We Own A $1.5m DBSS And Have $300k In Cash: For Retirement Should We Sell To Buy A Condo For Rental Or Another HDB?

Hi Stacked Homes,

My husband and I have been following your articles, and some of the advice is very insightful. Thank you for all the continuous great work to create awareness. 

My husband is at retirement age at 65, and I am crossing 50 this year. We have no children.   

Presently, we co-own a high floor 5-room DBSS in Central Singapore. If we sell, it is likely worth 1.48 M to 1.5 M. Our current loan is 399K. 

Our additional CPF under OA is 140K, and our available cash is 300 K. Both our SA/Retirement accounts are sufficient to meet the full retirement sum for CPF life. 

We plan to move abroad in two years, while my husband is retiring. This decision has significant financial implications for us.  

We are considering selling away our current DBSS and buying a property for rental income when we are away for a few years. At the same time, we hope to set aside cash of 500K for other passive incomes like T-bill, Saving savings bonds, etc. Given that property prices are rising, and we intend to keep the property to live in when we return, would it be advisable to buy an HDB instead of a private property? Another key concern is space as we are used to living in 1200 sq feet with 3 rooms where we mostly work from home.  

Your analysis and recommendations based on our current phase of life would be invaluable to us. We greatly value your expertise and would be grateful for your insights. Thank you. 

Regards,

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Hi there,

Thank you for your kind words and continued support! We greatly appreciate it.

Planning for your retirement is indeed a critical step, and there are several factors to consider when it comes to property, which we will explore in this article. Given that both of you have met the CPF Full Retirement Sum (FRS) and have decent cash savings, you and your partner are in a strong position to make an informed decision about your retirement living arrangements.

Let’s begin by assessing your affordability.

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Affordability

Sale of your current property

To be conservative, we will use the lower price point you’ve quoted of $1.48M for this calculation.

Sale price	$1,480,000
Outstanding loan	$399,000
Sales proceeds (CPF + cash)	$1,081,000

For the purchase of your next property

Given your husband’s retirement and your plans to move abroad, we assume that you will not be looking to take up a loan for your next property. At your budget, this means that new launches are more or less out of reach unless you choose to purchase a small 1-bedder which wouldn’t meet your size requirements (and is rare in today’s property market climate).

We will also set aside $200,000 from your sales proceeds, adding it to your $300,000 in cash savings to reach your goal of reserving $500,000 for alternative investments to generate passive income. Since you’re not taking a loan, the following calculations reflect your affordability for both an HDB and a private property purchase.

Sales proceeds	$881,000
CPF OA funds	$140,000
Total sales proceeds + CPF OA funds	$1,021,000
BSD based on $1,021,000	$25,440
Estimated affordability	$995,560

With an estimated affordability of $995,560, you can acquire a sizeable HDB flat, depending on the location and age. However, for a private property, you will most likely be looking at a smaller unit, such as a 1 or 2-bedroom apartment.

Now that we have your affordability, we’ll run through a couple of options and assess their outcome:

1. Buying an HDB to rent out, then returning to live in it (requires approval)
2. Buying a condo to rent out, then returning to live in it 
3. Buying a smaller condo to rent out first, then sell it and buy an HDB upon returning
4. Rent out your existing home while you’re abroad, sell it when you’re back to buy another HDB to unlock some cash

Buying an HDB

Source: HDB

Looking at the above table of the median transacted prices in Q1 2024 and with your affordability of $995K, you will be able to get most flat types in most estates depending on their age.

If this next property is going to be your permanent residence after you return to Singapore, the age of the flat may not be a huge concern since you will not be selling it. In that case, you can consider purchasing an older flat which typically requires a less hefty outlay, leaving you with more available funds on hand.

This could also potentially increase the rental yield depending on the location and upkeep of the property. In this case, finding an HDB that meets your lifestyle needs is really important since it would also serve as your primary residence on your return.

For calculation purposes, we’ll use the median price for a 4-room flat in Punggol aged between 20 – 29 years old at $550,444, as the purchase price. These seem to be some of the more affordable flats that aren’t too old (like those past 40 years of age). We will include a renovation cost of $20K for minimal touchup so that it’s rentable.

We will assume that you rent it out for five years and live in it for another five years. During your 5-year Minimum Occupation Period (MOP), you’re not allowed to rent out the entire unit, however, you can appeal to HDB to postpone the start of your MOP with the reason that you’ll be staying abroad for a period of time. However, approval is not guaranteed, as HDB accesses this on a case-by-case basis.

Do note that this would mean your MOP will only start when you return to Singapore, however, this shouldn’t matter to you as you intend to live in it after returning.

