Do You Gain or Lose If You Buy A Property And Sell It At The Same Price in 5 Years Time?

Updated: Mar 22



Property Investment Tips Singapore
Think you understand property investments well?

PROPERTY INVESTMENTS 101


Successfully investing in properties is not just about the potential capital appreciation that a property can bring.


One of the main factors that helps lower your investment risk is to ensure that a stable income stream exists that accumulates profit even when market cycles are not in your favour.


The fact is markets work in cycles and you can never guess whether your exit plans would coincide with a bullish or bearish market.


A simple question that i like to ask would-be investors is:


Do You Gain or Lose If You Buy A Property And Sell It At The Same Price in 5 Years Time?


Before we go any further, spend a few moments to think about the answer to the above.

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Have an answer in mind?


Good!


Let’s examine whether your understanding of this simple property investment theory is correct.


First, let’s establish some key factors.


We are talking about a RENTABLE property selected according to the Signals of A Good Investment Property (i.e. Right Entry Price, Growth Hotspots, Near Amenities, Transportation Modes, Tenant Catchment areas and Possessing Good Rental Returns)


It is a rented out property.


The following analysis does not apply to a property you live in.


For this example, the unit is rented out for the duration of 5 years at fair market rents. (4% rental yield. (Yes, these aren’t unicorns! Find them at https://www.squarefoot.com.sg/market-watch/rental-yield)


property investment trainers singapore
Ahhh.. Property investments. The road to riches in a land scarce and growing Singapore!

Now, assuming that a buyer puts down 20% for this property and takes an 80% bank loan (Valid at this point of writing), 


Purchase Price: $1,000,000 Cash/CPF downpayment: $200,000 Bank Loan: $800,000 Buyer Stamp Duty: $24,600 Legal Fees: $3,000

Total Outlay: $227,600 in Cash and/or CPF.

Based on 4% rental yield, he would have collected $40,000 per annum in rent. (Purchase Price x 4% = Annual Rent Collected)


Rental collected over the 5 years will be used to pay for these expenses:

Average Loan Interest: $997/month

Maintenance fees: $250/month

Property Repair costs: $1,000/annum (A more than reasonable figure)

Brokerage Fees: $8915.80 including GST (5 years of brokerage fees)


Total Rent Collected Over 5 years: $40,000 x 5 = $200,000

Less Interest Expenses: $59,820 (Use a mortgage cal. to derive interest over 60 months)

Less Maintenance Fees: $15,000 ($250/mth x 60 months)

Less Annual Property Repairs: $5,000 ($1,000/year x 5 years)

Less Brokerage Fees: $8915.80 (1/2 month fees per year + GST)


Nett Equity/Passive Income = $111,264.