Sell One Buy Two, Swap Your HDB for Two Condo?

Today I’m going to share about a recent experience that I had with my clients.

I met up with them to discuss the sales procedures of their house and of course how much it can be sold for.

She brought up one interesting doubt that I am excited to share with you guys.

Many of you would have come across the recent hot topic on “Sell One Buy Two” strategy to:

1. Upgrade to a condominium with Little or No Cash.
2. Own 2 Properties with the Same monthly installment that you are currently paying.
3. Create Spare Fund of up to $100k.

Well, I will share with you how this actually works and whether it is feasible for you!

Watch on my impromptu sharing.

It is usually suited for husband and wife who are the owners of the HDB flat.

As you are not allowed to do “de-coupling” anymore since April 2016, and with the recent increase in Additional Buyer Stamp Duty (ABSD) from 7% to 12% of the purchase price since 6 July 2018 , most Singaporeans couldn’t afford to get a second property anymore leaving you with these 3 common options :

(1) Pay for ABSD and go ahead to buy your second property.

You can keep your HDB flat but you are sacrificing 12% of the condo price, which is a lot of money.  For example, if you’re buying a $1million property, that is a WHOPPING $120k of ABSD. It’s going to take years to recover this amount!!

(2) Live in the same HDB flat and put your condo dream on hold.

You can have a simple and less stressful life. Accepting the fact that your HDB flat will depreciate as the years go by and miss out the chance to gain profit or move forward.

(3) Sell your HDB flat now to free up your name in property ownership and then get one private property each.

My client chose the 3rd option as they felt it’s the most ideal one. They will get to enjoy the 10 benefits if you did it correctly which I will come to that later.

Here’s how it works:

Mr. & Mrs. Lim sold their 5 room flat for $500K. They are both now in their 40s.

They don’t have any outstanding loan, and their Cash and CPF Proceed is $100K and $400K respectively.

(Most of You still have Outstanding Loan, so not to worry, we can do a Free Instant Financial Assessment for You!)

Arrange for a Free Discussion

Mr. Lim can now buy a nice 3 bedroom resale condo for own stay, good enough for them with their 2 children.

The condo cost him $1mil.

Mr.Lim is drawing $6,000 salary, he is able to get $750K loan, with a monthly installment of $3,200 for 25 years.

The downpayment for the condo is $250K plus stamp duty will be all in all $275K.

Using the HDB sales proceeds of $500k, they would still have $225k balance from the $275k downpayment plus stamp duty for their lovely 3 bedroom condo home.

Mrs. Lim will buy a 1 bedroom private condo for investment purpose, which will cost her $600K.

Mrs. Lim is getting $3,600 salary, she is able to get $450K loan, with a monthly installment of $1,900 for 25 years.

Her downpayment for the one bedroom will be $135K.

With the balance of $225k from the HDB sales proceeds, they will still have spare funds of $90K.

Arrange for a Free Discussion

Now you may be asking, no need to pay for the installment mehhh???

The total installment for both properties will work out to be $5,100 ($3,200+$1,900).

While they are making $9,600 monthly, they are only drawing $7,680 monthly cash after CPF contribution.

However, the monthly CPF OA contribution is approximately $2,200, which can be used to lighten their monthly installment burden to $2,900. And with the one bedroom rented out at $1,900, they will only have to fork out $1,000 cash monthly, which is about the same rental amount of a HDB Master Bedroom.

See, the difference is:

If you stay put at the fully paid HDB flat, your advantage is you got no debt, no stress. But, your CPF will get locked when you turn 55.

But if you choose to “Sell One Buy Two”, you could have to pay just the price of a Master Bedroom monthly rental but ACTUALLY OWNING 2 private condos!

Now I know why there is an increase of more than 14,000 Singaporean between the age of 35 to 54, has become the private property owners as compared to last year! And the number is still counting!