We Own A Bidadari BTO: Should We Keep It And Buy An Investment Property, Or Sell To Buy A Central Condo

8 min read

Hi team,

I’ve always liked the way your team analyzes enquiries. Hope you’re able to provide some insights into our query below. 

My wife and I are looking to invest our cash/cash equivalent on hand and are wondering what’s the most optimal option for our current situation. 

Some information are as follows:

• Husband’s monthly income: $12.7K (excluding CPF contribution). 36 years old
• Wife’s monthly income: $14K (excluding CPF contribution). 35 years old
• Annual bonus: ~$50K
• Current house: Bidadari 4Rm BTO ($302K outstanding loan) Purchase Price $522K MOP 1Q25
• Cash equivalent: $510K
• Stocks: $690K
• CPF OA each: ~$50K
• Monthly expense including car loan/mortgage/insurance payment: ~$7K

We’re thinking of using only cash equivalent/CPF for the purchase of an additional property investment with below considerations, what do you think is the most optimal option for us, thanks in advance!

Wife prefers to keep our BTO if possible. 

Hope to own a 2nd property for investment purpose. 

Hope this property (including rental income and capital appreciation) will be in line with typical stock appreciation – acts as a diversification from just stock holding.

If holding of BTO together with private property purchase isn’t possible, own stay condo is preferably central with >1,200 sq ft and has minimum 3 rooms. 

Hope to take <$500K loan each

More info:

For analysis purpose, definitely open to sell part of the stocks too in order to facilitate buying of 2 private properties. Although we do hope to keep the stocks if possible. Lastly, if keeping the BTO is not an option, by the time the BTO MOP, we’ll probably have another $200K or so for spending on the properties. 

Thanks again!

---

Hi there, 

Thanks for writing in. 

Allow me to introduce myself, I’m Grady, and I’ve been in the real estate industry for over a decade. Throughout my career, I’ve had the privilege of assisting a diverse range of clients, from first-time buyers to those seeking to upgrade, downsize, or invest in property.

I recognise the common sentiment among homeowners to hold onto their current flats, especially if they are situated in prime locations. There’s often a reluctance to part with such properties, considering the unlikelihood of acquiring a similar unit at a comparable price, particularly if it was originally purchased as a Build-To-Order (BTO) flat. 

It really depends on what your end goal is, but it typically doesn’t make sense to keep the flat and incur the hefty Additional Buyer’s Stamp Duty (ABSD). But before delving into that aspect, let’s first assess your affordability.

Affordability

Combined affordability without selling existing flat

The maximum loan based on a monthly combined income of $26,700 and ages of 36 and 37 (seeing as you can only buy next year) at 4.8% interest is up to $2,711,216, but because you still have an outstanding mortgage on your HDB, the Loan To Value (LTV) ratio for your second mortgage loan will be reduced to 45%. The cash down payment will also increase to 25%, while the remaining 30% can be paid with CPF or cash. 

As such, this greatly lowers your affordability for the second property.

Description	Amount
Purchase price	$780,000	$790,000
BSD	$18,000	$18,300
ABSD	$156,000	$158,000
25% cash	$195,000	$197,500
30% CPF	$234,000	$237,000
45% loan	$351,000	$355,500
Total cash and CPF required	$603,000	$610,800

Based on your cash and CPF funds of $610,000 (without liquidating your stocks) your estimated affordability for the second property is between $780,000 – $790,000.

Selling the existing flat

As none of the HDB clusters in the Bidadari area have obtained their MOP, we will use an assumed potential selling price of $800,000 for calculation purposes. 

Description	Amount
Selling price	$800,000
Outstanding loan	$302,000
Sales proceeds (CPF + cash)	$498,000

Also just to highlight, since your unit’s MOP is not until next year, the loan amount will be lower by then so the sales proceeds will be higher. 

Combined affordability after selling existing flat

Description	Amount
Maximum loan based on a monthly combined income of $26.7K and ages of 36 and 37 at 4.8% interest	$2,711,216 (28-year tenure)
CPF + cash	$1,108,000
Total loan + CPF + cash	$3,819,216
BSD based on $3,819,216	$168,752
Estimated affordability	$3,650,464

Husband’s affordability

Description	Amount
Maximum loan based on a monthly income of $12.7K and age of 37 at 4.8% interest	$1,289,605 (28-year tenure)
CPF + cash	$554,000
Total loan + CPF + cash	$1,843,605
BSD based on $1,843,605	$61,780
Estimated affordability	$1,781,825

* Assuming total CPF + cash of $1.108K is split equally

Wife’s affordability

Description	Amount
Maximum loan based on a monthly income of $14K and age of 36 at 4.8% interest	$1,445,158 (29-year tenure)
CPF + cash	$554,000
Total loan + CPF + cash	$1,999,158
BSD based on $1,999,158	$69,557
Estimated affordability	$1,929,601

* Assuming total CPF + cash of $1.108K is split equally

Now that we have a better understanding of your financial standing, let’s run through the possible pathways. 

