View Full Version : Would there be Negative Yield Eventually or Soon?
If you have investment properties in Malaysia where housing loan rate at about 5% and high vacancy rate, you will understand the meaning of negative yield. Even if the property is tenanted, after deducting all expenses like taxes and maintenance/repairs, you are paying your tenant to stay at your place.
Let's define YIELD. Yield should be based on the current estimated value of your property and not the historical costs which could be 10-20 years ago. Or perhaps your acquisition costs (include all taxes and duties) if it is higher.
Now, the market is reading US rate hike of 4-6 times within the next 12 months. This is very very scary if you are a borrower.
Let say rate hike of 2% within the next 12 months for Singapore housing loan, which will bring the housing mortgage rate to almost 4-4.5%. Most of the gross yield now is about 3-3.5% or even less if the acquisition cost is high.
So, after deducting all expenses, property tax, maintenance (getting higher), repair, commission etc, the net yield is likely to be in negative.
If that happen, if investors counting on rental income to pay off the monthly instalments would be facing difficulties in serving the loan even with lower LTV.
I am not sharing something that would not happen, but it is highly likely if interest rate is going up.
Next, Singapore has very high export value. The impact of trade war on Singapore cannot be under-estimated. The consequences of trade war, is the possible and potential job loss and economy downturn.
My point is... think twice before you jump.
Dunno why I share so much these few days... just perhaps, contribute two cents worth of view
Thanks for sharing more.
Actually US has hiked interest rates 6 times from 0% to 1.5% already
Our side, interest rate has probably moved less than 0.5%.
So is it better to buy extremely old LH properties (say 20 years left) on the basis that current yields will be very high?
Yield is only part of the play.
Yield is only part of the play. Of course, I know the other part is capital gain or perhaps come to this forum and tell people about your South Bank
Thanks for sharing more.
Actually US has hiked interest rates 6 times from 0% to 1.5% already
Our side, interest rate has probably moved less than 0.5%.
So is it better to buy extremely old LH properties (say 20 years left) on the basis that current yields will be very high?
The real life problem is high maintenance and repair cost, not just the money, but the problems can kill you.
Also, very difficult to find tenant for extremely old LH...
Enbloc for 20 years lease left is near zero
oldfreehold
10-07-18, 10:43
Then how about 50 years left? Bought 2 old freehold in 2016 and enbloced in 2018. The maintenance issues can really kill you. So many problems, almost every month will receive call from tenants. And now the rental market is very very very bad. Consider the prime location, it takes one month to rent one room out.
oldfreehold
10-07-18, 10:45
Archron bought his southbank in 2005 or 2006? Totally different from now, I don't see any value in those new projects.
Then how about 50 years left? Bought 2 old freehold in 2016 and enbloced in 2018. The maintenance issues can really kill you. So many problems, almost every month will receive call from tenants. And now the rental market is very very very bad. Consider the prime location, it takes one month to rent one room out.
Only those been through will understand what I meant. Congrats on your enbloc
For investment properties :
Your property in Sub-location : cannot find tenant
Your property in Prime Location : cannot meet price expectation
I just lower my rental today to catch the tenant
Btw, I stop writing from here.
Too busy
Mine all relatively new properties. No problem for me sourcing and renewing tenancy.
All non central.
Archron bought his southbank in 2005 or 2006? Totally different from now, I don't see any value in those new projects.
I see another 2006 coming because they cannot stop printing.
Ever wonder where they get the money for all the infrastructure in Singapore.
2006 -- $558 psf --958 sqft --$535,000 RCR D7 99yrs
SOUTHBANK NORTH BRIDGE ROAD Apartment 07 RCR 99 yrs lease commencing from 2006 Resale 1 1,480,000 - 958 Strata 26 to 30 1,545 Mar-18
2011 -- $899 psf 1453 sqft $1,305,800 OCR D19 99yrs
TERRASSE TERRASSE LANE Condominium 19 OCR 99 yrs lease commencing from 2010 Resale 1 1,525,000 - 1,453 Strata 01 to 05 1,049 Feb-18
2018 - $1523 psf 969 sqft $1,475,300 OCR D19 99yrs
THE GARDEN RESIDENCES SERANGOON NORTH VIEW Apartment 19 OCR 99 years leasehold New Sale 1 1,475,300 - 969 Strata 01 to 05 1,523 Jun-18
oldfreehold
10-07-18, 13:29
Mine all relatively new properties. No problem for me sourcing and renewing tenancy.
All non central.
Yes, you still can find tenants, but what is the rental yield now? Normally we play property game by leveraging, if you have paid up in full of coz rental yield don't bother you. This time round I am lucky, the old apartment went through successfully. With so many maintenance problems , these old apartments can not attract any good tenants. If you rent to those bad profile ones, it will bring you more problems. I can't imagine those out skirt condos, what is the rental yield looks like now.
oldfreehold
10-07-18, 13:32
Only those been through will understand what I meant. Congrats on your enbloc
For investment properties :
Your property in Sub-location : cannot find tenant
Your property in Prime Location : cannot meet price expectation
I just lower my rental today to catch the tenant
For investment properties :
Your property in Sub-location : cannot find tenant
Your property in Prime Location : cannot meet price expectation
Totally agree, unless you bought the properties before 2007 or went through the en bloc in 2017-2018.
