Buy Resale Private Condo and Rent-Out HDB
Rental Income from HDB 4 Room
So let’s say Rachel decided to buy a private condominium (resale) and rent out her HDB 4 room flat. Over the next 5 years, she would collect close to SGD 108,000 of gross rental income. Taking into consideration agent’s fee, repair cost, tax, and periods with no tenant, she would collect about SGD 90,000. Not bad for a property with a market value of around SGD 360,000 (the gross rental yield of around 6%).
Value of HDB 4 Room
However, based on research done by Institute of Policy Studies, it is irrefutable that HDB flats, being 99-year leasehold assets, will eventually depreciate in value as the lease reaches expiration. Further, in a January 2014 exchange in Parliament, former National Development Minister Khaw Boon Wan said, “Like all leasehold properties, HDB flats will revert to HDB, the landowner, upon expiry of their leases.” And there is no guarantee you will be offered SERS or lease extension.
With that said, given Rachel’s HDB 4 Room’s lease commencement is in the year 1985, its remaining lease will be 62 in the next 5 years. Henceforth, it is likely that the value of her HDB 4 room would depreciate than appreciate.
Value of Resale Private Condo
Ok, we do not have a crystal ball to determine if the value of the private condominium will be heading upwards or downwards in the next five years. So, let’s skip this for now and move on to the scenario that Rachel purchase an Executive Condominium instead.