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Which type of small condo is the best for rental yield?

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Old 15-01-2018, 07:06 PM   #61
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The so-called "abysmal" yield is not really "abysmal" at all!
There are many people who just don't understand the power of real estate, which is why look at the property magnates in Singapore, the like of Ng Teng Fong, Quek Leng Beng, etc - they all got rich from properties!

I will tell you a secret that BBCWatcher and many, either they are ignorant or they simply won't tell you!

Say, you bought a property at $1M.
You financed it with 80% loan paying 1.5% p.a. interest rate, while only paying $200k cash upfront (this is your investment capital).

Now, you rented out your property at $2500 pm, or $2500x12 / $1M = 3% p.a. rental yield.
So, this is the rental yield that BBCWatcher told you about, the "abysmal yield", they are low, as compared to CPF SA 4% interest that BBCWatcher like to shout out loud to you about!

Wait a minute, did you stop to think, hei, you only come out with $200,000, not $1M, why you calculate your rental yield by dividing by $1M?
So, the smart one will calculate their rental yield this way:
Rental yield
= (rental income - interest expenses) / (your capital invested)
= ($2500x12 - $800,000x0.015) / $200,000
= 9.0% p.a.!

So, the truth is, your rental yield for your $1M property renting out at $2500 p.m. is not 3% p.a. that BBCWatcher wanted you to believe, but really it is 9.0% p.a.!
Now, you compare this 9.0% p.a. to 4.0% paid by SA, are they big difference?
BBCWatcher may now tell you 9.0-4.0 = 5.0% p.a. not that great and not worth it considering the risk involved! Really?

Ok, let me give you another illustration again:
You start with $200,000 and you put this money into CPF SA earning 4% p.a. 30 years later, your pot of money becomes
= $200,000 x ((1+0.04) to power of 30)
= $200,000 x 3.243397
= 648,679

Let say instead of 4% p.a., now you get 9% p.a. (say, through your property investment), your pot of money starting with $200,000 now becomes
= $200,000 x ((1+0.09) to power of 30)
= $200,000 x 13.267678
= $2,653,535 = $2.653 Millions!

So, the difference between $2.653M and $648k = $2.005 Millions! Wow!
So it determines whether you become a Millionaire with just $200k or a pauper!
This above is considering rental income only and still does not include the capital gain you will get as a result of inflation and money printing!

So, there you are, this is the secret of how Ng Teng Fong and Quek Leng Beng become BILLIONAIRES!
Do you want to be a Millionaire (and on to become Multi-millionaire and even Billionaire)?
Or you want to be a pauper (after factoring in the escalating costs of living in Singapore) listening to BBCWatcher?
It is all up to you!

Only if loan interest stays constant.
Zero cost in property upkeep.
Zero property and income taxes.
No vacant periods in entire period.
Condo that has zero monthly maintenance.
Zero transaction costs.
Assumption of correct timing and capital gain and not capital loss.
These tend to be underestimated by people who do not own rental properties.
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Last edited by gerdhold; 15-01-2018 at 07:22 PM..
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Old 15-01-2018, 08:24 PM   #62
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The so-called "abysmal" yield is not really "abysmal" at all!
There are many people who just don't understand the power of real estate, which is why look at the property magnates in Singapore, the like of Ng Teng Fong, Quek Leng Beng, etc - they all got rich from properties!

I will tell you a secret that BBCWatcher and many, either they are ignorant or they simply won't tell you!

Say, you bought a property at $1M.
You financed it with 80% loan paying 1.5% p.a. interest rate, while only paying $200k cash upfront (this is your investment capital).

Now, you rented out your property at $2500 pm, or $2500x12 / $1M = 3% p.a. rental yield.
So, this is the rental yield that BBCWatcher told you about, the "abysmal yield", they are low, as compared to CPF SA 4% interest that BBCWatcher like to shout out loud to you about!

Wait a minute, did you stop to think, hei, you only come out with $200,000, not $1M, why you calculate your rental yield by dividing by $1M?
So, the smart one will calculate their rental yield this way:
Rental yield
= (rental income - interest expenses) / (your capital invested)
= ($2500x12 - $800,000x0.015) / $200,000
= 9.0% p.a.!

So, the truth is, your rental yield for your $1M property renting out at $2500 p.m. is not 3% p.a. that BBCWatcher wanted you to believe, but really it is 9.0% p.a.!
Now, you compare this 9.0% p.a. to 4.0% paid by SA, are they big difference?
BBCWatcher may now tell you 9.0-4.0 = 5.0% p.a. not that great and not worth it considering the risk involved! Really?

Ok, let me give you another illustration again:
You start with $200,000 and you put this money into CPF SA earning 4% p.a. 30 years later, your pot of money becomes
= $200,000 x ((1+0.04) to power of 30)
= $200,000 x 3.243397
= 648,679

Let say instead of 4% p.a., now you get 9% p.a. (say, through your property investment), your pot of money starting with $200,000 now becomes
= $200,000 x ((1+0.09) to power of 30)
= $200,000 x 13.267678
= $2,653,535 = $2.653 Millions!