Agents will always ask you to buy, once you commit, you will understand. Those buying 1 or 2 bedders in District 19, good luck to you.
Average yield for 3 properties based on current prices is 4.3%.
Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.
Yes, you still can find tenants, but what is the rental yield now? Normally we play property game by leveraging, if you have paid up in full of coz rental yield don't bother you. This time round I am lucky, the old apartment went through successfully. With so many maintenance problems , these old apartments can not attract any good tenants. If you rent to those bad profile ones, it will bring you more problems. I can't imagine those out skirt condos, what is the rental yield looks like now.
Average yield for 3 properties based on current prices is 4.3%.
Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.
You need to use current prices to tell yourself it is not a good buy, then you wait and wait and wait until the prices is right.
I only know if I can buy, Bank can loan just buy.
Rental will sure cover your interest, just use it as a saving plan then wait for lucky draw.
For investment properties :
Your property in Sub-location : cannot find tenant
Your property in Prime Location : cannot meet price expectation
Totally agree, unless you bought the properties before 2007 or went through the en bloc in 2017-2018.
Agents will always ask you to buy, once you commit, you will understand. Those buying 1 or 2 bedders in District 19, good luck to you.
In short buy within town,outskirts town area city fringe.
Did you have to pay SSD or the collective sales Paid for it?
Then how about 50 years left? Bought 2 old freehold in 2016 and enbloced in 2018. The maintenance issues can really kill you. So many problems, almost every month will receive call from tenants. And now the rental market is very very very bad. Consider the prime location, it takes one month to rent one room out.
Did you have to pay SSD or the collective sales Paid for it?
SSD is paid by the seller, the collective sale will not pay.
What is the end date of enbloc for the purpose of SSD, date of completion? or approval by Strata Board?
Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.
I just share :
in the same project
Investor 1 bought it 15 years ago at $500,000,
Investor 2 bought it now at $1,500,000
Both are more or less identical and rented out at a gross rental of $3,000pm
Gross Yield : Property 1 : 36,000/500,000 = 7.2%
Property 2 : 36,000/1,500,000 = 2.4%
If I am a potential buyer, which is the right number I will want to know? It is based on today's market price.
You cannot have a project with yield that is out of syn from market.
stalingrad
10-07-18, 19:40
Average yield for 3 properties based on current prices is 4.3%.
Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.
Must be based on current prices, because those are the current value of the properties which you can extract if you were to sell it and deploy the capital elsewhere. If you still use the prices prevailing 10, 20 years ago, you are comparing oranges with apples. Say you bought a home 50 years ago, your rental yield would probably approach 100%. That is just wrong.
stalingrad
10-07-18, 19:41
I just share :
in the same project
Investor 1 bought it 15 years ago at $500,000,
Investor 2 bought it now at $1,500,000
Both are more or less identical and rented out at a gross rental of $3,000pm
Gross Yield : Property 1 : 36,000/500,000 = 7.2%
Property 2 : 36,000/1,500,000 = 2.4%
If I am a potential buyer, which is the right number I will want to know? It is based on today's market price.
You cannot have a project with yield that is out of syn from market.
Of course, it is just common sense.
But you sell gotta pay even more to buy back (15-18% more leh).
Must be based on current prices, because those are the current value of the properties which you can extract if you were to sell it and deploy the capital elsewhere. If you still use the prices prevailing 10, 20 years ago, you are comparing oranges with apples. Say you bought a home 50 years ago, your rental yield would probably approach 100%. That is just wrong.
stalingrad
10-07-18, 20:05
That is not the issue we are talking about, right? The issue is what is the correct way to calculate yield. Whether you are going to buy them back or not is another issue.
But you sell gotta pay even more to buy back (15-18% more leh).
I got walk in who tell me he should have bought Poiz Residences because it look cheap compare to The Garden Residences. I told him he will look back again and said he should have bought The Garden Residences. Buying is not the deciding factor you profit or lost, selling is.
https://www.scmp.com/business/article/2154481/actress-shu-qi-splashes-out-us162-million-luxury-mid-levels-home
Actress Shu Qi splashes out US$16.2 million for luxury Mid-Levels home
May be she did calculate about yield before she buy.
Of course, it is just common sense.
:redface-new:
I got walk in who tell me he should have bought Poiz Residences because it look cheap compare to The Garden Residences. I told him he will look back again and said he should have bought The Garden Residences. Buying is not the deciding factor you profit or lost, selling is.
Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
Be professional in your advice please. Both buying and selling, holding power etc are counted.
Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
Be professional in your advice please. Both buying and selling, holding power etc are counted.
You must have hear a lot of professional advise, sometime it is good to take your shoe out and wear the other party shoe to understand what is going on. The Glass of water is half fill or half empty depends on who look at it, same goes to the professional getting professional advise.
Amber Woods
11-07-18, 08:19
Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
Be professional in your advice please. Both buying and selling, holding power etc are counted.
You must have hear a lot of professional advise, sometime it is good to take your shoe out and wear the other party shoe to understand what is going on. The Glass of water is half fill or half empty depends on who look at it, same goes to the professional getting professional advise.
You started your property journey in 2006 at the low of the previous property cycle. You were either savvy or lucky when your entry point was low and hence between 2006 to 2016 (10 years), you was able to ride into the next cycle and benefited.
Imagine if you started your journey in 2011, do you think you can achieve what you had achieved by 2021? The entry point in 2011 would have been rather high and we can see what it will be like in 2021 after 10 years. And you are going to say that how many 10 years one can have? You do it right the first 10 years, is better than you ended up trying to fix yourself and catching up with the market for the next 20 years.
You started your property journey in 2006 at the low of the previous property cycle. You were either savvy or lucky when your entry point was low and hence between 2006 to 2016 (10 years), you was able to ride into the next cycle and benefited.
Imagine if you started your journey in 2011, do you think you can achieve what you had achieved by 2021? The entry point in 2011 would have been rather high and we can see what it will be like in 2021 after 10 years. And you are going to say that how many 10 years one can have? You do it right the first 10 years, is better than you ended up trying to fix yourself and catching up with the market for the next 20 years.
No one knows what the future will become, but history do give us a small window to what the future will be.
When one know Bank is allow to print money and MAS control the flow, money become smaller and smaller.
When one know GLS is not going to sell cheaper than the previous sale, land price can only go up not down.
When one know Singapore cannot be like America and Europe where they can just move out of a Town and build another Town, property price got only one direction.
Any person who can buy property in Singapore need to jump over 9 Control Measure if he or she still alive and still don't buy can only join the MTB.
Feel sad for those who can buy and did not buy, they just need to pay 5% more.
I need to work for 8 years without spending a single cents just to pay the stamp duty if I buy now to be what I am.
oldfreehold
11-07-18, 09:40
Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
Be professional in your advice please. Both buying and selling, holding power etc are counted.
Eventually property price will go up but the cash flow also very very important. You are not just only paying for bank interest every month. You really need holding power to hold until that moment.
Amber Woods
11-07-18, 09:43
Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
Be professional in your advice please. Both buying and selling, holding power etc are counted.
You started your property journey in 2006 at the low of the previous property cycle. You were either savvy or lucky when your entry point was low and hence between 2006 to 2016 (10 years), you was able to ride into the next cycle and benefited.
Imagine if you started your journey in 2011, do you think you can achieve what you had achieved by 2021? The entry point in 2011 would have been rather high and we can see what it will be like in 2021 after 10 years. And you are going to say that how many 10 years one can have? You do it right the first 10 years, is better than you ended up trying to fix yourself and catching up with the market for the next 20 years.
The difference between Laguna and you said it all. You depend on luck while Laguna depends on wisdom and that is the difference.
oldfreehold
11-07-18, 09:48
SSD is paid by the seller, the collective sale will not pay.
What is the end date of enbloc for the purpose of SSD, date of completion? or approval by Strata Board?
When date of completion, I need to pay for 12% SSD . This round en bloc can see the difference between CCR freehold and OCR HUDC. CCR freehold normally achieved premium at least 100% with some projects achieved at least 120%( park house, tulip gardens) when those HUDC plus LH99(park west, normanton park) all around 50-60% premium over sell individually.But as I said, the entry price for CCR freehold now is too high. Based on the 1-2 % rental yield, you need to top up a lot of cash every month. If the project didn't enbloc this round, you stuck,.
Amber Woods
11-07-18, 10:34
Buying is the deciding factor as the cost of maintaining kick in and holding power counts.
Be professional in your advice please. Both buying and selling, holding power etc are counted.
No one knows what the future will become, but history do give us a small window to what the future will be.
When one know Bank is allow to print money and MAS control the flow, money become smaller and smaller.
When one know GLS is not going to sell cheaper than the previous sale, land price can only go up not down.
When one know Singapore cannot be like America and Europe where they can just move out of a Town and build another Town, property price got only one direction.
Any person who can buy property in Singapore need to jump over 9 Control Measure if he or she still alive and still don't buy can only join the MTB.
Feel sad for those who can buy and did not buy, they just need to pay 5% more.
I need to work for 8 years without spending a single cents just to pay the stamp duty if I buy now to be what I am.
The difference between Laguna and you said it all. You depend on luck while Laguna depends on wisdom and that is the difference.
oldfreehold
11-07-18, 11:13
Average yield for 3 properties based on current prices is 4.3%.
