- I am looking at a 1 bedroom at a high estimate of $700K.
- I am buying solely for investment purposes i.e. rental yield/capital gain.
- I am assuming a worst case scenario.
“Dwell in the rarity of an urban utopia.”
A nice tagline indeed. I have been looking at Geylang area for a while and a new launch just next to the MRT spark my interest. So after dropping off my cheque to indicate my interest, I started to do some serious number crunching.
The first question on my mind is affordability. Am I buying within my means?
I have already work out that I can afford the 5%+15% down payment as well as secure a loan. My concern here is if I am able to afford the monthly expenses. I am pretty sure that the mortgage loan is not the only monthly expense. Hearing words like “as long as your rent can cover your mortgage” is too simplistic.
After consulting with some friends, this is what I came up with.
A few notes.
Very interesting analysis there. Some well thought pointers.
Property prices in Singapore is controlled largely by policies laid out by the government. So barring any failings in the ruling party in the future.
Singapore should still remain one of the most viable place in the world to do business and to invest in its real estate.
Hi Eric,
On top of government policies, Singapore being an open economy is also very dependent on what is happening around the world. Interest rates are rising now and if less business come to Singapore due to a dwindling Word Economy, property prices will be affected.
Now : May 2016.
Your foresight has got you out of trouble. Property prices have fallen since then. The TRE residence rent for 1 br of $2k is definitely rental gross. After maintainance of $300, property tax and insurance, you would be lucky if you can net a monthly rental at $1400 pm. You miss out agent’s commission, repairs, transition of tenants, vacancy period etc. If you are working and having an income, this rental income has to be added to your working income for tax purpose. You are likely to be paying a higher tax bracket.
Have you tried to factor in CPF? If you use CPF to purchase this investment unit, compare it with leaving it untouch and interest compounded over the loan tenure, you may lose out! I have seen some cases that leaving money with CPF, with interest compounded is better off than property investment esp buying at the peak of property cycle. For investment property, one needs to buy at the trough of a property cycle rather than at its peak.
Hi Fred,
Are you a property investor? Thanks for your views and pointing out the other additional costs.
Adding in CPF is like opportunity costs? I have not factored that in and I think analysing that is a beast in itself.
Buying a property is very much like stocks – both have its cycles and the key is to understand the valuations and buy it below valuation. Easier said than then.