So, the difference between $2.653M and $648k = $2.005 Millions! Wow!
So it determines whether you become a Millionaire with just $200k or a pauper!
This above is considering rental income only and still does not include the capital gain you will get as a result of inflation and money printing!

So, there you are, this is the secret of how Ng Teng Fong and Quek Leng Beng become BILLIONAIRES!
Do you want to be a Millionaire (and on to become Multi-millionaire and even Billionaire)?
Or you want to be a pauper (after factoring in the escalating costs of living in Singapore) listening to BBCWatcher?

It is all up to you!
You are painting the wrong picture and giving wrong impression.

For a $1m with 80% loan. Even with 30yr loan period at low interest of 1.2% your monthly payment is $3.3k. Your rental is only getting you $2.5k so you are already having a negative cash flow ( need top up $800a month to service loan).
Add to that maintenance fees, property tax , rental income tax your cash outflow will be more.
And interest rates is set to rise so you’re mthly payment will increase to >$3.3K.
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Old 15-01-2018, 08:45 PM   #63
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You are painting the wrong picture and giving wrong impression.

For a $1m with 80% loan. Even with 30yr loan period at low interest of 1.2% your monthly payment is $3.3k. Your rental is only getting you $2.5k so you are already having a negative cash flow ( need top up $800a month to service loan).
Add to that maintenance fees, property tax , rental income tax your cash outflow will be more.
And interest rates is set to rise so you’re mthly payment will increase to >$3.3K.
Cash flows from rental can always be manipulated by adjusting tenor of debt and loan amount of property.

Basically if one is 80% loan, this person is leveraging to the max. And he shouldn't be looking at cash flows. Instead the focus is on the potential capital gain.

If you opt for lower loan and shorter tenor, monthly mortgage is lower. However the leverage effect is lower. But potentially positive cash flows.
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Old 15-01-2018, 09:12 PM   #64
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I think one just needs to be careful with estimating costs as they add up quickly.

a 1mio property draws something like 25k stamp duty.
even if you assume you don't pay any commission at time of liquidation, you are immediately -12.5% (assume 80% financing) the moment you enter that trade.
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Old 15-01-2018, 09:17 PM   #65
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What you are talking about is Return on Equity, which isn't without risks depending on the market at that point in time.

It is surely not a coincidence that the super bond bull cycle fitted in nicely with the appreciation of real estate worldwide.

And why do you have to use such extreme outliers? I have numerous clients who became very wealthy from the boom in real estate - and they are telling me that the golden era is over.

The so-called "abysmal" yield is not really "abysmal" at all!
There are many people who just don't understand the power of real estate, which is why look at the property magnates in Singapore, the like of Ng Teng Fong, Quek Leng Beng, etc - they all got rich from properties!

I will tell you a secret that BBCWatcher and many, either they are ignorant or they simply won't tell you!

Say, you bought a property at $1M.
You financed it with 80% loan paying 1.5% p.a. interest rate, while only paying $200k cash upfront (this is your investment capital).

Now, you rented out your property at $2500 pm, or $2500x12 / $1M = 3% p.a. rental yield.
So, this is the rental yield that BBCWatcher told you about, the "abysmal yield", they are low, as compared to CPF SA 4% interest that BBCWatcher like to shout out loud to you about!

Wait a minute, did you stop to think, hei, you only come out with $200,000, not $1M, why you calculate your rental yield by dividing by $1M?
So, the smart one will calculate their rental yield this way:
Rental yield
= (rental income - interest expenses) / (your capital invested)
= ($2500x12 - $800,000x0.015) / $200,000
= 9.0% p.a.!

So, the truth is, your rental yield for your $1M property renting out at $2500 p.m. is not 3% p.a. that BBCWatcher wanted you to believe, but really it is 9.0% p.a.!
Now, you compare this 9.0% p.a. to 4.0% paid by SA, are they big difference?
BBCWatcher may now tell you 9.0-4.0 = 5.0% p.a. not that great and not worth it considering the risk involved! Really?

Ok, let me give you another illustration again:
You start with $200,000 and you put this money into CPF SA earning 4% p.a. 30 years later, your pot of money becomes
= $200,000 x ((1+0.04) to power of 30)
= $200,000 x 3.243397
= 648,679

Let say instead of 4% p.a., now you get 9% p.a. (say, through your property investment), your pot of money starting with $200,000 now becomes
= $200,000 x ((1+0.09) to power of 30)
= $200,000 x 13.267678
= $2,653,535 = $2.653 Millions!

So, the difference between $2.653M and $648k = $2.005 Millions! Wow!
So it determines whether you become a Millionaire with just $200k or a pauper!
This above is considering rental income only and still does not include the capital gain you will get as a result of inflation and money printing!

So, there you are, this is the secret of how Ng Teng Fong and Quek Leng Beng become BILLIONAIRES!
Do you want to be a Millionaire (and on to become Multi-millionaire and even Billionaire)?
Or you want to be a pauper (after factoring in the escalating costs of living in Singapore) listening to BBCWatcher?