Potential pathways

Scenario 1. Keep the existing flat and purchase a second property for investment

This is not a route I usually advise buyers to take because the Additional Buyer’s Stamp Duty (ABSD) is quite substantial, and you’re not optimising the leverage on the loan. A significant advantage of purchasing a BTO flat is the potential for a decent profit upon resale after reaching the Minimum Occupation Period (MOP), which could serve as a stepping stone towards acquiring a more valuable property. By retaining it, you’re essentially holding onto these potential profits instead of capitalising on them.

Nevertheless, let’s still go through the figures if you opt for this approach.

Let’s assume a purchase price of $780,000. With this budget, you will likely be looking at a 1-bedroom apartment. 

Description	Amount
Purchase price	$780,000
BSD	$18,000
ABSD	$156,000
45% loan	$351,000
CPF + cash required	$603,000

Costs incurred

I will assume a 10-year holding period with a rental yield of 3% for the investment property. 

Description	Amount
Interest expense (Assuming 28-year tenure and 4% interest)	$124,917
BSD	$18,000
ABSD	$156,000
Maintenance fees (Assuming $200/month)	$24,000
Property tax	$28,080
Rental income	$234,000
Agency fees (Payable once every 2 years)	$10,530
Total costs	$127,527

Now let’s also look at the cost of holding onto the HDB.

Description	Amount
Interest expense (Based on an outstanding loan of $302K with 21-year tenure and 4% interest)	$99,910
Town council service & conservancy fees (Assuming $80/month)	$9,600
Property tax	$6,400
Total costs	$115,910

Total costs if you were to keep the existing flat and purchase a second property for investment: $127,527 + $115,910 = $243,437

Let’s also consider the potential capital appreciation based on the average growth rate over the last decade. 

Year	HDB Resale Price Index	Non-landed Private Property Price Index
2013-Q4	145.8	147.6
2014-Q4	137	142.5
2015-Q4	134.8	137.4
2016-Q4	134.6	133.8
2017-Q4	132.6	135.6
2018-Q4	131.4	146.8
2019-Q4	131.5	149.6
2020-Q4	138.1	153.3
2021-Q4	155.7	168.4
2022-Q4	171.9	182.1
2023-Q4	180.4	194.2
Average	2.30%	2.90%

Property	Price now	Potential price in 10 years	Gains
HDB	$800,000	$1,004,260	$204,260
Condo	$780,000	$1,038,122	$258,122

Total gains if you were to keep the existing flat and purchase a second property for investment: $462,382 (gains) –  $243,437 (costs) = $218,945 (profit)

Scenario 2. Sell your existing flat and buy a 3-bedroom condo

With a combined affordability of almost $3.7M after selling your flat, you will have sufficient funds to purchase a 3-bedroom unit >1,200 sq ft in the Central Region. 

For calculation purposes, let’s say you were to purchase a unit at $3.2M. 

Description	Amount
Purchase price	$3,200,000
BSD	$131,600
75% loan	$2,400,000
CPF + cash required	$931,600

Considering that you’ll have $1,108,000 of CPF funds and cash after selling your flat, subtracting the $931,600 required for the purchase of the 3-bedder leaves you with $176,400. This remainder can be allocated as a reserve fund, for renovations, or you can pay up more to reduce your loan.

If you choose to invest the entire amount buying a 3-bedder, your loan amount would decrease to $2,223,600. With a 28-year tenure and a 4% interest rate, the monthly mortgage repayment would be $11,012.

Given your combined monthly income of $26,700, minus $5,000 for expenses (I’ve adjusted for the previous mortgage estimated at $2K/month), the $11,012 mortgage repayment would consume 50% of your remaining monthly income. This percentage is relatively high compared to the average household mortgage repayment versus income (which is around 28% according to a 2022 survey done by UOB).

So since you’ve mentioned a desire to keep the loan under $1M ($500,000 for each of you), this would mean increasing the required CPF funds and cash to $2,331,600, which exceeds your total CPF funds and cash savings by $1,223,600.

By keeping the loan to $1M, this would be your revised affordability.

Description	Amount
Loan	$1,000,000
CPF + cash*	$1,108,000
Total loan + CPF + cash	$2,108,000
BSD based on $2,108,000	$75,000
Estimated affordability	$2,033,000

*Without liquidating your stocks

With a $2M budget, you can still get a 3-bedder unit in the Central Region but do note that your options will be limited and the majority of these units are either in boutique developments or are older 99-year leasehold projects. 

Just to be thorough, I will look at the costs involved if you were to buy a $3.2M property and also a $2M property. 

Costs incurred for a $3.2M property

Description	Amount
Interest expense (Assuming a 28-year tenure and 4% interest)	$854,132
BSD	$131,600
Maintenance fees (Assuming $400/month)	$48,000
Property tax	$109,400
Total costs	$1,143,132

Assuming a 2.9% growth rate, in 10 years, the potential selling price is $4,258,962, which amounts to $1,058,962 of potential gains. 

