Investing in a Condo?

[cscs3]

Understand amortisation too... the initial years you are losing alot of money..

Many ppl thought they earned, “price appreciated x%” over last y years... and forgot about all the interests, transaction, taxes....

That's right. Not to forget all other misc expenses eg maintenance fee, repair, and any furniture invested.

 

[yoongf]

Factoring in the monthly principal repayments, a negative cashflow adds a lot more risk to this investment proposal.

 

[BBCWatcher]

Not to forget all other misc expenses eg maintenance fee, repair, and any furniture invested.

And insurance, agent fees (or at least advertising costs), loss of rental income (vacancies between tenants, nonperforming tenants, suppressed rental rate periods), basic SP Services utility charges between tenants, periodic remodeling and refinishing (to keep the unit relevant in the rental market), and the value of your time being a landlord, as examples.

 

[bolts]

Simple back of paper calculation for rental yield is;
Rentals over a year/ actual price you bought your condo.

So, 2% yield you are looking at $1,167 per month rental for a $700k property.

If you are buying a investment condo, your rental yield must be higher than 2.5%. I assume that you will using your CPF monies to fund it too. And if you left your CPF in the OA, it will be accumulating interest of 2.5%. If your rental yield is lower than 2.5%, better to keep the money in the OA account?

On the other hand, if you are using pure cash to fund the purchase completely without using CPF, by all means, please go ahead.

 

[BBCWatcher]

Simple back of paper calculation for rental yield is;
Rentals over a year/ actual price you bought your condo.

Much, much too simple. Look to the recent posts for a long list of subtractions from gross rental income.

If you are buying a investment condo, your rental yield must be higher than 2.5%.

Even if you get the cost figures right, not necessarily. Hypothetically capital appreciation could compensate for a low yield during the ownership term. Neither capital appreciation nor even capital preservation are guaranteed or even necessarily likely, of course.

 

[dork32]

If you are buying a investment condo, your rental yield must be higher than 2.5%. I assume that you will using your CPF monies to fund it too. And if you left your CPF in the OA, it will be accumulating interest of 2.5%. If your rental yield is lower than 2.5%, better to keep the money in the OA account?

On the other hand, if you are using pure cash to fund the purchase completely without using CPF, by all means, please go ahead.

you do not have to beat oa interest. All you need is to beat what the bank interest.

 

[hwmook]

Understand amortisation too... the initial years you are losing alot of money..

Many ppl thought they earned, “price appreciated x%” over last y years... and forgot about all the interests, transaction, taxes....

If want to buy investment condo should not buy new one, it seem that the first few years of ownership will suffer more significant drop in value.

 

[hwmook]

ABSD wipes out wadever so called "investment"

dun waste time, it's 2020, not 2009

TS never say he got existing property, maybe this is his first property, no need ABSD.

 

[chrisloh65]

You don't know what is called leverage?
Without leverage, say you are looking at 2.5% pa yield.
Then, with 80% LTV leverage, you will be looking at ~2*4 = 10% pa yield!

Simple back of paper calculation for rental yield is;
Rentals over a year/ actual price you bought your condo.

So, 2% yield you are looking at $1,167 per month rental for a $700k property.

If you are buying a investment condo, your rental yield must be higher than 2.5%. I assume that you will using your CPF monies to fund it too. And if you left your CPF in the OA, it will be accumulating interest of 2.5%. If your rental yield is lower than 2.5%, better to keep the money in the OA account?

On the other hand, if you are using pure cash to fund the purchase completely without using CPF, by all means, please go ahead.

 

[pcmdan]

ABSD wipes out wadever so called "investment"

dun waste time, it's 2020, not 2009

Paid $100+k for my condo. After 2years capital gain more than $150k

My absd fully paid (though 1 is realized the other is unrealized)

 

[runforyourlife]

ABSD wipes out wadever so called "investment"

dun waste time, it's 2020, not 2009

At least absd is refundable....

But yea need to return cpf and other invisible costs.

 

[pcmdan]

Simple back of paper calculation for rental yield is;
Rentals over a year/ actual price you bought your condo.

So, 2% yield you are looking at $1,167 per month rental for a $700k property.

If you are buying a investment condo, your rental yield must be higher than 2.5%. I assume that you will using your CPF monies to fund it too. And if you left your CPF in the OA, it will be accumulating interest of 2.5%. If your rental yield is lower than 2.5%, better to keep the money in the OA account?

On the other hand, if you are using pure cash to fund the purchase completely without using CPF, by all means, please go ahead.

