Jan 20, 2013

$1M Home Goal

Over this weekend, i have decided $1M (Today Price) home features will be the goal i hope to achieve. So this is what i want.

- Private Condo
- More than 1K sqf
- Retirement and Recreational facilities
- Low Pollution and Traffics will be ideal
- Close to ammenties
- Reasonable rental income is a nice option

Next is can i afford ?
- 20 Years Loan (Using 20 for this example. There is a constraint on age: 65. So if you are 45, only 20 years)
- 1.5% Interests Rate

With 20% Cash and CPF, i will need $800K loan to be re-paid in 20 years with interests.
And about 3% stamp duty with cash. Assuming i have no problem with cash and cpf on the 20% and fees.
At 1.5% rate, monthly payment : $3,860
At 3% rate, monthly payment : $4,437 (up 14.9%)
At 5% rate, monthly payment : $5,280 (up 32%)

Total Cost excluding stamp duty, renovation and lawyer fees.
At 1.5% rate, $926,400. Total interests paid = $126,400.
Effective compound rate : 0.74%

At 3% rate, total interests paid = $264,880.

Effective compound rate : 1.26%

At 5% rate, total interests paid = $467,200. Almost half my condo price. I love Banks. :)
Effective compound rate : 2.33%

Investment Return
If I can achieve 3% on average annual property appreciation long term and with rental support bonus, this deal may makes sense. Anything more, else what am i waiting for ?

20th Jan 2013


  1. While still in Goldman's employment, Mr Buxani began investing in Singapore property in 2000, "using every dollar of my income at Goldman Sachs".
    Initially he bought freehold strata shops in the Orchard Road area at about $2,500-3,000 psf. "Net property yields were 5.5-6.5 per cent, though interest rates were, of course, much higher than today. Assuming you put down 25 per cent equity, borrowed 75 per cent and if the rental income was enough to cover the monthly loan instalment payments, property tax and maintenance fees, then by the end of your loan period of 15-20 years, you would have paid off your loan, and gained full ownership of the property (without any outstanding loan). Assuming there are no changes in rental and capital values, the initial 25 per cent equity investment will become 100 per cent - which means you would quadruple your equity. And having been at Goldman, managing money, trust me, it's not easy quadrupling your money in such a conservative manner in the global financial markets over the same holding period."
    That's not all. "Now the real kicker is: if you buy the property at a good time of the property cycle and capital values do actually appreciate, then the returns could end up being an 8-10 times multiple of your initial equity investment!"

  2. This is scary reality.

    Even with the current supplies of housing in 3 years time, the population is expected to be leap frogging. Demand will continues to outstrip supply imo. With WW economy on slow recovery, and continue currency war to avoid recessions with their own denominated $, it is quite unlikely we going to see bad time soon.

  3. We can play around with the number of years loan. A 30 yr loan will mean longer payment but lower monthly amount reducing risk further due to sudden unemployment with low saving.

    Another important factor is rental has a good chance to cover the monthly amount as well if we are going for investment. At worst, we can do top up. Keep in mind at the end of the loan, the property is free.

  4. You forget to add in monthly maintenance fees, sinking funds, annual property tax. Those are your running cost. And trust me, it is quite significant.

    BTW, where can you find a 1000sqft condo at 850psf? I like to know. :)

  5. Errr ...thanks for providing of more "Hidden" costs. :)

    I was checking Punggol region condo with names like River-X ...Maybe i got the price wrong.

  6. It proved to be Very helpful to me and I am sure to all the commentators here! Community Management Specialist