Apr 13, 2021

Cory Diary : Things I found out from Property Ownership

Not in any specific order, I am writing them down as notes as it comes off my mind for the past few days. No right or wrong but welcome to correct any errors.

1. Using CPF to pay for the housing

I think every couple should own their first property a HDB. Is the most affordable and one should only buy the right size that fits their income. If overstretch, relationship can be bad. And couple could be stressed.  Happy family, happy life, and good health. 

Question will be should we tap on CPF to purchase the property ? No right or wrong imo due to different circumstances. Just to be aware that there is accrued interests that we need to pay back to our own CPF account generally. Reason being I view CPF guaranteed returns are attractive and it makes sense for me to refund using idle money in the bank.

For my case, my SA account is not filled therefore VHR makes sense as I will do OA to SA transfer immediately after. So now hit FRS. After which I can do VC3AC to build up my SA further. There is annual limit of $37740 for MC+VC.

2. Condo Maintenance is sizeable

Let say $300 monthly. This is equal to $3600 annual ! And as I know this is generally paid by landlord if you rent out. So if one has no plan to use the condo for investment returns rather home stay, there is cost attached. In-addition there are gov benefits that ties to type of housing you live in. However life on earth is limited and each one has their own lifestyle. Make the full use of it.

3. Monthly Instalment there are 2 portions

Why I mention this is because the impact from interest rate is mitigated as time past due to large portion of our monthly installment is for paying down the principal loan. One reason why I refinance to a Fixed rate loan for 5 years. Lock lower rate on surface but also bought 5 years.

4. Property Tax

Yes, there is a cost. Period. In-addition I missed my 2nd payment because they switch to paperless without my explicit approval. They then allow me pay up without penalty for this time only. I feel like kenna kick and still have to bow to them. Life is Brutal next to Arrogant. 

5. Employment/Income Risk

You will be tied down. Risk of unemployment. Age risk. At age 51, if I am out of job, what is the chance that I can find another similar paying job within one year ? And if I could not, maybe is unlikely 5 years down the road. To mitigate this, do you think 1 year emergency fund enough ? So chances are is either get another job quickly at much lower pay of mismatch skillset or plan to be retired regardless I like it or not. Yes, is a waste of my skill but bo pian. 

6. Loan Year Restriction on Age

This is big for me because of my older age I can only borrow for 14 years max today. What this mean is my monthly amount will be much larger due to shorter loan period and need to meet the TDSR the same time. So if I plan to buy my next property,  I will need to pay much more in cash.

7.  Rental Income

For $3000 monthly rental, annual income is $36,000. This is good amount to offset loan payment for investment property at my age. Therefore I would only own more properties if regulation is more relaxed. There is risk if we do not have stable income or saving asset, we could panic. So we need to plan right as at current yield for my age, many properties are cash flow negative due to shorter loan period even though long run I will still be on top.

8. HDB or Private Property Loan

1% rate difference for $500k in simple term is $5k annually. Not cheap. So if I am to take HDB loan, make sure is worth it as it is much more expensive. I don't think it makes sense that people take HDB loan to minimize their chance of returning HDB flat if they failed to pay up. Either they overspend or cannot afford it in the first place.

9. Condo Space

Space is much smaller for New and Private. So if want to stay in one make sure we buy the size we want in number of rooms and total psf. If cannot afford, think twice. However if target rental, not sure 1 or 2 bed rooms are better. I do see quite a number of rent for 3 bedrooms just not as many. Due to gov curbs on number of properties,  getting the larger affordable unit will be a better choice.

10. Home Ownership

Shifted homes from HDB 1 room, 3 room, 4 room, 5 room and Condo. Can be due to family size, estate renewal, working distance, upgrade, etc. home is not forever because is not my experience. We move and change with times and needs. However each time we move, is for better.

11. Invest in Property or Reit ?

I do both. I think maybe good to have at least one rental property income for diversification. Do be prepared for cash flow negative periods due to increasing price. Currently I use a chunk of the Reit dividends to top up the differences.

12. Location Matters

for OCR, Integrated central location, the psf is much higher than 5 min or 10 min away apartment. Delta can be more than 300 psf. However once top, the psf increase for good location increased by 30% with good rental value. So rental investment wise, a key consideration ?

