Blind spots in property investing can sometimes be fatal, because the nature of such investment is longer term.The bigger mistake people tends to make isn’t blind spots actually, but choosing not to see the problem.
When a logical theory is being introduced, the thought comes, “since not many people are doing, let’s hope this remains as a theory”, it takes a lot of courage to look it the issue and take an independent action.
So what is the blind spot we want to address here? One might be losing significant money while renting out his hdb.
???? What you must know in order not to lose your hard earned income?
Moving forward, there are 4 major obstacles we need to be aware for renting our HDB. Let’s delve into them.
1. Restrictions from HDB – the subletting quota
Many people thought that only when selling should they need to be concern on the quota, it comes to their surprise that renting applies too. Once the non-citizen quota for submitting is filled, landlord cannot rent to any non-Malaysian tenants. This impact is huge consider that most tenants are not Singaporeans.
???? “HDB rental yield is the best” What is the misconception with this statement? One could buy at $300,000 and rent out at $2000, the yield BEFORE outgoing cost, is at 8%! However, yield does not represent rentability and consistency. The way yield is calculated exclude the number of months it is actually rented out in a year. Would you prefer to rent at $2000 consistently or $2300 but only 8 months in a year?
2. Age of the Flat
The older the flat is the more maintenance needed. Not everything can be borne by the tenant. Usually, the higher cost items falls under wear and tear, for example, leaking aircon, moulding issues, electrical and plumbing issues, floor cracking etc. In some cases, the rental income earned plus the time spent to earn that figure, after deducting the maintenance cost, it is not worth it. Should that want to sell by then, the condition of the house is not at the tip top condition to sell at an optimum price, hence, the loss of potential profits adds in to the damage.
Age of house has already become a growing concern for resale buyers. Non mature towns like Sengkang and Punggol has more and more new flats coming into the market. The difficultly to sell a 20 year old house in a HDB estate where most house are newer can be challenging.
Would you prefer to rent out a property but the value decreases or to rent and know that while you rent, the value of the property increases?
3. The CPF Minimum Sum
Do you know the figure 15 years ago? Is it logical to deduce that it may double the next 15 years too?
The Golden Period for anyone who wish to leverage on their CPF funds for property is until age of 55. Because after 55, depending on how much you have in your Retirement Account/Special Account, you may not be able to fully utilize your CPF. Thus, a Unique Strategy Customised to Your Life and Goals is important. If there is no plan or simply living day by day, one may be caught up in needing to sell after 55. As of today, people are not able to sell as they see no profits or in negative sales. Worst, they are forced to sell with negative sales due to circumstances.
It is sad because no one wish to be not earning profits after holding a property for such a long while and been working so hard for many years and end up to know retirement is not an option. However, there are ways to avoid this situation.
4. The Progressive damage of CPF Accrued Interest
Let me ask a question, “if your loan for your hdb is fully paid, does the CPF inside the property stops accruing interest or it will continue?”
The answer is it will still continue.
The impact is that when you eventually sell, some of the cash profits are sacrificed, especially if the property value is stagnant or decrease.
For example, the value of a 4 room flat today is $450,000. The CPF + Accrued Interest today is $200k. In 5 years, the accrued interest will be about $26,000! If the property stays stagnant and able to sell at $450k by then, the cash profits is sacrificed by $26,000. If the property value decrease, more will be sacrificed.
Again, would you prefer to rent out a property but the value decreases or to rent and know that while you rent, the value of the property increases?
???? A sincere Shout Out to you if you are thinking or already renting your HDB. We can assess your situation and advise according what are the options.