Renting whole life vs buying a property in Singapore (assume you are single local below 35) which guy above ends up richer? - Seedly
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Anonymous

Asked on 27 Sep 2020

Renting whole life vs buying a property in Singapore (assume you are single local below 35) which guy above ends up richer?

I haven’t bought my first property and wonder whether it’s better to rent whole life or buy A new launch condo in Singapore context. Rental is so Low here.

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Kenny Pang

Kenny Pang

Level 5. Genius

Updated on 27 Sep 2020

Need more context to your question. How much are you willing to fork out for rent and what's the purchase price for the condo?

Difficult to say who ends up "richer". More of, can you afford the lifestyle you are setting yourself up for? Let me paint you two hypothetical scenarios -

Scenario 1 - Paying $1000/per for rent, earns $5,000 per month. If I don't touch my CPF for my entire life, I could easily hit $1m by 65 if I transfer everything from OA to SA and let 5% interest compound. (Read more about the 1M65 strategy here - https://blog.seedly.sg/1m65-1-million-by-65-cpf - And I will allocate the 20/30/30 rule so I can pump in at least 20% of my salary into investments and let it compound.

Scenario 2 - Not sure about which launch you are talking about but let's assume a 1BR/Studio for $1M. You will need to take a bank loan and fork out at least 5% cash ($50,000). And how are you going to pay off your mortgage? CPF? If so, do you have enough in your CPF? If I intend to use cash to cover your monthly morgage and earn $5,000 per month, obviously not. Have you projected enough for retirement to meet BRS, ERS, etc.?

For obvious reasons, scenario 1 would end up richer but there's alot more factors to be determined. Unless you can pay your monthly morgage with cash, it wouldn't make sense to commit to a private property as that will squeeze your finances dry, leaving you to struggle during retirement years. (i.e., struggling to meet mininum retirement sums).

If I am single for my whole life, I would rent till I'm 35 and afterh I'm 35, purchase a 3-room resale HDB at a non-mature estate and pay off my morgage with cash :)​​​

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financialdignity

3w ago

Paying for a hdb with cash is by far one of the most stupid things to do. Liquidity is traded for illiquidity for an asset that you do not control and is subjected to lock in periods etc
Takingstock @
Takingstock @

3w ago

If you pay for HDB with cpf, you are essentially paying interest twice, once on the bank / hdb loan, second on the cpf interest. Over long period of time, long term cost of the cpf accrued interest @2.5% is significant compared to bank balances or fixed deposit that earn less than that. One has the weigh the long term consequences of the liquidity vs the opportunity cost of using cpf monies.
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Definitely buying a property. When you rent, you are essentially throwing money into the pipeline of another person's asset base instead of your own. Buying a property is a long-term commitment. However when you eventually pay it off, it is yours to keep or to rent out to others, earning you even more money that can even give you back a part of what you paid for the property.

Hope this helps!​​​

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Hi Anon, thanks for the question.

Special mention to Kenny for the detailed answer too.

More details are needed for a better, well rounded answer.

Most importantly, the questions to ask:

1) What is your end goal? In terms of finances, lifestyle, family?

2) How disciplined are you when it comes to budgeting and investing?

Renting and buying has both its pros and cons, and the answer will really depend on which compromise is more acceptable.

It may be a mixture of both, as Kenny has replied.

Wish you all the best!

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I recommend you read up this book The Wealthy Renter. There are many benefits to renting that are not discussed. Owning is not all that rainbows and unicorns as it is painted to be, the costs are not that straightforward as compared to renting(taxes,maintenance,town council). When owning, the fees involved in buying and selling have to be considered too, even after fully paying your mortgage, the opportunity cost of not renting it out has to be considered as your 'loss' since if you're staying in it, you're the renter of your own apartment.

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Short answer. The buyer always end up richer than the renter.

Simply because rental cost is an expense you'll never get back. When you buy, your capital paid is capital earned.

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Knowing the past helps you see the future.

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It all boils down to your cost of capital and opportunity cost - and this means you need to ask yourself what you will be doing with the money that you were considering using to buy/invest a property if you decide not to buy/invest a property.

If your preference is to use that money to save or invest in safer investments - then the reasons for buying/investing in property is more compelling.

If your preference is to use that money to invest in higher yielding investments such as stocks/equities, then the reasons for you to rent property is more compelling.

A more detailed explanation as to why i said the above: https://www.youtube.com/watch?v=Uwl3-jBNEd4

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LL

Lynn Lim Choo

Level 2. Rookie

Answered on 29 Sep 2020

If you could afford one, pls get one as you can use it to earn passive income for you and eventually capital gain from it. Make sure your do it right and buy the right property.

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