It is all up to you!
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Old 15-01-2018, 09:49 PM   #66
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How you get -12.5 %?

I think one just needs to be careful with estimating costs as they add up quickly.

a 1mio property draws something like 25k stamp duty.
even if you assume you don't pay any commission at time of liquidation, you are immediately -12.5% (assume 80% financing) the moment you enter that trade.
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Old 15-01-2018, 09:59 PM   #67
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The so-called "abysmal" yield is not really "abysmal" at all!
There are many people who just don't understand the power of real estate, which is why look at the property magnates in Singapore, the like of Ng Teng Fong, Quek Leng Beng, etc - they all got rich from properties!

I will tell you a secret that BBCWatcher and many, either they are ignorant or they simply won't tell you!

Say, you bought a property at $1M.
You financed it with 80% loan paying 1.5% p.a. interest rate, while only paying $200k cash upfront (this is your investment capital).

Now, you rented out your property at $2500 pm, or $2500x12 / $1M = 3% p.a. rental yield.
So, this is the rental yield that BBCWatcher told you about, the "abysmal yield", they are low, as compared to CPF SA 4% interest that BBCWatcher like to shout out loud to you about!

Wait a minute, did you stop to think, hei, you only come out with $200,000, not $1M, why you calculate your rental yield by dividing by $1M?
So, the smart one will calculate their rental yield this way:
Rental yield
= (rental income - interest expenses) / (your capital invested)
= ($2500x12 - $800,000x0.015) / $200,000
= 9.0% p.a.!

So, the truth is, your rental yield for your $1M property renting out at $2500 p.m. is not 3% p.a. that BBCWatcher wanted you to believe, but really it is 9.0% p.a.!
Now, you compare this 9.0% p.a. to 4.0% paid by SA, are they big difference?
BBCWatcher may now tell you 9.0-4.0 = 5.0% p.a. not that great and not worth it considering the risk involved! Really?

Ok, let me give you another illustration again:
You start with $200,000 and you put this money into CPF SA earning 4% p.a. 30 years later, your pot of money becomes
= $200,000 x ((1+0.04) to power of 30)
= $200,000 x 3.243397
= 648,679

Let say instead of 4% p.a., now you get 9% p.a. (say, through your property investment), your pot of money starting with $200,000 now becomes
= $200,000 x ((1+0.09) to power of 30)
= $200,000 x 13.267678
= $2,653,535 = $2.653 Millions!

So, the difference between $2.653M and $648k = $2.005 Millions! Wow!
So it determines whether you become a Millionaire with just $200k or a pauper!
This above is considering rental income only and still does not include the capital gain you will get as a result of inflation and money printing!

So, there you are, this is the secret of how Ng Teng Fong and Quek Leng Beng become BILLIONAIRES!
Do you want to be a Millionaire (and on to become Multi-millionaire and even Billionaire)?
Or you want to be a pauper (after factoring in the escalating costs of living in Singapore) listening to BBCWatcher?

It is all up to you!
You are sounding like a property agent.

Only telling the good stories.
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Old 15-01-2018, 09:59 PM   #68
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How you get -12.5 %?
THink he assume your capital $200k and already lost $25k for stamp duty before earning any returns. So $25k / $200k.
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Old 15-01-2018, 10:03 PM   #69
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How you get -12.5 %?
I thought you are a Maths tutor.

25k / 200k is the leveraged loss.
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Old 15-01-2018, 10:04 PM   #70
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Longer tenor , lower monthly mortgage repayment.

Cash flows from rental can always be manipulated by adjusting tenor of debt and loan amount of property.

Basically if one is 80% loan, this person is leveraging to the max. And he shouldn't be looking at cash flows. Instead the focus is on the potential capital gain.

If you opt for lower loan and shorter tenor, monthly mortgage is lower. However the leverage effect is lower. But potentially positive cash flows.
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Old 15-01-2018, 10:05 PM   #71
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It is not applicable for my case.

I thought you are a Maths tutor.

25k / 200k is the leveraged loss.
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Last edited by yyhwin; 15-01-2018 at 10:09 PM..
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Old 15-01-2018, 10:07 PM   #72
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Longer tenor , lower monthly mortgage repayment.
Oops you got me.

Yes my point is the cash flows aspect can be manipulated.
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Old 15-01-2018, 10:08 PM   #73
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If you calculate like that, higher capital means lower % loss.


THink he assume your capital $200k and already lost $25k for stamp duty before earning any returns. So $25k / $200k.
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Old 15-01-2018, 10:11 PM   #74
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If you calculate like that, higher capital means lower % loss, it doesn't make sense.
Because higher capital means lower leverage.

Remember leverage increases potential gain/loss.
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Old 15-01-2018, 10:19 PM   #75
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Actually there are 1 bedders at other areas as well, but more expensive

hi all, been doing some research on this area.... im quite optimistic on the geylang area... theres some potential i feel.... what do you guys think?

thanks
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