13. Renovation Cost
As condo is half furnished, there is some saving. I do the fan, lighting and curtains. However due to limited space, customized bedding needed for smaller room. In total less than 15k i think. 

14. Store room
Being used to store room in HDB, quite surprise the Condo unit I have do not have one. Many things are thrown before we move in. Minimalist by circumstances ?

15. Weather
Choose the NS direction. There are swimming pools below about 30m away to the side. So is not noisy.
As the unit is inward facing and unblocked, the temperature is quite cooling. However clothing takes longer to dry.

16. Leverage " Demon "
Property is high leverage considering for first property say we pay only 20%. So any gain or loss, magnifies. However there is cushioning from Rental income. Say over 5 year we make 250k for 1M apartment, the money put down including cost could be only 230k. So returns easily 15% annual for past 5 years excluding Rental Support. If we include say 30k annual rental income after cost, the returns  will be roughly = 34% annual ! The range can be between 30% to 40% due to actual sell price 5 years later cannot be confirm .(updated)

I put item 16 the last because I want people to think hard about it. 

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.


  1. Cory,


    Your point 16 may confuse/woke those who blindly listened to those REITs promoters who tout REITs yield so much more, physical properties only yield like that niah...

    So buy REITs!

    Then again, does not matter whether invested in REITs or physical properties, the trick is to buy at good, better, best prices.

    Its no fun to sit on unrealised losses and hoping one day we'll breakeven :(

    1. Hey SMOL, I feel like kenna drag out and get whipped and sayang the same time. I guess is your thing right. haha. Yes, hope is a dangerous thing. No hope better cut loss. Usually I am blessed. Has been reading property curb coming. Stay safe ! Be it Reit or Property.

  2. Hello,

    "(250k+150k)/230k/5 = 34% annual"

    I think the math is misleading ; however a lot of people usually get this wrong too.

    It should be (250k + 150k) / (230k + 5 years of mortgage + 5 years of property tax + 5 years of mcst fees + 2.5 months of agent leasing fees + 5 years of wear and tear repairs) divide by 5 years.

    People conveniently forget/ignore these costs especially the mortgage portion because of "rent can cover mortgage". In reality, you are still paying mortgage just that the rent cash inflow goes out to cover mortgage outflow.

    Put it another way, if you hold and sell the property after 25 or 30 years (assume loan fully discharged), what leverage are we really talking about here?

    Don't mind my poking but if you can re-do the math, the CAGR will be dramatically lower.

    All in good fun no malice intended. thanks : )

    1. Hi Anonymous, you are right. I simplify it as my unit may command between 42k to 48k based on URA Rental. My calculation assume 30k. So I guess enough buffer to cover all those cost. Is a rough approx.

      As I know once Condo move past 10 years, appreciation will be harder. That's why I am focusing returns within 5 years because that what I experience. I will have another 5 years to think about after.


    2. Don't mind me poking here but my math for this example would be

      $1M condo purchase price
      25% downpayment for 1st property (no ABSD, only 3% BSD - 5400)
      2.5% monthly mortgage for balance 750k for 30 years ($2963/month assumes interest rates normalises at some point)
      $400/month maintenance
      $4k rent income/month (on high side for $1M condo, likely 2.5k to 3k max)
      2.5 months of agent leasing fee for 5 years of rental (1 month for every 2 years)
      Assume 250k (25%) capital appreciation after 5 years (also on high side for $1M condo, likely to move in tandem with GDP/inflation)
      Assume 1.5% of selling price to agent for selling condo after 5 years
      Assume Property tax of 10% of rental income per year (a little on high side because depends on annual value of property which is typically lower)


      Rent Income + Appreciation = (4k x 60 months + 250k) = 490k

      1) Downpayment 250k Downpayment
      2) BSD (30k-5.4k) = 24.6k
      3) Agent fees for 5 year rental i.e. 2.5months x $4k agent fees = 10k
      4) Monthly maintenance 0.4k maint fee x 60 months = 24k
      5) Property tax 10% x $4k x 60months Property tax = 24k
      6) 1.5% market rate x $1.25M selling price after 5 years = $18.8k
      7) $3k Conveyance fee upon purchase of property
      8) 5 years mortgage = $2963 x 60 months = 180k

      Total cost after 5 years = 250 + 24.6 + 10k + 24k + 24k + 18.8k + 3k + 180k
      = 534k rounded

      Cost > Income ... in fact, likely cashflow negative every month once you factor in monthly cash outflows like maintenance fee, property tax, some amount of income tax, agent leasing fee plus monthly mortgage.