Actually I don’t understand why must based on current prices if I have zero intention of selling. It’s not even the amount you put in and take loan for. The only rationale I can see is it’s based on current prices because you can loan it out again via equity term loan.
4.3% rental yield is very hard to find in current market, but you also must factor in half month agent fee, property tax, property quarterly maintenance fee , lose rental income when looking for new tenants. How much left after reducing all these? I believe now the market only those LH small units can achieve this kind of rental yield. With the recent cooling measure, once you have these small units, it's very hard for you to play property game any more. These things agent won't tell you.
oldfreehold
11-07-18, 11:19
The difference between Laguna and you said it all. You depend on luck while Laguna depends on wisdom and that is the difference.
Agents earn from transactions. Investors earn from data analysis and calculation. Those rush into show room buying new launch projects in D19, good luck to you.
You started your property journey in 2006 at the low of the previous property cycle. You were either savvy or lucky when your entry point was low and hence between 2006 to 2016 (10 years), you was able to ride into the next cycle and benefited.
Imagine if you started your journey in 2011, do you think you can achieve what you had achieved by 2021? The entry point in 2011 would have been rather high and we can see what it will be like in 2021 after 10 years. And you are going to say that how many 10 years one can have? You do it right the first 10 years, is better than you ended up trying to fix yourself and catching up with the market for the next 20 years.
What Arachon mean is he bought in 2006, and he might be paying about the same or even a premium at that point of time.
Illustrating pinnacle duxton owner said their hdb was high price at point of time.
After 5-10years, they looked back and everything seem to be cheap. Comparing to present time
Amber Woods
11-07-18, 13:09
delete
Amber Woods
11-07-18, 13:12
What Arachon mean is he bought in 2006, and he might be paying about the same or even a premium at that point of time.
Illustrating pinnacle duxton owner said their hdb was high price at point of time.
After 5-10years, they looked back and everything seem to be cheap. Comparing to present time
You probably do not know the previous property cycle in year 2006.
You probably do not know the previous property cycle in year 2006.
Ya probably. J
ust waiting for your statistics and transaction prices in 2006, of any condo and southbank for comparison.
Amber Woods
11-07-18, 14:25
Ya probably. J
ust waiting for your statistics and transaction prices in 2006, of any condo and southbank for comparison.
Year 2006 was the low of the previous property cycle when no one wanted to buy. He was lucky (or his wisdom) to buy it during the low of the property cycle and benefited from it and thereon ride with the market. Had he bought during the next cycle high say 2011/2013, he would not be telling people the buy at anytime as long as bank is willing to lend him. He has a simplistic view of the money market probably watching to many Youtube from the US who themselves were also vested to attract more viewers to make more money for themselves.
Agents earn from transactions. Investors earn from data analysis and calculation. Those rush into show room buying new launch projects in D19, good luck to you.
The current market is already vastly different from that earlier on.
I think quite a number who bought in D19 has intention to stay in while they let go or rent away another place. Not many can be a landlord. Given the narrative about the area (especially Sengkang / Punggol area), I really doubt anyone would buy purely for investment in that area given the supply.
D19 is a very heterogeneous place, encompassing the more matured towns of Hougang and Kovan, the areas near Sengkang and Punggol MRT, as well as those that are further away (maybe lining the expressway).
It is not that easy to conclude.
Year 2006 was the low of the previous property cycle when no one wanted to buy. He was lucky (or his wisdom) to buy it during the low of the property cycle and benefited from it and thereon ride with the market. Had he bought during the next cycle high say 2011/2013, he would not be telling people the buy at anytime as long as bank is willing to lend him. He has a simplistic view of the money market probably watching to many Youtube from the US who themselves were also vested to attract more viewers to make more money for themselves.
2016 also nobody wanted to buy. So our friend oldfreehold got himself 2 units at a bargain and all enbloc already. Dunno how to calculate his yield also, but it's definitely not just luck.
Depends on one's motive and personal situation, one buys specific types of houses.
And based on whether one executes his intended plan to completion, one can then hope to reap the desired outcome.
So far so good for me too.
Year 2006 was the low of the previous property cycle when no one wanted to buy. He was lucky (or his wisdom) to buy it during the low of the property cycle and benefited from it and thereon ride with the market. Had he bought during the next cycle high say 2011/2013, he would not be telling people the buy at anytime as long as bank is willing to lend him. He has a simplistic view of the money market probably watching to many Youtube from the US who themselves were also vested to attract more viewers to make more money for themselves.
There’s always winners and losers even in stock market.
Arachon or you giving the best advices, we do not know until 10 years later.
You maybe right now, and
Arachon maybe right 10years later. Who knows. If buyers have time horizon, able to hold, have no knowledge to invest in stocks nor forex. So why not..?
