We Are In Our 50s With $1 Million In Cash Staying In A 5-room HDB. Should We Sell Our HDB To Buy A Condo?

Dear Stacked homes,

I have been reading your articles and find them very helpful thus would like to seek your advice.
We are currently living in a 5 room HDB flat. Our total family income is 18k. We are around 50 years old. We have about one million in cash and 200 thousands in CPF. We have two teenagers to be in university in a few years time. As we are planning for our retirement, we are contemplating to invest in property for passive incomes and/or capital gains.

We are looking at the following scenarios.
1) Buy a new 2 bedder condo and rent it out. Stay in current HDB flat 
2) Buy resale 3 bedder and stay. Rent out current HDB flat.
3) Buy new condo. Sell HDB
4) Renovate HDB and stay.

We look forward to having your advice. Feel free to suggest other options.

(This is part of an ongoing series where we answer reader questions about the property market. If you have one of your own, send it to stories@stackedhomes.com.)

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Hi there,

It’s great to hear that our content has been helpful to you, and thanks for the support. Your income and the amount of funds you have puts you in a good position to restructure your property portfolio. Or at least, to be flexible such that you have the option to choose from various scenarios.

Before we start, it’s worth mentioning that the advice below is purely based from a property standpoint. This can obviously change a lot depending on your retirement goals – are you looking to maintain the same lifestyle, or would you be thinking of right-sizing and scaling down in the future. Are you looking to fund your kids throughout their education? And are you hoping to leave behind some assets/wealth for them? Naturally, the answers to these will have an affect on what you do next, and we aren’t in the right position to assist with that. As such, this will be quite general advice due to the lack of detail that we have here.

Another thing we’d like to highlight is that we don’t have details of your HDB, and so it would be excluded from our forecasts. Moreover, if the HDB is old, then we wouldn’t want to speculate on the growth in value over time as the more prudent forecasting.

Finally, as with all of our opinions expressed, this is not financial advice and but merely an exercise on the different scenarios as well as their potential outcomes based on the information you have given, as well as the assumptions we will make.

With that said, let’s take a look at the scenarios you’ve listed:

Scenario 1: Buy a new 2 bedroom condo, rent it out and stay in the current HDB flat 

Let’s start by first looking at your affordability. As we are not sure if your current HDB flat is fully paid and what is your manner of holding, we will assume both husband and wife are listed as owners and we will do two separate calculations – if your HDB is fully paid and if it is not.

If HDB is fully paid:

Maximum loan (based on both parties being 50 years old with a fixed monthly income of $9000)	$1,384,843 (15 year tenure)
Monthly repayment at 3.5% interest rate	$9,900
CPF funds	$200,000
Cash	$1,000,000
Maximum loan + CPF and cash	$2,584,843
4% BSD + 17% ABSD	$527,417
Estimated affordability	$2,057,426

If your HDB is not fully paid:

Using $1.5M as the purchase price – 45% LTV for second mortgage loan

Maximum loan (based on both parties being 50 years old with a fixed monthly income of $9000)	$675,000 (15 year tenure)
Monthly repayment at 3.5% interest rate	$4,825
CPF funds	$200,000
Cash	$1,000,000
Maximum loan + CPF and cash	$1,875,000
4% BSD + 17% ABSD	$378,350
Estimated affordability	$1,496,650

Both of this calculations will fully utilise all your CPF funds as well as cash savings. Given you have 2 kids that are going to university in a couple of years, we presume you still have to support them financially during this period and also, we never want to totally max out all our funds either in case of emergencies. It’s always good to set aside some for a rainy day. And so if we put aside $500,000 of cash savings, your budget will be around $1.1m or $1.6m depending on whether your HDB is fully paid.

Unfortunately given how the market has moved, and the stage of a low supply of new launches, there are currently no brand new 2 bedroom units under $1.1m. These are some that are under $1.6m:

Project	District	Tenure	Size (sqft)	Level	Price	PSF
Zyanya	14	Freehold	614	#04	$1,237,296	$2,015.14
Bartley Vue	19	99 years	657	#11	$1,421,000	$2,162.86
Mori	14	Freehold	710	#04	$1,431,000	$2,015.49
Pasir Ris 8	18	99 years	710	#04	$1,438,000	$2,025.35
Fyve Derbyshire	11	99 years	592	#10	$1,590,000	$2,686

Do note that these projects may not necessarily be the best fit for you, it is advisable to consult an agent for further analysis. These are just the available options at this point in time.