We will use the average rent in Q1 2024 of $3,300 for a 4-room flat in Punggol for the calculation. Based on this figure and the purchase price of $550,444, the rental yield is at 7.2%. 

BSD	$11,113
Town council service & conservancy fees (Assuming $83/month)	$9,960
Renovation cost	$20,000
Property tax	$29,305
Rental income	$198,000
Agency fees (Payable once every 2 years)	$10,791
Total gains	$116,831

Amount of funds left over

Total sales proceeds + CPF OA funds	$1,021,000
Purchase price	$550,444
BSD	$11,113
Renovation cost	$20,000
Funds left	$439,443

Buying a condo

With a budget of $995K, depending on whether you have any location preferences, you may/may not need to make some compromises regarding size and location. Seeing as you’ve been staying in the Central region, should you prefer to continue residing in a location you’re familiar with, there may be limited options.

A quick search on property portals shows that properties in the Central region within this price range are mostly boutique developments. Due to their relatively affordable price points compared to other units of similar size in the area, many of these units are likely owned by investors generating rental income. Although not all boutique projects experience this, there is a general trend where prices for such developments remain relatively stagnant due to a lack of consistent transactions.

We will list a few projects just for your reference:

Project	District	Tenure	TOP year	No. of units	Unit type	Average price (Last 1 year)	Average rent (Last 6 months)	Rental yield
6 Derbyshire	11	Freehold	2017	168	1b	$976,667	$3,373	4.1%
8 Bassein	11	Freehold	2015	74	1b	$837,000	$2,941	4.2%
RV Point	9	999 years	2015	36	1b	$945,000	$3,050	3.9%

Please note that we are highlighting these projects solely because they fall within your budget and are centrally located. However, they may not necessarily be suitable for your needs. We strongly recommend consulting a property agent for a more comprehensive analysis.

To reiterate our earlier point, boutique developments typically have a weaker growth rate compared to their larger counterparts. This is evident in the graph above, which shows the subpar resale performance of these three developments—something to consider since you are buying the property for investment purposes.

Let’s now examine the potential gains. We’ll assume, as before, that you rent the property out for five years and then live in it for another five years. We’ll also presume that you max out your budget of $995K and rent out the property at a 4% yield.

BSD	$24,450
Maintenance fees (Assuming $200/month)	$24,000
Renovation cost	$20,000
Property tax	$32,170
Rental income	$199,020
Agency fees (Payable once every 2 years)	$10,845
Total gains	$87,555

However, if size carries a greater priority than location, there are more comfortably sized units under $995K located in the outskirts. 

Here are a few of them:

Project	District	Tenure	TOP year	No. of units	Unit type	Average price (Last 1 year)	Average rent (Last 6 months)	Rental yield
Parkview Apartments	23	99 years	1998	532	2b	$971,182	$3,247	4%
Melville Park	18	99 years	1996	1,232	2b	$902,603	$3,431	4.6%
Orchid Park Condominium	27	99 years	1994	615	2b	$887,736	$3,254	4.4%

Should you max out your budget and rent at a 4% yield, the gains will be the same as above but you will have a more comfortable space to live in when you move into the property.

However, this probably isn’t a good idea as it’s a stretch for a condo that you won’t be happy moving into later. Your budget simply wouldn’t help you fulfil your goals if you take this pathway, so let’s explore the third option.

Buy a condo to rent out while you’re abroad, then sell it and buy an HDB for your own stay when you return

In this scenario, since you won’t be residing in the property you’re investing in, its location doesn’t necessarily need to align with your personal preferences. Instead, it should focus on maximising potential returns.

These are some younger and more sizeable developments that fall within your affordability and have good rental yields:

Project	District	Tenure	TOP year	No. of units	Unit type	Average price (Last 1 year)	Average rent (Last 6 months)	Rental yield
Parc Esta	14	99 years	2022	1,399	1b	$968,667	$3,578	4.4%
Parc Riviera	05	99 years	2019	752	1b	$787,300	$2,936	4.5%
Sol Acres	23	99 years	2018	1,327	1b	$838,593	$2,989	4.3%

The graph indicates that these projects show significantly higher growth rates compared to the previous boutique developments. Again, our selection of these projects is based on their affordability, but their suitability may vary. 

Let’s use the same numbers for this calculation. 