Year 2006 was the low of the previous property cycle when no one wanted to buy. He was lucky (or his wisdom) to buy it during the low of the property cycle and benefited from it and thereon ride with the market. Had he bought during the next cycle high say 2011/2013, he would not be telling people the buy at anytime as long as bank is willing to lend him. He has a simplistic view of the money market probably watching to many Youtube from the US who themselves were also vested to attract more viewers to make more money for themselves.
Does Arachon knows he buying cheap..?
I don’t even know I’m buying cheap in 2008 year at 342k for 797sqft condo. as I’m comparing hdb prices against the unit. I still find it expensive and lesser rooms.
I bgt it because I can pay the mortgages, and I’m young at 30. Got sufficient time frame
oldfreehold
11-07-18, 16:16
2016 also nobody wanted to buy. So our friend oldfreehold got himself 2 units at a bargain and all enbloc already. Dunno how to calculate his yield also, but it's definitely not just luck.
Depends on one's motive and personal situation, one buys specific types of houses.
And based on whether one executes his intended plan to completion, one can then hope to reap the desired outcome.
So far so good for me too.
Let's go back to 2016 when you can buy cheap.
One property 1500sqft , cost 3M (now maybe owner will ask for 4M plus).
Monthly instalment 9300 with 3600 interests , 600 maintainence , 300 property tax ,agent fee 200 per month ,repair 100 per month. Rental merely 3800 to 4000 per month. Negative rental yield . Would you buy ? Monthly cash top up 5k plus .
If you know it's park house, would you buy ?
oldfreehold
11-07-18, 16:26
For those buying riverfront big units for own stay , of coz @1200psf almost EC price , personally feel not bad. But buy those small units in the nearby garden residences @1700 psf ?
First time buyer status is very very precious now. Think thrice before commit. Dun buy regret , anyhow buy , regret more in the future...
oldfreehold
11-07-18, 16:41
For the investors bought small units in the garden residence@ 1700 psf , you have to compete with those resale condo nearby in the future . If you are tenants looking for a place in that area, which one would you choose ? For own stay , it's a different story.
oldfreehold
11-07-18, 17:36
Let's go back to 2016 when you can buy cheap.
One property 1500sqft , cost 3M (now maybe owner will ask for 4M plus).
Monthly instalment 9300 with 3600 interests , 600 maintainence , 300 property tax ,agent fee 200 per month ,repair 100 per month. Rental merely 3800 to 4000 per month. Negative rental yield . Would you buy ? Monthly cash top up 5k plus .
If you know it's park house, would you buy ?
Btw I don't own park house , what I mean is holding power is very important when you focus on capital gain . Give me one more chance , I won't touch condo with negative yields again. Luck won't come every time. It's really painful to do all the repairs, handle tenant problems and yet you need to top up thousands of cash every month.
Not sure what’s the squabble all about.
I’m the case who bought in 2006 (my first property), then bought in 2007 (second property which is my current house, just sold recently), 2010/11 (third property, sold in 2014), 2012/13 (2 x D19 property, with one sold, one rental), 2017 (1 x D14 property), 2018 (1 x D15/D16 property).
In between, there’s selling for profit gain.
Well, I’m still alive and kicking.
Maybe like what some thinks, no wisdom, I’m just damn lucky.
I calculate my yield based on the amount i put in. Say the property is 1.6 mio and I pay 600k cash and borrow 1 mio. My estimated yield is (rental - interest - tax - agent fees - repair -etc) divded 600k. This is regardless if the market price of my property value goes up or down as I dont see why I should use MTM (mark to market).
This is the money i commited. Of course one needs to take into consideration the monthly mortage payment of which a potion goes to the capital repayment and the remaining goes to the interest rate. Can be done using excel but i just use an estimated yearly amount.
Question is: if the market value drops, the yield would look more attractive if we use the MTM method. But the capital i sink in is still 600k.
So for simplicity I prefer to use this method.
I calculate my yield based on the amount i put in. Say the property is 1.6 mio and I pay 600k cash and borrow 1 mio. My estimated yield is (rental - interest - tax - agent fees - repair -etc) divded 600k. This is regardless if the market price of my property value goes up or down as I dont see why I should use MTM (mark to market).
This is the money i commited. Of course one needs to take into consideration the monthly mortage payment of which a potion goes to the capital repayment and the remaining goes to the interest rate. Can be done using excel but i just use an estimated yearly amount.
Question is: if the market value drops, the yield would look more attractive if we use the MTM method. But the capital i sink in is still 600k.
So for simplicity I prefer to use this method.
Hi Hi, Old friend
shall send u for an accounting course
What u have is return on your cash investment and not yield lah
stalingrad
11-07-18, 19:11
4.3% rental yield is very hard to find in current market, but you also must factor in half month agent fee, property tax, property quarterly maintenance fee , lose rental income when looking for new tenants. How much left after reducing all these? I believe now the market only those LH small units can achieve this kind of rental yield. With the recent cooling measure, once you have these small units, it's very hard for you to play property game any more. These things agent won't tell you.