I think have to look at it holistically. Rental yield plus capital appreciation must be higher than 2.5%

To be honest, buying a ppty in singapore is kind of the cheapest leverage one can find

Interest rate sub 2%.

Of course ur condo must be superb location with high earnings potential

 

[pcmdan]

Anyone works out the sum before? I think condo investing should be much more complicated than normal stocks/bonds investing

I am looking at a 700k condo which can yield 2% rental. If I were to pay half in cash, the mortgage seems to be $1500 per month and I can cover by renting out the condo

Say if the condo price raise 4% per year and 10 years later, it be worth about 1mil. Remember i only took out 350k of my capital and the return is 300k

(650k/350)^(1/10)=6.3%.

Thoughts?

go to excel, use the formula xirr

Better way to show which is higher

 

[BBCWatcher]

At least absd is refundable....

What do you mean?

 

[BBCWatcher]

To be honest, buying a ppty in singapore is kind of the cheapest leverage one can find
Interest rate sub 2%.

No, not actually. At this instant, as I write this, if you borrow at least S$150,000 from Interactive Brokers (a lower threshold than most mortgage lenders have) you’ll pay only 1.373% interest. And that’s with zero fees — no valuation, legal, stamp duties, or other fees. It’s a mouse click or finger tap away. Yes, that’s Singapore dollars, for margin to take positions in Singapore dollar denominated securities. And at S$1.5 million or more the interest rate falls to 0.873%. Pretty incredible, isn’t it?

That’s not necessarily a recommendation; it’s just a factual observation.

 

[zoneguard]

No, not actually. At this instant, as I write this, if you borrow at least S$150,000 from Interactive Brokers (a lower threshold than most mortgage lenders have) you’ll pay only 1.373% interest. And that’s with zero fees — no valuation, legal, stamp duties, or other fees. It’s a mouse click or finger tap away. Yes, that’s Singapore dollars, for margin to take positions in Singapore dollar denominated securities. And at S$1.5 million or more the interest rate falls to 0.873%. Pretty incredible, isn’t it?

There are people who used IB margin loan to buy properties before:
1. Vietnam.
https://medium.com/@justusjp/buying...m-interactive-brokers-my-journey-c15babf1a9c9

2. London.
https://firevlondon.com/2015/12/14/housing-pt2-how-not-to-buy-a-house-in-london/

Anybody game to do it in SG?

 

[pcmdan]

No, not actually. At this instant, as I write this, if you borrow at least S$150,000 from Interactive Brokers (a lower threshold than most mortgage lenders have) you’ll pay only 1.373% interest. And that’s with zero fees — no valuation, legal, stamp duties, or other fees. It’s a mouse click or finger tap away. Yes, that’s Singapore dollars, for margin to take positions in Singapore dollar denominated securities. And at S$1.5 million or more the interest rate falls to 0.873%. Pretty incredible, isn’t it?

That’s not necessarily a recommendation; it’s just a factual observation.

Ooo did not know that. Thanks for sharing

 

[Kaypohji]

Any securities ?

Any repayment terms period etc ?

This is nice actually

No, not actually. At this instant, as I write this, if you borrow at least S$150,000 from Interactive Brokers (a lower threshold than most mortgage lenders have) you’ll pay only 1.373% interest. And that’s with zero fees — no valuation, legal, stamp duties, or other fees. It’s a mouse click or finger tap away. Yes, that’s Singapore dollars, for margin to take positions in Singapore dollar denominated securities. And at S$1.5 million or more the interest rate falls to 0.873%. Pretty incredible, isn’t it?

That’s not necessarily a recommendation; it’s just a factual observation.

 

[BBCWatcher]

Anybody game to do it in SG?

What you could do, eventually, is park your ES3 or G3B, MBH, VWRA, etc. — and maybe some Singapore Government Securities too — at IB, borrow on margin against that collateral, and use the Singapore dollar cash for some other purpose. It’s an “interesting idea.”

How about, for example, borrowing at 1.373% to repay CPF OA, plus accrued interest, if you’re at or near age 55? Or to jack up your CPF Retirement Account to the Enhanced Retirement Sum AND repay your OA while shielding both your SA and OA? Then, if IB’s margin interest rate sours, repay from CPF (maybe with another SA shield)?

 

[BBCWatcher]

Any securities ?

Pretty much, but IB will assess different securities differently in terms of collateral value, and IB reserves the right to adjust its assessments. For example, Singapore Government Securities — T-bills, say — will likely have the highest or among the highest collateral value.

Any repayment terms period etc ?

No repayment per se. You can pay interest only if you wish.

This is nice actually

At this instant. This is a variable rate, adjusted daily I believe.