Condo purchase price: $995K with a 4% rental yield

HDB purchase price: $550,444

Buying the condo

BSD	$24,450
Maintenance fees (Assuming $200/month)	$12,000
Renovation cost	$20,000
Property tax	$27,800
Rental income	$199,020
Agency fees (Payable once every 2 years)	$10,845
Total gains	$103,925

Buying the HDB

BSD	$11,113
Town council service & conservancy fees (Assuming $83/month)	$4,980
Property tax	$1,705
Renovation cost	$20,000
Total costs	$37,798

Total gains if you were to take this pathway: $103,925 – $37,798 = $66,127

Considering the figures, due to the double payment of BSD and renovation, the overall gain is lower compared to the first two options. However, this calculation doesn’t include potential capital appreciation. If you choose a property with strong appreciation potential that outweighs these costs, this approach could be advantageous. Additionally, we’ve used a more current conservative rental yield assumption of 4%, whereas actual yields might range from 4.3% to 4.5%. (Also, do note that the final yield that you get back will be lower as you’ve to account for other fees such as the monthly condo maintenance). 

Rent out your existing home while you’re abroad, sell it when you’re back to buy another HDB

This is another pathway you can consider if you do not require the funds from your current property immediately. Since the flat has already met the MOP, you will be able to rent out the whole unit and this also saves the hassle of selling and buying before you go abroad. Given that property prices and interest rates are at a high, this also allows you to observe the market movements while you’re away. 

We will assume that you rent the flat for 5 years. So a search for a DBSS flat that is around $1.48 to $1.5 million in price, the corresponding rental rates go for a median of $4,700. We’ll also take into account the remaining loan tenure of 7 years at 4% interest. 

Interest expense	$53,824
Town council service & conservancy fees (Assuming $83/month)	$4,980
Property tax	$48,960
Rental income	$282,000
Agency fees (Payable once every 2 years)	$15,369
Total gains	$158,867

Assuming that you sell your flat at the same price of $1.48M:

Sale price	$1,480,000
Outstanding loan (in sixth year)	$64,050
Sales proceeds (CPF + cash)	$1,415,950

We will set aside $200,000 to add to your cash savings to make up $500,000 for alternative investments. Here’s your revised affordability:

Sales proceeds	$1,215,950
CPF OA funds	$140,000
Total sales proceeds + CPF OA funds	$1,355,950
BSD based on $1,355,950	$38,838
Estimated affordability	$1,317,112

Presuming you purchase the HDB at $550,444:

BSD	$11,113
Town council service & conservancy fees (Assuming $83/month)	$4,980
Property tax	$1,705
Renovation cost	$20,000
Total costs	$37,798

Total gains if you were to take this pathway: $158,867 – $37,798 = $121,069

Amount of funds left over:

Total sales proceeds + CPF OA funds	$1,355,950
Purchase price	$550,444
BSD	$11,113
Renovation cost	$20,000
Funds left	$774,393

Taking this pathway leaves you with a good amount of gains compared to the other options as well as a larger fund leftover that can be used to invest elsewhere.

What should you do?

Of the four pathways, the second option of purchasing a condo may be less favourable considering the options that you have. The significant downsizing from a 5-room to a 1 or 2-bedroom unit addresses a key concern you’ve raised. 

With options 1, 3 and 4, all three scenarios leave you with surplus funds that can be allocated to emergencies or other investments.

In options 1 and 4 you only incur the BSD once. While future market growth rates may not match recent years, if the HDB is intended as your permanent residence upon return, its appreciation rate may be less critical since you’re not planning to sell it. This option might even allow you to consider an older, more affordable HDB, leaving more funds at your disposal. 

However with option 1, given that you’ll have to delay the MOP (upon HDB’s approval), you will have to stay in the property for at least 5 years when you return, so picking a unit that meets your living needs is crucial. Moreover, there’s no guarantee that you’ll be approved. This can derail your plans to go abroad, so this may not be suitable.

Option 3 enables you to maximise rental income from the condo while abroad and potentially benefit from appreciation. However, paying BSD twice necessitates that the property’s appreciation or rental yield outperforms this additional cost. A well-chosen property could yield substantial returns in this scenario.

Considering your life stage and plans to relocate abroad, opting for an HDB and renting it out appears to be a safer and more prudent choice. Considering that your current flat has already met its MOP, the last option of renting out your existing flat and selling it when you return appears to be an appropriate choice. This also allows you to observe the market movements while you’re away considering the current high prices. Your centrally-located DBSS can command a good rental return which fulfils your objective of having some passive income while you’re abroad. 

As you prioritise size, it would be difficult to find a sizeable condo for your budget. Upon returning, you can then sell it and move into less central HDB since both of you work from home. This lets you unlock more cash to invest elsewhere which can supplement your passive income.