Another convert to property! :)

[OngHuatHuat]

If you are truly in the game, you know as long as your rental covers interest + maintainence, you are in a net positive region.

Cover part or all principal is just something extra.

If you can get rental > principal + interest + maintainence, then basically you are getting the condo free after paying 20 % + 3 % - 5400.
Sometimes it is too good to be true, isn't it?

From what i see the principal + interest payment and maintenance might not be covered by the rental and some have not factored in maintenance and vacancy costs (unless you tell me it will never be 1 or half a month vacant)

the growth is then purely leverage and capital appreciation, not rental

 

[SBC]

Is the monthly mortgage payment st $3720? How long is the loan duration?

Loan rate at 1.6%, the spread is quite ok at > 1.3%.

My 3BR apartment was bought last year at similar pricing. Renting out HDB.

 

[OngHuatHuat]

So now I am lucky again?

In stock market, people said I am lucky, now similar terms appear.

Actually the key is to get the loan when you are still young, but how to get the initial capital needed for the downpayment is another problem to consider.

You are lucky to have a 40-year loan period. This helped to reduce your monthly mortgage payment. Now, no such loans.
Looking at recent BTO, EC & entry level PC sizes, HDB & most developers are reducing their size to meet loan quantum.

Projects that are priced correctly are still clearing their stock fast. Consumers are always on a look up for good projects to vest their funds.

 

[OngHuatHuat]

Capital repayment cannot be treated as part of expenses. Coz eventually you are getting a fully paid condo with a lot of cash value inside.
Your calculation will be correct if your condo doesn't worth a single cent after you fully repay it.

Secondly, current depressed price is just a very small percentage of transacted value, it is not correct to put capital depression in the picture since most of the owners with holding powers won't sell during this period.

One point taken is that the mortgage is covered by the rental but i just want to have a realistic view.

My friend was saying his friend is trying to rent out eight riversuite, a condo 5 mins walk from boon keng mrt which is 2 bedroom for $2800/mth.

From what i gather the current value is $1.15 mil.

So i worked out the figures

It seems the cash on cash cash flow is negative, which means that the owner will have to supplement on top of the rentals.

Or are a lot of the costs that i am considering, not realistic, like too high of an annual value, we should not consider the increase in our income tax, too high of a maintenance and condo fees.

i have not factor in any vacancy cost.

 

[SBC]

So now I am lucky again?

In stock market, people said I am lucky, now similar terms appear.

Actually the key is to get the loan when you are still young, but how to get the initial capital needed for the downpayment is another problem to consider.

Hello, Mr Yap. Indeed young age at 31 has high advantages.

I am mid 40s. Somehow was pressured to get the 2nd property only last year due to reducing loan period.

My outstanding loan is 855k now. Probably few k more than your SG property loan. Haha

 

[OngHuatHuat]

Around the same as me actually, but your rate of decrease will be much faster than mine.

Most likely from next month onwards, your loan outstanding will be lesser than mine already.

My current loan is until 67 years old.

Which property you rented out?? Your hdb or condo?

Hello, Mr Yap. Indeed young age at 31 has high advantages.

I am mid 40s. Somehow was pressured to get the 2nd property only last year due to reducing loan period.

My outstanding loan is 855k now. Probably few k more than your SG property loan. Haha

 

[SBC]

My loan payment per month is slightly over 4k. Using cash of almost 1k.

Renting out my HDB. Yield is > 6%.

Btw, any special prices for me at your tuition Centre? Where is the location?

 

[OngHuatHuat]

Using cash or cpf for me is around the same, unless your view cpf as a form of tax that is non recoverable.

Your condo interest repayment is around 1 k per month, maintainence around 300, which means 1.3 k outflow.

Assume your hdb rented out at 2.7 k, you still have a net positive flow of 1.4 k per month.

When you are 55 years old, you can take out cpf money(any excess above minimum retirement sum) then use it in a high yield account/ bond, then use the interest on that to serve part of your loan repayment for the last 10 years. Then your condo is essentially free when you turns 55 years old. It your condo is freehold, which means you can easily treat it as perpetual bond and move to a smaller units when you are old.

I only take in A levels student for now.

My loan payment per month is slightly over 4k. Using cash of almost 1k.

Renting out my HDB. Yield is > 6%.

Btw, any special prices for me at your tuition Centre? Where is the location?

 

[SBC]

Mortgage interest is about $1300.
Maint $300

Rented HDB at $2200. + cash flow of few hundreds.

OA allocation will rise to about $1800 next year bcos of the 2nd overflow from MA. SA will hit FRS next year.
Using CPF to generate higher interest to offset my loan payment b4 it is fully drained out.

Few kids, difficult to downsize over the next 10 years.

 

[arctician]

just apply valuation techniques just like how one investin stocks and it will be fine

money is made at the price of entry, not at the point of sale..ppl must understand that

i bought mine in 2010..average return on capital 30% PA, gross yield 5%. Astronomical upside

 

[OngHuatHuat]

If like that a bit tough to execute my model, but you can try using high yield bond or high yield stable stocks to offset the difference in interest and make it sustainable, I sure you have other reserved besides hdb and cpf.

