Hi,

In short, we wish to go for BTO at the age of 55. 

We have taken 1 time subsidy when we bought our first resale 4 room flat in 1998 and sold in 2003, without paying back the levy. We bought our 2nd resale flat subsequently at the same year. We have rent out the flat in 2019 as we moved in to our new condo, and reside till now. My wife and myself are both 51 this year. We are thinking to sell our lake grande condo (2b) and rent a condo unit at Clementi near to NUS, as our daughter is studying there. Our flat will continue to rent out. At age around 54 or 55, after 30 month of disposed our condo, we could apply for BTO. And we only pay a flat levy of $40K to HDB, without the incurred interest at 55. And this new flat will be our retirement flat. I am not sure is this the best option or there is other options we didn’t think of. 

Seek your advice and please feel free to contact me if you need further information. 

Thank you for your time.

Regards,

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Hi there,

Before diving into the details, do note that if you’re looking to get a BTO, you’ll need to sell the HDB that you currently have as at any one time, you can only own 1 HDB.

Also considering that it will be your retirement home, lease decay won’t be a significant concern, so purchasing a brand-new flat isn’t necessary. In addition as second-timers, your chances of successfully applying for a BTO flat are lower.

Even if you secure a unit on your first try, renting while waiting for the flat to be completed could lead to substantial rental costs. Additionally, to have the interest on the resale levy waived, you’d need to purchase a new 3-room or smaller HDB flat.

With this in mind, let’s look at the numbers to determine if this option is viable. We’ll also explore some alternative pathways you might consider.

Potential pathways

Lease out your HDB, sell Lake Grande, rent a place near NUS, apply for BTO after a 30-month wait out, and then sell your HDB.

The first option is exactly as you have described.

Since we do not have your exact figures or details about your properties, we will use hypothetical numbers for our calculations. We’ll assume that both of your existing properties are fully paid off and that you do not plan to take out a loan for your next property.

Let’s also estimate that you can rent out your HDB flat at the average rental price for a 4-room flat across all HDB towns in Q1 2024, which is $3,368/month.

Here are the 2-bedroom transactions done in 2024 at Lake Grande:

Date	Size (sqft)	PSF	Price	Address
Jul 2024	614	$1,760	$1,080,000	2 Jurong Lake Link #04
May 2024	721	$1,803	$1,300,000	8 Jurong Lake Link #03
May 2024	667	$1,888	$1,260,000	2 Jurong Lake Link #12
Apr 2024	614	$1,956	$1,200,000	6 Jurong Lake Link #07
Mar 2024	721	$1,942	$1,400,888	8 Jurong Lake Link #06
Mar 2024	775	$1,813	$1,405,000	8 Jurong Lake Link #11
Mar 2024	818	$1,736	$1,420,000	10 Jurong Lake Link #05
Jan 2024	818	$1,711	$1,400,000	10 Jurong Lake Link #04
Jan 2024	818	$1,797	$1,470,000	8 Jurong Lake Link #09

Since we do not have information about the size of your unit, we will assume an average transacted price of $1.33M as your selling price.

Let’s now take a look at the 2-bedroom rental rates of condominiums that are in the vicinity of NUS:

Project	Average 2-bedroom rent (Jan – May 2024)
West Bay Condominium	$3,629
Blue Horizon	$3,960
Westcove Condominium	$4,278
The Vision	$4,169
Clementiwoods Condominium	$4,600
Varsity Park Condominium	$6,060

To be conservative, let’s estimate that you rent a unit at West Bay Condominium at $3,629/month.

For calculation purposes, we will use a 10-year horizon. We will put the timeline in point form for easier reading:

• Sell Lake Grande

• Sales proceeds (CPF + cash): $1.33M

• Apply for BTO after 30 month wait-out period

• Assuming you get a unit on your first try, wait 4 years for BTO to complete
• Let’s say you purchase a unit at $400,000. This is about the cost of a mature/prime 3-room BTO.

