HDB - Sell or rent?

[NeneNene]

Hi Investment gurus,
Need some advise if GPT below is giving me right advise.

Scenario:
45 year old considering whether to sell HDB or rent it out (currently staying in a condo with mortgage). Value of HDB in current $ about 300K and remaining lease is about 50years. I am aware of the lease decay and possibilities of steep price drop in future and ...In future may be a) future populist govt bailing out via SERS/VERS b) no such luck and I need to let go after of 99-yr lease. Assuming the worst that I let the lease decay, the following is what GPT suggests. Is this sound?

To decide whether to sell the flat for $300,000 or keep it and rent it out, we need to compare the present value of the two options over the 50-year period. Here’s how we can approach the analysis:

Option 1: Sell the Flat and Invest​

• Initial Investment: $300,000
• Annual Return on Investment: 4%
• Future Value after 50 years: This is the value of the initial investment after 50 years at a 4% annual return.

Option 2: Rent the Flat​

• Initial Monthly Rent: $2,500
• Annual Rent Increase: 2%
• Reinvestment Return Rate: 4%
• Future Value of Rent Payments: This is the value of the reinvested rent payments over 50 years.

Calculation​

Option 1: Future Value of Selling and Investing​

The future value FVFV of an investment can be calculated using the formula:
FV=PV×(1+r)nFV=PV×(1+r)n
Where:

• PVPV = Present Value (initial investment)
• rr = Annual interest rate
• nn = Number of years

FVsell=300,000×(1+0.04)50FVsell=300,000×(1+0.04)50

Option 2: Future Value of Renting​

The future value of rent payments, taking into account reinvestment and rent increase, requires a bit more calculation since the rent increases annually and each payment is reinvested at a 4% return. The formula for the future value of a growing annuity (rent payments growing at 2%) is:
FVrent=P×(1+i)n−(1+g)ni−gFVrent=P×i−g(1+i)n−(1+g)n
Where:

• PP = Initial monthly payment (annualized)
• ii = Reinvestment interest rate (4%)
• gg = Growth rate of payments (2%)
• nn = Number of years

Given the monthly rent, we first annualize it:
P=2,500×12=30,000P=2,500×12=30,000
Now let's calculate these values using Python:

Comparison of Options​

1. Future Value of Selling and Investing: Approximately $2,132,005
2. Future Value of Renting and Reinvesting: Approximately $6,622,643

Conclusion​

Based on these calculations, the future value of renting the flat and reinvesting the rent payments significantly outweighs the future value of selling the flat and investing the $300,000. Therefore, it makes more financial sense to rent the flat under the given assumptions of rental increase and reinvestment returns.

 

[dgeralds]

No need to do any calculation. Just rent! Better still ...do the agreement and get the tenants yourself. No need agent.

 

[~sabaisabai~]

No need to do any calculation. Just rent! Better still ...do the agreement and get the tenants yourself. No need agent.

nowadays ppl diy rental. no need agent

 

[highsulphur]

you haven't factored in repair costs, income tax, property tax and other cost

but i suspect the 2nd option will still yield higher

 

[DevilPlate]

No need to do any calculation. Just rent! Better still ...do the agreement and get the tenants yourself. No need agent.

What are the free website to list? No carouhell pls (it work for room rental tho)

 

[DevilPlate]

you haven't factored in repair costs, income tax, property tax and other cost

but i suspect the 2nd option will still yield higher

Occasionally kena tenant from hell….owe monies for few mths and balik kampong….
bedbugs, termite infestation not uncommon as well since older flats attracts less desirable tenant profile like workers and students

unless willing to spend some monies and reno kitchen, toilets every 10years in order to attract better quality tenants

 

[ahnyaahnya]

Can rent out HDB and stay in own condo?

 

[DevilPlate]

Hi Investment gurus,
Need some advise if GPT below is giving me right advise.

Scenario:
45 year old considering whether to sell HDB or rent it out (currently staying in a condo with mortgage). Value of HDB in current $ about 300K and remaining lease is about 50years. I am aware of the lease decay and possibilities of steep price drop in future and ...In future may be a) future populist govt bailing out via SERS/VERS b) no such luck and I need to let go after of 99-yr lease. Assuming the worst that I let the lease decay, the following is what GPT suggests. Is this sound?

To decide whether to sell the flat for $300,000 or keep it and rent it out, we need to compare the present value of the two options over the 50-year period. Here’s how we can approach the analysis:

Option 1: Sell the Flat and Invest​

• Initial Investment: $300,000
• Annual Return on Investment: 4%
• Future Value after 50 years: This is the value of the initial investment after 50 years at a 4% annual return.