Mortgage interest is about $1300.
Maint $300

Rented HDB at $2200. + cash flow of few hundreds.

OA allocation will rise to about $1800 next year bcos of the 2nd overflow from MA. SA will hit FRS next year.
Using CPF to generate higher interest to offset my loan payment b4 it is fully drained out.

Few kids, difficult to downsize over the next 10 years.

 

[hindsight]

One point taken is that the mortgage is covered by the rental but i just want to have a realistic view.

My friend was saying his friend is trying to rent out eight riversuite, a condo 5 mins walk from boon keng mrt which is 2 bedroom for $2800/mth.

From what i gather the current value is $1.15 mil.

So i worked out the figures

It seems the cash on cash cash flow is negative, which means that the owner will have to supplement on top of the rentals.

Or are a lot of the costs that i am considering, not realistic, like too high of an annual value, we should not consider the increase in our income tax, too high of a maintenance and condo fees.

i have not factor in any vacancy cost.

Those numbers look alright to me.

And yes you are right about the non-existent yield, property is not a good investment right now, the glut is putting downward pressure on rents and in the long run, property prices are a function of rents and interest rates. The only reason why property prices have not dived in spite of the glut is due to persistently low interest rates.

 

[hindsight]

money is made at the price of entry, not at the point of sale..ppl must understand that

Absolutely true.

 

[Majestic12]

just apply valuation techniques just like how one investin stocks and it will be fine

money is made at the price of entry, not at the point of sale..ppl must understand that

i bought mine in 2010..average return on capital 30% PA, gross yield 5%. Astronomical upside

It is actually both. If you cannot sell (no liquidity), it is almost as good as non existent. Such as the current Singapore corporate bond market in certain sectors.

Time to buy during the next recession!

 

[Majestic12]

i take a way that you expect technology to deflate and cause unstability in wages big.

could you list out why you look at commercial over residential?

Yes. It is already happening all around us.

As to your second question - this is information I don't disclose online. Get to know my partners and I first and we can share.

 

[RM2SSG]

Sharing my experience.

My rental property was TOP-ed in mid 2012, over the past 4 years, I have kept detailed records of all of my expenses and income associated with this unit.

Using simple formula of net income (rental income - all expenses [inclusive of monthly loan repayment, etc]) over buying price, in my best year, the yield is 2.6%

However, based on last transacted price (May 2016) from URA site for a similar unit in my development, I am looking at unrealised gain of about 36% from buying price.

I reckon this gain (sell - buy price) will plateau at some point, perhaps when the property reaches certain age ( I am speculating here).

From my 4 years of being a landlord, what I can say is do not count on your unit being rented out 100% of the time, also, quite clearly, in the past 2 years, it is taking longer to find tenant and rent getting lesser.

I am watching the market closely and when it is favorable, I'll probably cash out and abandon my original plan of using this unit as my retirement income because it is really quite unpredictable.

 

[WindBoi]

Capital repayment cannot be treated as part of expenses. Coz eventually you are getting a fully paid condo with a lot of cash value inside.
Your calculation will be correct if your condo doesn't worth a single cent after you fully repay it.

Secondly, current depressed price is just a very small percentage of transacted value, it is not correct to put capital depression in the picture since most of the owners with holding powers won't sell during this period.

it depends on how you look at it. i computed the cash flow accordingly

EBIT = before interests and income tax, so definitely no principal
net rental income = EBIT - interest - tax, so no principal
cash on cash = net rental income - principal

 

[hwmook]

just apply valuation techniques just like how one investin stocks and it will be fine

money is made at the price of entry, not at the point of sale..ppl must understand that

i bought mine in 2010..average return on capital 30% PA, gross yield 5%. Astronomical upside

If you pour your money into SPX at 5x leverage in 2010, you would be looking at more than 500% capital gain. Why bother with property?

 

[WindBoi]

Sharing my experience.

My rental property was TOP-ed in mid 2012, over the past 4 years, I have kept detailed records of all of my expenses and income associated with this unit.

Using simple formula of net income (rental income - all expenses [inclusive of monthly loan repayment, etc]) over buying price, in my best year, the yield is 2.6%

However, based on last transacted price (May 2016) from URA site for a similar unit in my development, I am looking at unrealised gain of about 36% from buying price.

I reckon this gain (sell - buy price) will plateau at some point, perhaps when the property reaches certain age ( I am speculating here).

From my 4 years of being a landlord, what I can say is do not count on your unit being rented out 100% of the time, also, quite clearly, in the past 2 years, it is taking longer to find tenant and rent getting lesser.

I am watching the market closely and when it is favorable, I'll probably cash out and abandon my original plan of using this unit as my retirement income because it is really quite unpredictable.

thanks for sharing. how much of closing costs do you anticipate will shave your gain? in terms of maintenance is it very minimal?

 

[Mecisteus]

it depends on how you look at it. i computed the cash flow accordingly

EBIT = before interests and income tax, so definitely no principal
net rental income = EBIT - interest - tax, so no principal
cash on cash = net rental income - principal

I believe those components do not take loan tenor into account?

Just stretch the loan to the max tenor. You will pay "less" interests. Thus higher cash flow.

Looks good in the short term but you are paying more interests in the long term.