AMA Stacked Homes
Asked 3w ago
I am 28 years old, with no immediate plans to get married and purchase my own home with a partner. However, I do have some savings and was thinking of investing a huge portion (>80%) of my savings into a small condo. As I could continue to stay with my parents, I am thinking to rent the condo out, so it may be easier for me to pay the home loan without paying too much out of my own pocket. I currently earn about $65k/year.
A condo is illiquid and risky. Illiquid because you need to sell the unit to unlock its value. Risky because property prices are at the mercy of government policies. There's also stuff to consider, such as finding and managing tenants and condo maintenance fees.
Do consider investing parts of your money into index funds and parts of your money into bonds (or equivalent) for a balanced investment portfolio. Balanced because I'm not sure if you will need the money in the next 7 or 8 years.
Definitely recommend you not to consider buying the condo.
Your current priority should be setting aside money and saving for settling down. You just don't know when.
Having bought a condo and also ilp / endowments before... I would say condo is not a good way to invest, its just a good savings tool. If you want to collect rental income, go for reits that you are comfortable with. And go for that.
I would instead recommend setting aside some money to do investing via an RSP or equivalent - just get used to saving / squirrelling money away. Who knows by the time you may want to settle down, it may have grown sufficiently to help pay the hdb down-payment?
usually I don't give investing advice, but I buy a lot of reits. I have adjusted my ocbc blue chip investment plan to just buy xxx amt of capitaland integrated commercial trust for next year - its a way to save + invest + collect rental income over time
Another objective recommendation would be like a reits fund or the syfe reits+.
Compared to your original plan to buy the condo, a trusted reliable blue chip reit gives you rental income, without the mess of handling
1) tenant and renewals
2) interest on the loan, property taxes, maintenance fees
3) stamp duty
If you not careful about the loan, you can be easily overwhelmed by the interest and loan payments. And you might not even make capital gain by the time you want to settle down.
Out of the your regular savings, I guess your incremental tax rate is around 3.5% after considering cpf and reliefs. Would also recommend squirrelling 3.5% x 65k = 2k into cpf (amount not that significant to add value in srs). I didn't recommend go max coz you not yet married, so better not to put too much into cpf.
Hi SY, it’s not a good idea or rather it’s a terrible idea. This is because it will affect your ability to buy another home in the future. You will not be able to buy a HDB, BTO or resale in the future since you’ll need to sell off the condo and wait 30 months before being eligible to buy a HDB flat. On top of that, you’ll might be unable to buy another condo in the future unless the you can afford to pay both the mortgages in the future since the debt that you can be is limited at 60% of you and your future wife’s gross monthly income. Even if you are able to keep it under 60%, you will only be able to take a 2nd home loan(assuming you have not paid finish your existing loan) of 45% from the bank of your next condo. Which means that in order for you to buy a condo that is worth 1 mil, you’ll need 550k cash and cpf (20% cash assuming you have 35% in cpf). And on top of that, since it will be your second home, you will need to pay an additional buyer stamp duty of 12% of your next home along with the stamp duty. As in the example above, if your next condo purchase is 1 mil, you’ll need to pay stamp duty on top of the 550k cash and cpf is 120k + 24,600 in cash upfront though you may be able to claim from cpf assuming you have it enough.
Therefore, the cash upfront for your will be enormous and will not be worth it at this point in time