1.6% is the rental yield, if you deduct all the expenses, take into consideration the period between tenants, and use the current market value (not how much you put in) as the base. That means at the present time, holding properties is just slightly more sensible than putting money in bank fixed deposits. In the long run, who knows?
1.6% is the rental yield, if you deduct all the expenses, take into consideration the period between tenants, and use the current market value (not how much you put in) as the base. That means at the present time, holding properties is just slightly more sensible than putting money in bank fixed deposits. In the long run, who knows?
OOOP, net rental income is subject to personal income tax but not interest earned on FD.
Taking away the income tax, the net rental yield perhaps lower than FD interest
Return on our cash investment is the return of our money, so it is the "yield", nothing wrong about it.
We use that to compare to say putting that cash in the banks or somewhere else and ask ourselves, which investment instrument gives us higher "return" or "yield"?
Hi Hi, Old friend
shall send u for an accounting course
What u have is return on your cash investment and not yield lah
Let me tell you this: In the long run, your money in banks will be "inflated" away (so much so that your cash can buy much less than what you can buy today)!
Don't believe?
Water price up 30%, electricity up >6%, GST going to up 2% (and actual compounding effect will be >10%) etc - all these will work to give so much higher inflation in future!
That is the cold hard truth about this new world economics! :onthego:
1.6% is the rental yield, if you deduct all the expenses, take into consideration the period between tenants, and use the current market value (not how much you put in) as the base. That means at the present time, holding properties is just slightly more sensible than putting money in bank fixed deposits. In the long run, who knows?
Return on our cash investment is the return of our money, so it is the "yield", nothing wrong about it.
We use that to compare to say putting that cash in the banks or somewhere else and ask ourselves, which investment instrument gives us higher "return" or "yield"?
That’s how I always made my calculations on the returns based on my initial capital. Assuming THIS amount of money in different instruments.
Financed Transactions
Calculating the ROI on financed transactions is more involved.
For example, you purchased the same $100,000 rental property as above, but instead of paying cash, you took out a mortgage.
The down payment needed for the mortgage was 20% of the purchase price or $20,000 ($100,000 sales price x 20%).
Closing costs were higher which is typical for a mortgage totaling $2,500 up front.
You paid the same amount of $9,000 for remodeling.
Your total out-of-pocket expenses wer $31,500 ($20,000 + $2,500 + $9,000).
Plus, there are ongoing costs associated with the mortgage.
Let's assume you took out a 30-year loan with a fixed 4% interest rate. On the borrowed $80,000 ($100,000 sales price minus the $20,000 down payment), the monthly principal and interest payment would be $381.93.
We’ll add the same $200 a month to cover water, taxes, and insurance, making your total monthly payment $581.93. (Note: A great tool for calculating the totals cost of a mortgage is a mortgage calculator like the one below.)
Rental income of $1,000 for a total of $12,000 for the year.
Your monthly cash flow was of $418.07 monthly ($1,000 rent - $581.93 mortgage payment).
One year later:
You earned $12,000 in total rental income for the year at $1,000 per month.
Your annual return was $5,016.84 ($418.07 x 12 months).
To calculate the property's ROI:
We divide the annual return by your original out-of-pocket expenses (the down payment of $20,000, closing costs of $2,500, and remodeling for $9,000) to determine the ROI.
ROI: $5,016.84 ÷ $31,500 = 0.159.
Your ROI is 15.9%.
To calculate the property's ROI:
We divide the annual return by your original out-of-pocket expenses (the down payment of $20,000, closing costs of $2,500, and remodeling for $9,000) to determine the ROI.
ROI: $5,016.84 ÷ $31,500 = 0.159.
Your ROI is 15.9%.[/QUOTE]
stalingrad
12-07-18, 04:27
Financed Transactions
Calculating the ROI on financed transactions is more involved.
For example, you purchased the same $100,000 rental property as above, but instead of paying cash, you took out a mortgage.
The down payment needed for the mortgage was 20% of the purchase price or $20,000 ($100,000 sales price x 20%).
Closing costs were higher which is typical for a mortgage totaling $2,500 up front.
You paid the same amount of $9,000 for remodeling.
Your total out-of-pocket expenses wer $31,500 ($20,000 + $2,500 + $9,000).
Plus, there are ongoing costs associated with the mortgage.
Let's assume you took out a 30-year loan with a fixed 4% interest rate. On the borrowed $80,000 ($100,000 sales price minus the $20,000 down payment), the monthly principal and interest payment would be $381.93.
We’ll add the same $200 a month to cover water, taxes, and insurance, making your total monthly payment $581.93. (Note: A great tool for calculating the totals cost of a mortgage is a mortgage calculator like the one below.)
Rental income of $1,000 for a total of $12,000 for the year.
Your monthly cash flow was of $418.07 monthly ($1,000 rent - $581.93 mortgage payment).
One year later:
You earned $12,000 in total rental income for the year at $1,000 per month.
Your annual return was $5,016.84 ($418.07 x 12 months).