      * Note I ignored Income tax from rental because this depends on your income range (assumed zero income other than rent income as a retiree)
      ** I also ignored wear and tear expenses because hard to estimate

      Hopefully this is a clearer way to show P&L from rental.
      Not sure if you agree (or disagree)

      Bottomline, one can't depend on rent income unless you got them super cheap (maybe pre GFC and before cooling measures kicked in) or if floodgates open to foreigners again. thanks for bearing with this long post.

    3. Yup item 11 mentioned cashflow negative due to pay down of principal not just interests. If we try to get another property, that is a different matter because unless curb eases we may have higher cashflow problem. But long term is +ve.

      And in item 12, location I have matter. Strong yield on purchase price. The actual unit is 1M+. Tax is relatively low. Blogged on OA to SA to hit FRS. Wish 2008/2009 period but is not.

      For my age, loan cannot be that long. Mostly Principal down payment.- From what I see is significantly lower from your figure. I will double check again later.

      I did left out the market rate agent fee 18.8k. wow. Is that real ! It can go up to 30k too from what I just googled....

      The way I original computed (Profit-all costs)/invest where invest is not expense. (450k-180k)/230k/5. It comes down to 23%+.

    4. However the actual sell price is not known which is 5 years later. Assuming 2% appreciation compounded. Using 1.5% sell agent fee. Property tax as mention is quite low for me so no where near your estimate. It can range 30 to 42% average ROI for 5 years.

    5. Agree payment of principal goes towards equity building but doesn't change the fact that your overall cash outlay would increase with each passing year. This is the mistake most people commit; they include the rental income but not all the outlay incurred to earn that income.

      Here's another way of calculating ROI
      Year 1 ROI = (48k rent income) / (250k down + 0.5 mo leasing fee + 12 mo maint fee + 1st year proptax + 1st year interest + 3k conveyance etc.)

      Cumulative Year 2 ROI = (48k x 2 rent income) / (250k down + 1mo leasing fee + 24 mo maint fee + 2 years proptax + 2years interest + 3k conveyance etc.)

      Cumul Year 3 ROI = (48k x 3) / (250k + conveyance + all other cost multiplied by 3 years)

      Cumul Year 4 ROI --- same logic as above

      Cumul Year 5 ROI with sale - same logic as above plus $250k cap appreciation upon sale less 1.5-2% agent fee to sell.

      Again, this throws up a different set of % where ROI decreases over time simply bec more outlay is incurred to earn rent and cap appreciation upon sale. AKA this is also cost of capital concept(where capital is tied up in a single asset over time).

      Power of leverage also decreases over time (not the simple 1/% downpayment multiplier where 20% down means 5x leverage and 25% down means 4x leverage and so on). Need to include all other cost that should greatly diminish leverage. Zero leverage if property is fully paid up (you may earn big profits upon sale if you bought 30 years ago but the truth is, there is zero leverage if property is paid up. Conversely in the good old days where sub-sales are allowed, profit % is infinite ... you can sign the OTP and immediately earn 10-20k when u assign to the next buyer within same day).

      Of course, property agents just want to keep the math simple so that they can extol the virtues of leverage to sell property (but in reality property investment is not that lucrative in Sg because of low cap rates and high ancillary recurring costs).

      Hopefully this provides another angle to property investment. Feel free to disagree. Again, this is not to diss anyone : )

  3. True. Which I am fortunate to have Reit to give me the cashflow to support it. This can be planned.

    ".. fact that your overall cash outlay would increase with each passing year. This is the mistake most people commit; they include the rental income but not all the outlay incurred to earn that income."

    Yes, the base of investment affects the ROI some. I would say the final sell price can also shift the picture largely. The Perfect way is to use XIRR which I do in my stock investment. I am not property agent btw haha so using their average simplification is good estimate before diving deeper into the calculation. However if we put enough buffers, approx is enough. At the end of the day is the leverage that magnifies with relatively lesser money than equity. Put you far ahead in return compared to equity provided you are selling at higher price else it will be another sub prime ! LOL

    I do both Equity and Property today. You can check my Equity returns and roughly the amount deployed to grow to this level. Property is another lever just make sure we do within our ability to hold.