With your current affordability, it is possible to buy a new 2 bedroom condo. That said, it may not be the best option considering the hefty ABSD that you’ll incur. Let’s say you were to rent it out at $3,500/month, it will take a little over 6 years to breakeven on the ABSD for a $1.6M property. Of course, this will differ depending on which project you buy and how it performs once it’s completed but it will still take a considerable amount of time to just breakeven on the ABSD. It is also not the most flexible option because in the event your investment property is profitable and you decide to sell and purchase another one, you will have to pay for the ABSD again.

One good thing however, is the progressive payment plan for new launches which will allow you to repay the loan in smaller amounts throughout the construction period and gives you time to accumulate more funds.

Let’s now look at the potential gains over 10 years in this scenario.

From rental:

$3,500/month for 7 years with a month of vacancy each year (first 3 years under construction)	$269,500
Agency fees if you engage an agent	$14,332.50
Costs of repairs/replacements (assuming $1,000 a year)	$7,000
MCST (assuming $350/month)	$29,400
Property tax (assuming $3000 a year)	$21,000
Estimated gains over 10 years	$197,767.50

From potential capital appreciation:

Assuming 2% annual growth	$1,950,391
Original purchase price	$1,600,000
ABSD	$272,000
Interest costs (assuming $900,000 loan at 3.5% interest)	$25,746.17
Estimated gains over 10 years	$52,644

Total potential gains from rental and capital appreciation over 10 years: $250,412

As you can see, any gains that you might have will be eroded by the amount you have to stump up for the ABSD, and most of the gains that you’d see will come from your rental.

Scenario 2: Buy resale 3 bedroom unit for own stay and rent out current HDB flat

Using the same affordability of $1.6M, these are some of the newer resale 3-bedroom units that are available on the market at the moment:

Project	District	Tenure	TOP	Size (sqft)	Price	PSF
The Brownstone	27	99 years	2017	947	$1,299,000	$1,371.70
Lake Life	22	99 years	2017	1,087	$1,480,000	$1,361.55
Kingsford Waterbay	19	99 years	2018	1,001	$1,350,000	$1,348.65
Parc Riviera	5	99 years	2020	904	$1,380,000	$1,526.55
Parc Botannia	28	99 years	2022	874	$1,368,000	$1,565.22

As we don’t have the details of your HDB flat, it’s hard to really make a comparison with how a resale condo unit would have. Likely given your age, you’d be in possession of a 5-room HDB flat that would be bigger than these condo units on paper. So it’s going to be a tradeoff with a slightly smaller apartment, but now with the advantage of facilities.

Again without any details of the HDB flat, we are not able to calculate the exact rental yield. For your knowledge, the following is the average rent, prices and rental yield of 5-room HDB units across Singapore in the second quarter of 2022:

HDB Town	Average Price	Average Rent	Average Rental Yield
Ang Mo Kio	$785,000	$2,600	3.97%
Bedok	$643,000	$2,500	4.67%
Bishan	$851,000	$2,700	3.81%
Bukit Batok	$790,000	$2,600	3.95%
Bukit Merah	$866,000	$3,000	4.16%
Bukit Panjang	$584,500	$2,400	4.93%
Bukit Timah	–	–	–
Central	–	–	–
Choa Chu Kang	$571,000	$2,200	4.62%
Clementi	$900,000	$2,800	3.73%
Geylang	–	$2,600	–
Hougang	$608,800	$2,400	4.73%
Jurong East	$647,500	$2,500	4.63%
Jurong West	$550,000	$2,460	5.37%
Kallang/Whampoa	$836,500	$2,700	3.87%
Marine Parade	–	–	–
Paris Ris	$600,000	$2,300	4.6%
Punggol	$580,000	$2,300	4.76%
Queenstown	$875,000	$3,010	4.13%
Sembawang	$545,000	$2,250	4.95%
Sengkang	$580,000	$2,250	4.66%
Serangoon	–	$2,540	–
Tampines	$625,500	$2,500	4.8%
Toa Payoh	$784,000	$2,800	4.29%
Woodlands	$545,000	$2,400	5.28%
Yishun	$622,000	$2,330	4.5%

Similar to scenario 1, this option does not offer much flexibility and ABSD is also payable. However, rental yield for the HDB is highly likely going to be better than that of a private condominium due to its lower price tag, and no monthly maintenance costs. In the event your HDB is fully paid, the rental can be used to partially offset the monthly mortgage payments for your own stay unit.

Let’s now look at the potential gains over 10 years in this scenario.