• Initial costs required

Option fee	$2,000
10% down payment when signing the Agreement of Lease	$38,000
BSD	$6,600
Total	$46,600

• Costs required upon key collection

• Do note that you will still be charged the percentage graded resale levy at 22.5% (minimally $40K) of the sale price or 90% valuation of your first subsidised flat, whichever is higher
• Since we do not know how much you sold your flat for, we will use a resale levy of $40K for the calculation

Remaining 90% payment	$360,000
Resale levy	$40,000
Total	$400,000

Total costs (excluding property value): $46,600

• Rent West Bay Condominium at $3,629/month for 6.5 years (30 months + 4 years)

• Rental cost: $283,062

• Rent out your HDB at $3,368/month for 6.5 years

Rental income	$262,704
Town council service and conservancy fees (assuming $72/month)	$5,616
Property tax	$36,940
Agency fee (payable once every 2 years)	$11,013
Total gains	$209,136

• Sell HDB – Assuming the selling price to be the average 4-room HDB flat price across all towns in Q1 2024 at $616,757

• Sales proceeds (CPF + cash): $616,757

• Stay in BTO for 3.5 years

Town council service and conservancy fees (assuming $50/month)	$2,100
Property tax	$560
Total costs	$2,660

Total costs if you were to take this pathway: $46,600 + $283,062 + $2,660 = $332,322

Total funds (CPF + cash) available (including rental gains from HDB): $1,330,000 + $616,757 + $209,136 = $2,155,893

Total funds (CPF + cash) remaining after deducting cost and value of HDB: $2,155,893 –  $332,322 – $400,000 = $1,423,571

Lease out your HDB, sell Lake Grande, rent a place near NUS, sell your HDB and buy another resale flat 

This option is similar to the first pathway, but by purchasing a resale flat, you eliminate the construction wait time and thus avoid paying a resale levy. Since your daughter will likely finish her studies in a couple of years, you could rent a place closer to NUS while renting out your HDB. This means that instead of selling Lake Grande immediately, you could rent it out for another 2.5 years before selling and waiting out the 15 months. This would help cover some of the rental costs incurred. For calculation purposes, let’s assume you rent at West Bay for 4 years.

Cost of renting West Bay for 4 years: $174,192

Renting out the HDB at $3,368/month for 4 years

Rental income	$161,664
Town council service and conservancy fees (assuming $72/month)	$3,456
Property tax	$22,732
Agency fee (payable once every 2 years)	$7,342
Total gains	$128,134

Sales proceeds from selling HDB (CPF + cash): $616,757

Renting out Lake Grande for 2.5 years

The average rent of a 2-bedder in Lake Grande from January to May this year is at $4,493. Let’s assume this to be the rental price. 

Rental income	$134,790
Maintenance fees (assuming $250/month)	$7,500
Property tax	$22,740
Agency fee (payable once every 2 years)	$4,897
Total gains	$99,653

Sales proceeds from selling Lake Grande (CPF + cash): $1.33M

If you’re buying a resale flat, there are no restrictions on the flat type that you can purchase, but in this scenario let’s say you were to purchase a 3-room flat at the average price of $408,257 and stay in it for 6 years. 

BSD	$6,847
Town council service and conservancy fees (assuming $50/month)	$3,600
Property tax	$1,020
Total costs	$11,467

Total costs if you were to take this pathway: $174,192 + $11,467 = $185,659

Total funds (CPF + cash) available (including rental gains): $1,330,000 + $616,757 + $128,134 + $99,653 = $2,174,544

Total funds (CPF + cash) remaining after deducting cost and value of HDB: $2,174,544 –  $185,659 – $408,257 = $1,580,628

Remain status quo, rent out both Lake Grande and your HDB, and rent a place near NUS

It could make sense to keep both properties even during retirement, as you can rent out one of them to generate passive income.

Suppose you rent at West Bay for 4 years while renting out both your properties, then move back into Lake Grande for another 6 years while continuing to rent out the HDB.

Renting out Lake Grande for 4 years and staying for 6

Rental income	$215,664
Maintenance fees (assuming $250/month)	$30,000
Property tax	$45,228
Agency fee (payable once every 2 years)	$9,794
Total gains	$130,642

Renting out the HDB at $3,368/month for 10 years

Rental income	$404,160
Town council service and conservancy fees (assuming $72/month)	$8,640
Property tax	$56,830
Agency fee (payable once every 2 years)	$18,355
Total gains	$320,335

Cost of renting West Bay for 4 years: $174,192

Total gains if you were to take this pathway: $130,642 + $320,335 – $174,192 = $276,785

Since you are not selling either property, the cash available to you will be lower, but you will benefit from a steady stream of passive income each month.

Keep Lake Grande, sell your HDB, rent a place near NUS

If legacy planning is a consideration, private property is generally more advantageous since there are fewer eligibility conditions for inheritance. However, even if you leave behind an HDB flat that your daughter cannot inherit, she will still receive a substantial amount from selling the property. So if your goal is to leave a property, retaining the private property is preferable.