To calculate the property's ROI:
We divide the annual return by your original out-of-pocket expenses (the down payment of $20,000, closing costs of $2,500, and remodeling for $9,000) to determine the ROI.
ROI: $5,016.84 ÷ $31,500 = 0.159.
Your ROI is 15.9%.
You buy a home for $100,000 and your annual gross rental yield is $12,000? This kind of home is not available for purchases in Singapore. What is available in Singapore is homes at $600,000 to yield annual rental income of $12,000. Many such homes can be had, if you are stupid enough.
Calculating gross yield using market value
Gross rental yield = Annual rental income (weekly rental income x 52) / market value x 100
I often seen gross yield calculations made using the current rent and original purchase price. These sorts of calculations can be misleading as they don’t take into account the time value of money or the change in value of the underlying asset. After all, a dollar today is not the same as a dollar yesterday. If you want to draw comparisons between historic versus current rental return, you’re better off making separate calculations.
It’s also important to remember that a high gross rental yield is not the be all and end all. A property may have a high gross rental yield but the rental return may be low when expenses are accounted for.
For these reasons, I think net yield is a better measure than gross yield when assessing returns.
Calculating net yield
Net yield is particularly useful when determining your financial capability as it will give you a truer indication of whether you can afford to invest, what your financial position will be and whether your investment will be self-sustaining.
To calculate net yield, you’ll need to know or estimate:
Annual expenses: managing agent fees, vacancy costs (lost rent and advertising), repairs and maintenance, insurance(s), strata levies (if applicable), rates and charges, etc.
Total property costs: purchase price plus transaction costs (e.g. stamp duty, legal fees, pest and building inspections, loan set up fees, etc.) and the cost of any renovations or furnishings needed before tenants can move in.
Here’s how to calculate net yield:
Net yield = (Annual rental income – Annual expenses) / (Total property costs) x 100
You’ll note that I haven’t included mortgage interest or tax in the above example. This is because these vary depending on the circumstances of the owner and aren’t directly related to the property itself. They should of course be included in any return on investment calculations.
https://www.yourinvestmentpropertymag.com.au/mistakes/the-truth-about-rental-yields-148067.aspx
The time value of money (TVM) is the concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.
You buy a home for $100,000 and your annual gross rental yield is $12,000? This kind of home is not available for purchases in Singapore. What is available in Singapore is homes at $600,000 to yield annual rental income of $12,000. Many such homes can be had, if you are stupid enough.
If you can’t tell that the above is an illustration from website, it’s obvious who’s the 傻逼
stalingrad
12-07-18, 19:42
If you can’t tell that the above is an illustration from website, it’s obvious who’s the 傻逼
Hey, take it easy. I did not say you were stupid. Read my post again. It says if a person is willing to shell out 600k to purchase a property to generate 12,000 a year in rental income, then he is probably stupid.
Hey, take it easy. I did not say you were stupid. Read my post again. It says if a person is willing to shell out 600k to purchase a property to generate 12,000 a year in rental income, then he is probably stupid.
Base rental is still minimum $1,500 per month even for outskirts 1BR units, which technically costs 600-700k onwards. Well located sites rent for minimum 2k and above.
Nonetheless, the downpayment if no ABSD is about 150k, or up to 200K onwards with the new ABSD.
Even full cash down (600-700k), which people rarely ever does (unless their mind works quite differently), the rental income still ranges from $15,000 to $20,000 deducting what you wish to deduct.
stalingrad
12-07-18, 21:14
Base rental is still minimum $1,500 per month even for outskirts 1BR units, which technically costs 600-700k onwards. Well located sites rent for minimum 2k and above.
Nonetheless, the downpayment if no ABSD is about 150k, or up to 200K onwards with the new ABSD.
Even full cash down (600-700k), which people rarely ever does (unless their mind works quite differently), the rental income still ranges from $15,000 to $20,000 deducting what you wish to deduct.
We have a condo at west coast. The gross rental yield is 2.5% (based on current market values). But if you take into considerable the period between tenants (we one time went without a tenant for 6 months), the gross yield goes down to 1.8-2%. That doesn't sound like a good return. Considering the expenses and income taxes, we are looking at less than 1%.
https://www.youtube.com/watch?v=LcT9OKbLN5k&feature=youtu.be
She is talking without knowing enbloc process.
Developers buying enbloc is paying the sellers upfront, and no way to wait for the launch. (5:53)...
give up listening...
We have a condo at west coast. The gross rental yield is 2.5% (based on current market values). But if you take into considerable the period between tenants (we one time went without a tenant for 6 months), the gross yield goes down to 1.8-2%. That doesn't sound like a good return. Considering the expenses and income taxes, we are looking at less than 1%.