From rental:

$2,500/month with a month of vacancy each year	$275,000
Agency fees if you engage an agent	$14,625
Costs of repairs/replacements (assuming $1,000 a year)	$7,000
Town council S&C fees (assuming $85/month)	$10,200
Property tax (assuming $3,000 a year)	$30,000
Estimated gains over 10 years	$213,175

From capital appreciation:

Assuming 2% annual growth	$1,950,391
Original purchase price	$1,600,000
ABSD	$272,000
Interest costs (assuming $900,000 loan at 3.5% interest)	$25,746.17
Estimated gains over 10 years	$52,644

As we do not have the details of your HDB flat, we are not able to do a projection on that.
Potential gains from rental over 10 years: $265,819

Scenario 3: Sell HDB and buy new condominium

We will look at two pathways you can consider:
1. Sell HDB to buy 1 new condo under both names
2. Sell HDB to buy 1 condo each

As we do not know how much the sales proceeds or CPF refund from the sale of your HDB will be, we will not take those into consideration and assume that will be aside as emergency funds.

Option 1: Sell HDB to buy 1 new condo under both names

Maximum loan (based on both parties being 50 years old with a fixed monthly income of $9,000)	$1,384,843 (15 year tenure)
Monthly repayment at 3.5% interest rate	$9,900
CPF funds	$200,000
Cash	$1,000,000
Maximum loan + CPF and cash	$2,584,843
4% BSD	$87,993.72
Estimated affordability	$2,496,849.28

These are some new launch 3 bedders under $2.4m that are available at the moment:

Project	District	Tenure	Size (sqft)	Level	Price	PSF
Ki Residences	21	999 years	1,152	#12	$2,248,000	$1,951
Sky Eden @ Bedok	16	99 years	1,087	#10	$2,291,000	$2,108
Bartley Vue	19	99 years	1,066	#08	$1,994,000	$1,871
Pasir Ris 8	18	99 years	1,302	#05	$2,214,000	$1,700
Midtown Modern	7	99 years	904	#03	$2,397,000	$2,652

Again, it’s hard to really comment much on this given this will be an own stay decision. Let’s now look at the potential gains over 10 years in this scenario.

From potential capital appreciation:

Assuming 2% annual growth	$2,925,587
Original purchase price	$2,400,000
Interest costs (assuming $1.2M loan at 3.5% interest)	$34,328.21
Estimated gains over 10 years	$491,258

Total potential gains from capital appreciation over 10 years: $491,258

Option 2: Sell HDB to buy 1 condo each

Husband (Purchase own stay unit)

Maximum loan (based on 50 years old with a fixed monthly income of $9,000)	$692,421 (15 year tenure)
Monthly repayment at 3.5% interest rate	$4,950
CPF funds	$100,000
Cash	$700,000
Maximum loan + CPF and cash	$1,492,421
4% BSD	$44,296.84
Estimated affordability	$1,448,124.16

Wife (Purchase investment unit)

Maximum loan (based on 50 years old with a fixed monthly income of $9,000)	$692,421 (15 year tenure)
Monthly repayment at 3.5% interest rate	$4,950
CPF funds	$100,000
Cash	$300,000
Maximum loan + CPF and cash	$1,092,421
4% BSD	$28,296.84
Estimated affordability	$1,064,124.16

Option 2 will definitely give you more flexibility as you can always sell your investment property if and when it becomes profitable and it will not affect your living situation. Whereas for option 1, if you want to realise the capital gains, you’ll have to sell the house you’re living in and move.

Seeing that you have 2 children, you might also be thinking about legacy planning and having 2 condos to pass down definitely sounds nice but it could be more financially demanding as well. It’s not something that you might want to take on at this stage of your lives, having the stress of taking on 2 mortgages – so this is certainly not an option for everyone. Given how you’ve reached this point with your HDB and sizeable cash reserves, it would point to your more prudent nature than a risk-taking one.

Let’s now look at the potential gains over 10 years in this scenario.

Here’s the outlook of the investment property (we’ll take that you purchase a resale unit as there are no new launch 2 bedders under $1M). We’d assume an average of a 3% rental yield here as well.

Assume 2% annual growth	$1,218,994
Original purchase price	$1,000,000
$2,500/month for 10 years with a month of vacancy each year	$275,000
Agency fees if you engage an agent	$14,625
Costs of repairs/replacements (assuming $1,000 a year)	$10,000
MCST (assuming $350/month)	$42,000
Property tax (assuming $3,000 a year)	$30,000
Estimated gains over 10 years	$397,369

And from the own stay property:

Assuming 2% annual growth	$1,218,994
Original purchase price	$1,000,000
Interest costs (assuming $600,000 loan at 3.5% interest)	$17,164.12
Estimated gains over 10 years	$201,830

Total potential gains from rental and capital appreciation over 10 years: $599,199

Another pathway you can consider is to buy a HDB under one name with the other party as an essential occupier. Once the HDB reaches its MOP, the essential occupier can then go on to purchase a private property without paying ABSD. Compared to option 2 above, this may be less taxing financially but there’s the 5 year wait which will affect the loan amount and tenure for the party buying the investment property.

