Landed property as an investment?

Recently I’ve been asked my a close friend if I would purchase a landed property as an investment… So I spotted a real nice Terraced Flat (3B/2T/Full renovated/1.5k SQF/99 Years/Terraced/Prime location) online going for $850k and decided to use that as a comparison to a REIT etf.

These are factors I took into consideration:

1. Total cost of the property
   • Downpayment (20% of Property Price = 5% cash +15% CPF) = $170k
   • Buyer stamp duty tax = $20.1k
   • Total UPFRONT payment = $190.1K up front
   • Total COST OF property = $870.1k
2. Loan amount $(850k – $170k = $680k)
   • Sourcing out loans (Moneyline)
   • Total loan cost (Cheapest) for 3 Years will add up to $83.1k (30 Years Tenure)
3. Rental Income
   • Income ($3,300/Month – 118,800 3yrs)
     • Vicinity rental rate ( $2.8k – $4k)
     • PSQF rental ability (Similar SQF area is going for $2.8K)
     • Furnished ability ( Should be able to get high than $3k)
   • Cost = $102,024
     • Property Agent fee (1 Month rental) = 3.3k
     • NOOP Tax = $4,008
     • Depreciation of furnitures (Reduced tax) = $1.2k
     • Loan = $83,100
   • Net income = $16,776 – 3 Yrs / $5,592 – 1 Yr [0.64% of 870.1k]
4. Opportunity cost
   • Benchmark NikkoAM-Straits Trading Asia ex Japan REIT ETF (5%)
   • $43,505 [870.1k] – $5,592 =$37,913

I have intentionally left a few numbers (Capital Gain on both property and ETF/Interest on CPF/OC of cash payment/ETC) out as a comparison between a REIT and an individual property purchase would be real messy.

All in all, I’d think purchasing a landed property (as an investment) requires a special sets of knowledge to make it a feasible investment… which I obviously don’t possess…

This post is a very subjective post

“+1 knowledge point”