I sold my unit at the Infiniti, though I drive. I still find inconvenient. Not sure if yours is just nearby
We have a condo at west coast. The gross rental yield is 2.5% (based on current market values). But if you take into considerable the period between tenants (we one time went without a tenant for 6 months), the gross yield goes down to 1.8-2%. That doesn't sound like a good return. Considering the expenses and income taxes, we are looking at less than 1%.
Yes, I am aware of your condo. It is a good buy for store of value and appreciation (due to its implied land price and ultra-long lease), but not so much for rental yield. The location at the moment is not too ideal. With West Coast MRT coming up, it might have a stronger rental demand.
This is also why calculating yields based on current market price is unwise and risky.
1. Price might be really high due to the land and lease price. This causes yield to appear depressed.
2. Price might be psychologically inflated due to "market value" which may or may not be real. I.e. the last done price might not be a real price you can achieve even as a sincere buyer.
3. The price can also go steadily down in poor market conditions and raise your yields! But does this bode well for holding this particular property?
Seriously, if you think badly of your yield and believe there are better yielding instruments, why don't you sell?
Pt 2 should read sincere seller. Typo.
Amber Woods
13-07-18, 08:14
She is talking without knowing enbloc process.
Developers buying enbloc is paying the sellers upfront, and no way to wait for the launch. (5:53)...
give up listening...
Technically, she sounded a little "off track" to most people on en bloc sale since developers will need to secure financing to pay en bloc sellers upon completion date. However, some developers launch their new developments while the sellers still staying there like the developer for Uber 388 at Upper East Coast Road. Many developers launch their en bloc fast to generate cash flow to reduce their borrowings (for the project itself) or to embark on other projects. In this aspect, she was right that developers use the money from the sale of the redevelopment site to "pay off" the en bloc sellers. Cash flow management does not necessarily means using the same money collected but it about timing and cash in cash out for the entire project life.
Technically, she sounded a little "off track" to most people on en bloc sale since developers will need to secure financing to pay en bloc sellers upon completion date. However, some developers launch their new developments while the sellers still staying there like the developer for Uber 388 at Upper East Coast Road. Many developers launch their en bloc fast to generate cash flow to reduce their borrowings (for the project itself) or to embark on other projects. In this aspect, she was right that developers use the money from the sale of the redevelopment site to "pay off" the en bloc sellers. Cash flow management does not necessarily means using the same money collected but it about timing and cash in cash out for the entire project life.
Sound like me when I cash out, Bank tell me cannot use money to buy property but I ask myself how they know the money is their money or my money.
Amber Woods
13-07-18, 10:20
Technically, she sounded a little "off track" to most people on en bloc sale since developers will need to secure financing to pay en bloc sellers upon completion date. However, some developers launch their new developments while the sellers still staying there like the developer for Uber 388 at Upper East Coast Road. Many developers launch their en bloc fast to generate cash flow to reduce their borrowings (for the project itself) or to embark on other projects. In this aspect, she was right that developers use the money from the sale of the redevelopment site to "pay off" the en bloc sellers. Cash flow management does not necessarily means using the same money collected but it about timing and cash in cash out for the entire project life.
During the bull period, some banks may even willing to lend developers who secured good land with good project concepts the financing for the land purchase and using the same land as collateral. To business entities, their concept of money and cash flow defer from the individual and they consider the land purchase settled as long as financing is in place.
Many investors also leverage on financing to buy their investment properties even at inflated prices because they are using tenant's money to pay for their assets.
Having said that, individuals using the business model of businesses in money and cash flow management for their own investments can get into a lot of troubles if the tide is against them. For business, at most they loss the land, the work-in-progress developments or worst case the business fold but the bosses remain rich. However, the individuals will become bankrupt.
Yes, I am aware of your condo. It is a good buy for store of value and appreciation (due to its implied land price and ultra-long lease), but not so much for rental yield. The location at the moment is not too ideal. With West Coast MRT coming up, it might have a stronger rental demand.
There will be a lot of supply coming up in that west coast cluster. MRT or not there won't be enough demand from the surrounding commercial cluster.
PropVestor
16-07-18, 12:45
During the bull period, some banks may even willing to lend developers who secured good land with good project concepts the financing for the land purchase and using the same land as collateral. To business entities, their concept of money and cash flow defer from the individual and they consider the land purchase settled as long as financing is in place.
Many investors also leverage on financing to buy their investment properties even at inflated prices because they are using tenant's money to pay for their assets.
Having said that, individuals using the business model of businesses in money and cash flow management for their own investments can get into a lot of troubles if the tide is against them. For business, at most they loss the land, the work-in-progress developments or worst case the business fold but the bosses remain rich. However, the individuals will become bankrupt.
If you treat all investment as a form of business, I think even as individuals, you will calculate the risks before lunging right in. All businesses face the risk of losses so if anyone is not keen to bear it or even face it should not even go into it. I think those who run their own businesses and invest in property have an advantage of 'sleeping with one eye open'. The problem has and will always be greed. One do not know when to stop and keep bumping up their risks in either going in at the wrong time and price or get led along without doing their own analysis.
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