I wanted to explore whether a person with $100k can afford to buy 3 properties. The answer is no. You need to start with a HDB and slowly build up to the 2nd property which you can rent it out. The 3rd property will be a commercial one.
1. Understand Singapore’s Property Landscape
- Private Properties: Require significant cash upfront for down payment and other costs.
- HDB Flats: More affordable, but have restrictions, including eligibility criteria (e.g., income ceilings, citizenship).
- Loan-to-Value (LTV) Ratios: The Monetary Authority of Singapore (MAS) caps LTV, affecting how much you can borrow. For private properties, the LTV is typically 75%, requiring at least a 25% down payment. For HDB flats, LTV with HDB loans can be up to 80%.
2. Maximize Loans and Leverage
Assuming you want to finance three properties, you’ll need to creatively maximize leverage:
Step 1: Buy Your First Property
- Type: Consider starting with an HDB flat if eligible (most affordable option). For a resale flat, you can use CPF Ordinary Account (OA) savings for part of the down payment.
- Strategy:
- Use 5% cash for the initial payment (if financing the rest with a bank loan).
- Tap into CPF OA for the remaining amount (15%) and other fees.
- Example: For a $400,000 resale HDB:
- Down payment: 5% cash = $20,000
- Rest funded via CPF OA and bank loan.
Step 2: Buy a Second Property
- Type: Look for a small private condominium or executive condominium (EC) after Minimum Occupation Period (MOP) if you still meet eligibility.
- Financial Plan:
- Use rental income from the first property to support cash flow for the second.
- LTV is reduced to 45% for a second property, requiring a larger down payment (~25% cash, 30% CPF/OA).
Step 3: Co-Invest in a Third Property
- Option 1: Partner with Family/Friends
- Pool resources to buy a private property, such as a shoebox apartment or an undervalued unit.
- Option 2: Real Estate Investment Groups
- Join a property investment syndicate where you invest a smaller amount as a shareholder in a larger property.
3. Leverage CPF
Use your CPF OA savings to minimize cash outlay:
- For HDB or private properties, your OA savings can cover significant portions of the down payment and monthly loan repayments.
4. Rent Out Properties to Generate Income
- Upon securing your first property (especially an HDB), after the MOP, consider renting it out to generate rental income for future purchases.
5. Consider Smaller Property Investments
- Shoebox Apartments: Small private condos that require less capital upfront.
- Commercial Properties: No additional buyer’s stamp duty (ABSD), but generally higher risk.
6. Explore Creative Financing
- Joint Ownership: Buy with a spouse or family member to split costs.
- Bridge Loans: Temporarily cover financing gaps between sales and purchases of properties.
Challenges
- Additional Buyer's Stamp Duty (ABSD): 20% for second property and 30% for the third (if you're a Singapore Citizen; higher for PRs or foreigners).
- Debt Servicing Ratios:
- Total Debt Servicing Ratio (TDSR) cap: 55% of your monthly income.
- Must ensure your combined debt doesn’t exceed these limits.
Sample Breakdown with $100k
| Property | Purchase Price | Down Payment | Loan | Strategy |
|---|---|---|---|---|
| HDB | $400,000 | $20,000 cash | $320,000 | Use CPF for additional costs |
| Condo (small) | $800,000 | $200,000 (20-25%) | $600,000 | Joint purchase or rent out 1st property |
| Commercial | $500,000 | $100,000 (20%) | $400,000 | Pool funds with others or reduce ABSD |
Important Notes
- This strategy assumes high leverage and financial discipline.
- ABSD and MAS rules make it challenging to buy multiple properties simultaneously.
- Explore legal, tax, and financing implications.
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