Total losses if you were to sell the existing flat and purchase a $3.2M 3-bedroom condo: $1,058,962 (gains) –  $1,143,132 (costs) = -$84,170 (loss)

Costs incurred for a $2M property

Description	Amount
Interest expense (Assuming a 28-year tenure and 4% interest)	$355,888
BSD	$69,600
Maintenance fees (Assuming $350/month)	$42,000
Property tax	$36,800
Total costs	$504,288

Assuming a 2.9% growth rate, in 10 years, the potential selling price is $2,661,851, which amounts to $661,851 of potential gains. 

Total gains if you were to sell the existing flat and purchase a $2M 3-bedroom condo: $661,851 (gains) – $504,288 (costs) = $157,563

In this scenario, unless you opt to lease out the additional bedrooms, your profits will depend solely on the property’s appreciation, making the selection of the development even more important. Additionally, the returns are diminished as you lack rental income to balance out the expenses.

Scenario 3. Sell existing flat and buy 2 condos

Looking at your individual affordability after selling your flat, you can each buy a private property. With a considerable cash reserve, your budgets can be easily adjusted by reallocating the cash. However, acquiring a 3-bedroom unit in the Central Region, as discussed in the preceding scenario, may present limited options. Exploring properties in the Rest of Central Region (RCR) could offer more alternatives.

This approach aligns with your objective of owning 2 properties while also facilitating the segregation of your primary residence and investment property, thereby offering greater flexibility.

As your wife is eligible for a higher loan, let’s presume the own stay property is bought under her name at $2M.

Description	Amount
Purchase price	$2,000,000
BSD	$69,600
Maximum loan	$1,445,158
CPF + cash required	$624,442

Costs incurred

Description	Amount
Interest expense (Assuming a 29-year tenure and 4% interest)	$517,935
BSD	$69,600
Maintenance fees (Assuming $350/month)	$42,000
Property tax	$36,800
Total costs	$666,335

As for the investment property, I will assume a purchase price of $1.5M with a 3% rental yield.

Description	Amount
Purchase price	$1,500,000
BSD	$44,600
Remaining CPF + cash	$483,558
Loan required	$1,061,042

Costs incurred

Description	Amount
Interest expense (Assuming 28-year tenure and 4% interest)	$377,612
BSD	$44,600
Maintenance fees (Assuming $250/month)	$30,000
Property tax	$66,000
Rental income	$450,000
Agency fees (Payable once every 2 years)	$20,250
Total costs	$88,462

As before, assuming a growth rate of 2.9%, these are the potential gains for both properties in 10 years.

Property	Price now	Potential price in 10 years	Gains
Own stay property	$2,000,000	$2,661,851	$661,851
Investment property	$1,500,000	$1,996,388	$496,388

Total gains if you were to sell the existing flat and buy 2 condos: $1,158,239 (gains) –  $754,797 (costs) = $403,442

In this scenario, the combined monthly mortgage repayment stands at $12,227 for both properties. After factoring in the rental income of $3,750 (based on a 3% rental yield), the monthly repayment reduces to $8,477. This constitutes 39% of your monthly income (after allocating $5,000 for other expenses), a notably lower percentage compared to Scenario 2.

What should you do?

Let’s do a quick summary of the 3 scenarios.

	Scenario 1. Keep the existing flat and purchase a second property for investment	Scenario 2. Sell the existing flat and buy a 3-bedroom condo	Scenario 3. Sell existing flat and buy 2 condos
Costs incurred	$243,437	For a $3.2M property:     $1,143,132 For a $2M property: $504,288	$754,797
Potential gains (after deducting costs)	$218,945	For a $3.2M property: -$84,170 For a $2M property: $157,563	$403,442
Number of properties owned	2	1	2

If owning 2 properties is a priority, then only Scenarios 1 and 3 can meet that goal. However, given the hefty amount of ABSD payable in Scenario 1, it is not a route that I would recommend. 

Considering that both of you are still young, earn a healthy income, and possess strong finances, it would be more advantageous to leverage your BTO flat and upgrade to a private property with better capital appreciation potential. If you prefer, you can always liquidate these assets and right-size to an HDB flat in the future.

Purchasing a 3-bedroom condo is feasible if owning just one property suits your needs. However, as seen in the table above, unless the selected project exhibits a higher appreciation rate, the potential gains are likely to be lower, given the absence of rental income to offset expenses. Furthermore, acquiring a $3.2M property would result in your monthly mortgage repayment consuming 50% of your monthly income, which isn’t as prudent. 

Of the three scenarios, I would recommend the last option: selling your HDB and acquiring two properties. This strategy allows you to capitalise on the equity in your flat, segregate your primary residence from your investment property, and avoid the need to pay ABSD. Although securing a unit in the Central Region for your primary residence may not be feasible, you can certainly find suitable options in the city fringe within your budget. Moreover, this approach reduces risk by generating rental income, thereby lowering the percentage of your monthly mortgage payment relative to your income to 39%.

It is essential to note that if you opt for this route, it may not be feasible to keep the loan under $500K each, as doing so would significantly reduce your budget. If taking up two loans above $500K concurrently puts too much pressure on your finances, you could consider buying one property under one name first, but keeping the other name free to purchase another one down the road should the opportunity arise. 

We hope that our analysis will help you in your decision-making. If you’d like to get in touch for a more in-depth consultation, you can do so here.