Option 2: Rent the Flat​

• Initial Monthly Rent: $2,500
• Annual Rent Increase: 2%
• Reinvestment Return Rate: 4%
• Future Value of Rent Payments: This is the value of the reinvested rent payments over 50 years.

Calculation​

Option 1: Future Value of Selling and Investing​

The future value FVFV of an investment can be calculated using the formula:
FV=PV×(1+r)nFV=PV×(1+r)n
Where:

• PVPV = Present Value (initial investment)
• rr = Annual interest rate
• nn = Number of years

FVsell=300,000×(1+0.04)50FVsell=300,000×(1+0.04)50

Option 2: Future Value of Renting​

The future value of rent payments, taking into account reinvestment and rent increase, requires a bit more calculation since the rent increases annually and each payment is reinvested at a 4% return. The formula for the future value of a growing annuity (rent payments growing at 2%) is:
FVrent=P×(1+i)n−(1+g)ni−gFVrent=P×i−g(1+i)n−(1+g)n
Where:

• PP = Initial monthly payment (annualized)
• ii = Reinvestment interest rate (4%)
• gg = Growth rate of payments (2%)
• nn = Number of years

Given the monthly rent, we first annualize it:
P=2,500×12=30,000P=2,500×12=30,000
Now let's calculate these values using Python:

Comparison of Options​

1. Future Value of Selling and Investing: Approximately $2,132,005
2. Future Value of Renting and Reinvesting: Approximately $6,622,643

Conclusion​

Based on these calculations, the future value of renting the flat and reinvesting the rent payments significantly outweighs the future value of selling the flat and investing the $300,000. Therefore, it makes more financial sense to rent the flat under the given assumptions of rental increase and reinvestment returns.

Im a LL myself for over 20years and i can tell it is Not a passive income at all.
Personally, i buy and hold FH condos in good locations primarily for the potential capital appreciation over time.

So if i were u, i will js sell HDB which eventually goes to zero unless u kena SERs (lottery effect)

Also many here advocate index etf like vwra, cspx which potentially yield 8-10% returns over a long period…
so why use 4% return?

 

[DevilPlate]

Can rent out HDB and stay in own condo?

Can why not?
Before absd was introduced, many are doing that……buy condo liao and rent out their hdb

 

[reddevil0728]

Can rent out HDB and stay in own condo?

After MOP?

 

[ahnyaahnya]

After MOP?

I think still can't. Must stay in the HDB.
Maybe those who MOP years ago can. But this guy is only 45. If he's single ( he doesn't say whether he is married) he would have MOP only 5 years ago, so cannot

 

[DevilPlate]

I think still can't.
Maybe those who MOP years ago can. But this guy is only 45. If he's single ( he doesn't say whether he is married) be would have MOP only 5 years ago, so cannot

he shd be able to…
else so funny post this qn to troll us whahaha

 

[reddevil0728]

I think still can't. Must stay in the HDB.
Maybe those who MOP years ago can. But this guy is only 45. If he's single ( he doesn't say whether he is married) he would have MOP only 5 years ago, so cannot

Why cannot?

 

[highsulphur]

Can rent out HDB and stay in own condo?

can. after MOP

https://www.hdb.gov.sg/residential/renting-out-a-flat-bedroom/renting-out-your-flat/eligibility

 

[ahnyaahnya]

Why cannot?

I said " I think ".

 

[reddevil0728]

I said " I think ".

Yea so why did you think cannot?

 

[qhong61]

can. after MOP

https://www.hdb.gov.sg/residential/renting-out-a-flat-bedroom/renting-out-your-flat/eligibility

Thot must stay hdb, rent out condo?

 

[ahnyaahnya]

Thot must stay hdb, rent out condo?

Me too .
I think there was a change some years ago to disallow renting the hdb and live in own private.
But that it did not apply retroactively to those who had already bought their private property prior to the announcement.
I'm 90% sure of it.

 

[ahnyaahnya]

What are the free website to list? No carouhell pls (it work for room rental tho)

HDB website for one!

 

[ahnyaahnya]

Can why not?
Before absd was introduced, many are doing that……buy condo liao and rent out their hdb

https://www.google.com/search?q=are...id-samsung-ss&sourceid=chrome-mobile&ie=UTF-8

Confirmed cannot.
Unless get permission