007 for $550,000 ($896 psf), however, making a capital gain of 50.7% in just 1½ years.
Ng also studied the URA Master Plan and the Land Transport Authority (LTA) MRT plans for future growth areas. When the Downtown Line was announced in 2009, there was much speculation about where the new stations would be. At that time, Ng was excited by the opportunity of “a bargain” at The Tropicana, a boutique 40-unit private condominium adjacent to the then upcoming Upper Changi MRT station on the Downtown Line. The 999-year leasehold unit was 1,658 sq ft and purchased for $890,000 ($537 psf) in 2010.
In 2011, Ng sold the unit at The Rivervale to a Singaporean upgrader for about $827,000. Two years later, he divested the unit at The Tropicana for $1.41 million ($850 psf), according to caveats lodged then. Also in 2011, he spotted the opportunity to purchase a corner terraced house in a strata-landed development on Brighton Avenue near Serangoon Gardens for $1.56 million.
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Ng purchased a corner terraced house in the strata-landed development on Brighton Avenue near Serangoon Gardens in 2011 and recently put it on the market for $1.9 to $2 million (Credit: Samuel Isaac Chua/EdgeProp Singapore)
Eye on cash flow
As the strata-landed project was near the Australian International School, he managed to rent the corner terraced house to an Australian family. Subsequently, he rented out its five rooms individually to obtain a higher rental yield. “For landed property, it takes longer to find a tenant compared with a condo,” says Ng. “Sometimes, it takes up to three to four months.”
The master bedroom, for instance, was rented at $1,300 to $1,400 a month, similar to the rate of a master bedroom in an HDB flat. He kept the number of tenants in the house to a maximum of eight persons. When URA announced in May last year that the maximum number of occupants was to be reduced to six per private home, he complied. “But the cash flow didn’t make sense to me. So, I’ve decided it’s time to sell,” he says.
Ng recently put his corner strata terraced house on the market for $1.9 million to $2 million. “You can tell that the property cooling measures have really taken hold,” he says. “The only viewers are owner-occupiers, mainly families.”
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He started to invest in strata retail units at Bugis Cube and strata industrial units in Business 1 and Business 2 developments in 2011 and 2012, when the government unleashed a series of property cooling measures on the residential market (Credit: Samuel Isaac Chua/EdgeProp Singapore)
Diversification caused by ‘policy risk’
He started to invest in strata retail units at Bugis Cube and strata industrial units in Business 1 and Business 2 developments in 2011 and 2012, when the government unleashed a series of property cooling measures on the residential market.
In 2009, after the global financial crisis, Ng made a “pilot buy” in the US. “I felt that the returns in the Singapore market were too low and that there was too much policy risk,” he says. Ng bought land — two plots in an upmarket retirement village in Florida, which had a private marina — instead of condos or houses. The original owner had purchased the land parcels for US$100,000 each. During the credit crunch, Ng was able to purchase the land parcels from the owner at just US$10,000 each. He subsequently sold them for US$40,000 ($54,641) apiece last year.
He decided to increase his investments in the US in 2012. Focusing on the housing market, he travelled to Cleveland, Florida, Indianapolis, New York, Los Angeles and San Francisco to look for opportunities. “I found that the culture of Indianapolis is very similar to Singapore,” he says. “When I walked along the streets at 10pm, I felt safe. They respond to texts even though it’s after 8pm. I felt these were some important things to consider before investing.”
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Since he started, Ng has launched four single-family houses in Indianapolis for sale under a contract for deed (Credit: Victor Ng)
In the US, Ng works with “three to four partners”. In Indianapolis, he started out with a traditional investment model — buying a house and renting it out. A few months ago, he offered houses for sale under a contract for deed: Based on the agreed purchase price, the homebuyer will pay for the house in monthly instalments. The repayment period could be 10 to 18 years at an interest rate of 6% to 10%, says Ng. A contract for deed is useful when a buyer is unable to obtain bank financing. It is the seller who finances the sale of the property. “I just call it a property note,” adds Ng.
Since he started, Ng has launched four single-family houses for sale under a contract for deed, one of which has been sold. He has another one coming up in Florida and one in Missouri. The single-family houses are priced at around US$100,000. “It’s much faster than the traditional method of buying and renting,” says Ng. “In the US, residential investment is still the way to go. Don’t go into commercial property unless you have deep pockets to embark on multi- family apartment or condominium blocks.”
Pitfalls
Not all his investments have panned out, he admits. He points to his pepper farm in Kampot, Cambodia. It was sold as a real estate investment but required expertise that the developer and management lacked, says Ng. He had to write off his investment of almost $200,000. “Because of this investment, I came to know about Kampot pepper, and now I’m talking to Nanyang Polytechnic to explore creating natural food premixes for busy people,” he says.
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Ng's investments included a pepper farm in Kampot, Cambodia (Credit: Victor Ng)
In Singapore, Ng is chairman of the collective sale committee at Bugis Cube, a strata commercial development located across the road from Bugis Junction. “We’re going ahead with a collective sale but we’re timing the market,” he says. “So, we may launch in 2019.”
In Iskandar Malaysia, Prime Minister Mahathir Mohamad created a wave of uncertainty in the region on Aug 27 when he commented that Forest City, worth about US$100 billion and developed by China’s Country Garden, could not “be sold to foreigners”. Naturally, investors such as Ng are also concerned about the impact on the property market in Iskandar Malaysia.
From 2011 to 2013, seven rounds of property cooling measures were introduced in the Singapore residential sector. These included hikes in additional buyer’s and seller’s stamp duties and cuts in the loan-to-value borrowing limit for mortgages as well as the total debt servicing ratio loan framework. “Many Singaporeans had ventured overseas then,” notes Doris Tan, regional director of Strawberry Star and a veteran in marketing overseas properties for more than three decades, primarily in the UK, the US and Australia. While Tan expects some Singaporeans to look at overseas investments again, given the latest round of cooling measures that came into effect on July 6, she reckons “the wave may not be as strong as in 2011 to 2013”.
Even though Ng has ventured overseas, his Singapore properties still constitute the largest part of his portfolio in terms of asset value. He has no desire to become a property developer. “I’m very happy being an investor,” he says. “You have to know your own investment objectives, risk appetite and motivation. Given my own parameters, this is the mode that I’m very happy with."