Here’s how it could work out:

Husband (Purchase HDB)

Maximum loan (based on 50 years old with a fixed monthly income of $9,000)	$377,684 (15 year tenure)
Monthly repayment at 3.5% interest rate	$2,700
CPF funds	$100,000
Cash	$300,000
Maximum loan + CPF and cash	$777,684
3% BSD	$17,930.52
Estimated affordability	$759,753.48

Wife (Purchase investment unit)

Maximum loan (based on 55 years old with a fixed monthly income of $9000)	$500,577 (10 year tenure)
Monthly repayment at 3.5% interest rate	$4,950
CPF funds	$100,000
Cash	$700,000
Maximum loan + CPF and cash	$1,300,577
4% BSD	$36,623.08
Estimated affordability	$1,263,953.92

Scenario 4: Renovate HDB and stay

As we do not have the details of your HDB, it’s difficult to advise on this. Generally with most leasehold properties, due to lease decay, prices should gradually drop as the properties age. Although in certain estates prices do hold up better but we do not recommend that you hold onto the HDB for a long term.

Conclusion

Given the 4 scenarios above (as you can see from the general math and assumptions) they are all workable on paper for you. Understandably, it’s a little messy, so here’s a summary:

Scenario	Simulated Outcome
Scenario 1: Buy a new 2 bedroom condo, rent it out and stay in the current HDB flat	+$250,412
Scenario 2: Buy resale 3 bedroom unit for own stay and rent out current HDB flat	+$265,819
Scenario 3 (Opt 1): Sell HDB to buy 1 new condo under both names	+$491,258
Scenario 3(Opt 2): Sell HDB to buy 1 condo each (aka Sell 1 Buy 2)	+$599,199

For us, we’d like to avoid having to pay the ABSD as much as possible, and keeping your HDB flat just to acquire a second property is too much of a burden. This is reflected in the lower gains in both scenarios 1 and 2. And as mentioned, it also makes things very inflexible for you later on, should you have to relinquish the property earlier for any reason.

Of both options, option 2 has the best returns since you not only benefit from capital appreciation on two private properties, but you’ll also be earning rental income from one unlike in scenario 3, option 1. Of course, this method means that both individual property owners must be comfortable taking on a mortgage under their own names. In this situation, we would reserve more cash as a safety net in the event that the cashflow from the rental property dwindles.

We would also add that just because “Sell 1 Buy 2” seems to maximise returns, we must remember that the quality of life is compromised here since the own stay property would likely be smaller. It also assumes both properties appreciate and that good rental returns are consistent which may not be the case.

If you are certain about moving to the condo route, right now probably represents one of the best periods to let go of your HDB – scenario 3. Of course, some people might point out you are essentially selling high to buy high. There’s no question that that’s everyone’s dream – sell at the high, and buy at a low, if and when the property market comes down from its current highs. But the reality is, that not everyone has the option of other homes to stay to time the market.

Realistically in Singapore’s property market today, you are very unlikely to go through the same boom and bust cycles of before. With the number of cooling measures and restrictions in place, you just aren’t going to see a huge drop in property prices. Conversely, you also won’t be seeing sudden huge spikes in prices either. As the Government has said repeatedly, they are in the business of ensuring that private property prices are inline with economic fundamentals.

As such, unless you really want to keep your HDB flat for sentimental reasons, then scenarios 1 and 2 will not be as recommended. For scenario 4, that’s really dependent on if you have other avenues of investment that can provide better returns, and it’s hard for us to really comment too much on that.

Now with all that said and done, these scenarios may or may not play out as we predicted: real estate is complex, and even within each scenario, good and bad decisions can be made (e.g. buying the wrong type of condo). It would be best to consult a real estate professional to help you make greater sense of the finer details in your move forward.

To conclude, since you have a substantial amount of funds and still some ways to go before you retire, the third scenario can still be workable for you if you find the right property. Depending on how risk averse you are, even selling your current HDB to buy a new one to put it under the essential owner and occupier scheme could make sense as it represents a way for you to avoid having to pay for the ABSD, and still keep a HDB property if you want to right size in the future.

Have a question to ask? Shoot us an email at stories@stackedhomes.com – and don’t worry, we will keep your details anonymous.

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