In this instance, let’s assume that you rent out Lake Grande for 4 years while renting a place near NUS, then move back into Lake Grande after that.

Sales proceeds from selling HDB (CPF + cash): $616,757

Cost of renting West Bay for 4 years: $174,192

Renting out Lake Grande for 4 years

Rental income	$215,664
Maintenance fees (assuming $250/month)	$12,000
Property tax	$36,384
Agency fee (payable once every 2 years)	$9,794
Total gains	$157,486

Staying in Lake Grande for 6 years

Maintenance fees (assuming $250/month)	$18,000
Property tax	$8,844
Total costs	$26,844

Total costs if you were to take this pathway: $174,192 + $26,844 = $201,036

Total funds (CPF + cash) available (including rental gains): $616,757 + $157,486 = $774,243

Total funds (CPF + cash) remaining after deducting cost: $774,243 – $201,036 = $573,207

Sell Lake Grande, rent out your HDB, rent a place near NUS

This will be the same situation as the above just that you’ll be keeping the HDB instead.

Sales proceeds from selling Lake Grande (CPF + cash): $1.33M

Cost of renting West Bay for 4 years: $174,192

Renting out the HDB for 4 years

Rental income	$161,664
Town council service and conservancy fees (assuming $72/month)	$3,456
Property tax	$22,732
Agency fee (payable once every 2 years)	$7,342
Total gains	$128,134

Staying in the HDB for 6 years

Town council service and conservancy fees (assuming $72/month)	$5,184
Property tax	$2,520
Total costs	$7,704

Total costs if you were to take this pathway: $174,192 + $7,704 = $181,896

Total funds (CPF + cash) available (including rental gains): $1,330,000 + $128,134 = $1,458,134

Total funds (CPF + cash) remaining after deducting cost: $1,458,134 – $181,896 = $1,276,238

What should you do?

Let’s do a quick summary of the various pathways:

Potential pathways	Properties held	Costs incurred	Funds available (CPF + cash)
Lease out your HDB, sell Lake Grande, rent a place near NUS, apply for BTO after a 30-month wait out, and then sell your HDB	1 HDB	$332,322	$1,423,571
Lease out your HDB, sell Lake Grande, rent a place near NUS, sell your HDB and buy a resale flat	1 HDB	$185,659	$1,580,628
Remain status quo, rent out both Lake Grande and your HDB, and rent a place near NUS	1 HDB, 1 condo	$174,192	$276,785
Keep Lake Grande, sell your HDB, rent a place near NUS	1 condo	$201,036	$573,207
Sell Lake Grande, rent out your HDB, and then rent a place near NUS	1 HDB	$181,896	$1,276,238

Which pathway to take depends on two key factors:

1. Cash Flow Preferences: Would you prefer to cash out and have funds readily available for your retirement, or would you rather generate a monthly passive income? If you opt for the latter, you can still choose to cash out from the property/properties at a later time.
2. Legacy Planning: Are you planning to leave the property to your daughter? If so, private properties have fewer eligibility requirements for inheritance.

Options 1, 2, 4, and 5 allow you to cash out from one or both of your properties. If you prefer having liquid funds over receiving monthly passive income, these options are worth considering.

Option 1 (which you initially considered) is feasible, but it comes with uncertainties. As a second-timer, your chances of securing a unit are lower. Additionally, to waive the interest on the resale levy, you’d need to opt for a 3-room or smaller unit. Otherwise, there’s a 5% interest accrued per annum on the percentage graded resale levy which will be a large sum over 21 years. Also, waiving that is on a case-by-case basis, and they’re applied to those with financial hardships so this may not be applicable in your case. Moreover, unless you move back into your existing HDB flat, you’ll incur significant rental expenses while waiting for the BTO to be completed. 

Given that this will be your retirement home and you do not plan to sell it, there’s no need for it to be brand new. Therefore, you could consider Option 2, where you purchase a resale flat, over Option 1.

Options 4 and 5 involve less hassle as you are only offloading one property. However, the property you retain must meet your living needs.

With Option 3, since you won’t be cashing out from either property, you’ll have fewer funds available immediately but will benefit from passive income to support your retirement. This may be preferred if you have no real need to unlock the cash right away, and having a monthly passive income could serve you nicely. If you ever require more cash later on, you could always sell one of them too.

Ultimately, the best pathway depends on your retirement goals and plans and this is quite personal, but we hope the numbers and pathways illustrated above will help you better make a decision.

If you ever wish to have a more personalised consultation including which developments to consider and its unit/price analysis, feel free to reach out to us here.