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Sell One Buy Two

Is Sell one Buy two a Popular Wealth Building method or is it a Scam?

Sell HDB Buy 2 Properties

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Sell HDB Buy 2 Properties” has been one of the catchlines of various property agents in challenging times.

The proposal - sell your HDB flat and use the proceeds for down payments on two condos.

It sounds like a perfect plan and has had some homeowners and investors hooked, but market watchers are cautioning against it, calling for prudence because Selling HDB to Buy 2 Properties carries some serious risks.

Check out the MAS statements within the Business Times

Table of Contents

Why Sell 1 Buy 2?

ABSD
Additional Buyer Stamp Duty rates

Since 1st April 2016, HDB flat owners are no longer allowed to transfer ownership of the flat to a family member except under exceptional circumstances.

This means that HDB dwellers are disallowed from giving up their ownership to obtain a private property without incurring the recently inflated Additional Buyer Stamp Duty (ABSD).

Selling your house to buying two private properties” strategy are usually targeted at HDB owners, as they need to pay 12% additional buyer stamp duty (ABSD) for their 2nd property.

Having this precedence set, one would understand why the ‘Sell 1 Buy 2’ concept has picked up rapidly over the last few years.

Lets weigh the Pros and Cons of Sell 1 Buy 2 concept today.

sell one buy two

An ingenious strategy or a doomsday plan? Is it a good idea to sell your HDB flat and become owners of two properties with potential for long term profit? Lets weigh the pros and cons so that you can make a well-informed decision.

The Pros of Selling HDB and Buying 2 Properties

sell hdb buy condo
sell 1 buy 2 property

Price movement comparison between HDB resale and Private Property from 2011 to 2020

The value of HDB flats depreciates over time and in order to capitalize on its appreciation thus far, couples have opted to sell off their HDB flat and renounce their ownership.

This will then enable one of them to purchase a private property such as a condominium as their residential home and the other can invest in another private property, that will not incur additional ABSD and can be rented out, resulting in earnings. Normally buying a Resale Condo for home stay and purchasing a New Launch for investment.

On the flip side, this also means the couple will have two mortgages to pay off.

However, with proper financial knowledge and planning involving personal finances, loans, CPF Ordinary Account contribution, their monthly installments will eventually be manageable.

Sounds enticing? When calculated prudently, employing the ‘Sell One Buy Two’ approach could pay off.

pros and cons of sell 1 buy 2

However, this approach is accompanied by certain risks that home owners should be aware of.

The Cons of Selling HDB and Buying 2 Properties

In an article by the Business Times late last year, potential buyers were warned of the sluggish economy, being laid off and depreciating property values.

The Monetary Authority of Singapore (MAS) themselves stood by these potential risks, urging Singaporeans to think twice.

Buyers also need to consider that their eligibility for a good loan to help pay off two mortgages is not guaranteed and so are the rental returns.

If they ‘Sell One Buy Two’, it will become necessary for both parties to work in order to qualify for their individual property loans.

In the situation where one party is laid off, finances would become tight, stripping reasons for having two mortgages.

Eventually, the second property may have to be let go at a loss. These are factors that need to be taken into serious consideration in your planning.

Is Sell 1 Buy 2 suitable for you?

In this article, I am not making an attempt to influence you in any way. Instead, I would like to guide you on:

Factors to consider

Financial Calculation

sell 1 buy 2 calculation

In-depth financial calculation is always one of the key factors

Scenario 1 - Decide to sell HDB and buy 2 properties

CPF usable amount for property purchase

– Work out the total usable CPF amount that you can use to purchase property. Meaning Current Ordinary Account(OA) plus Refunded CPF amount after selling your house.

CASH proceeds you will get back after selling your house

– Understand the amount of cash you will get back after selling your house. Is it sufficient for you to purchase your next property?

CPF monthly deductible for mortgage loan

– Understand how much is the monthly mortgage loan amount.

How much do you need to top up cash after cpf deduction.

Mortgage loan for property purchase

– The monthly mortgage loan amount after purchasing the property.

Potential Rental yield or passive income generated from the investment property

– Have an idea the rental trend or rental income you are expecting from your investment property.

So you can estimate if you need to top up cash monthly for mortgage loan. Or, the fund from rental plus your monthly cpf is more than sufficient. 

Potential capital gain from investment property

– Any future potential development that will increase your capital gain in the future.

Study the surrounding and understand why the property  is a good buy.

Scenario 2 - Keep HDB and buy one more property

property Loan to value
Table: Loan amount eligibility
ABSD
Additional Buyer Stamp Duty rates

CPF usable amount for property purchase

– What is the usable CPF for 2nd property. Check more information on CPF Website.

CPF monthly deductible for mortgage loan

– Understand how much is the monthly mortgage loan amount.

Do you have sufficient cpf to deduct for your 2nd property?

Eligible loan for next property purchase

– How much loan are you eligible to loan up to?

You are not eligible for Full loan for 2nd property onward, refer to table on top.

Mortgage loan for property purchase

– The monthly mortgage loan amount after purchasing the property.

Potential Rental yield or passive income generated from the investment property

– Have an idea the rental trend or rental income you are expecting from your investment property.

So you can estimate if you need to top up cash monthly for mortgage loan. Or, the fund from rental plus your monthly cpf is more than sufficient. 

Potential capital gain from investment property

– Any future potential development that will increase your capital gain in the future.

Study the surrounding and understand why the property  is a good buy.

Additional Buyer Stamp Duty (ABSD)

– Is it worth paying for the extra stamp duty. (Refer to table above) 

Summary

To summarized, financial calculation is an important key factor in Selling 1 to buying 2 properties.

Have your financial work out on the available usable CPF and cash.

If you are not in a good financial situation at the moment, then the Sell one Buy two is a very risky option.

If you are well-positioned to explore the options available. PLEASE study and analyze in-depth on the investment property that you are looking to buy.

property investment Singapore blog
Related article: Do You Gain or Lose if you Buy A Property and Sell It At The Same Price in 5 Years (click to read)

Identify the benefits and how some owners successfully benefited from it 

sell hdb buy condo
sell 1 buy 2 property

Price movement comparison between HDB resale and Private Property from 2011 to 2020

Looking at the price chart comparison between HDB and Private Property for the past 10 years – It clearly shows that HDB has been a depreciating asset since 2013 due to certain factors and regulations.

I am not saying that all private property is worth the buy.

But with proper study and analysis, there are some development out there that have good returns in time to come.

Successful owners that benefited from it. 

Selling or Keeping your HDB before purchasing second property

sell hdb buy condo
ABSD
Additional Buyer Stamp Duty rates
  • Looking at the HDB resale price movement. It shows that it is a depreciating asset. To keep or sell your HDB – depend on your personal needs and goal.

 

  • Don’t Sell your flat – If you too comfortable in your place, the depreciation factor does not concern you, and you have the extra fund for the down payment on your next property and additional buyer stamp duty.

 

  • Sell your flat and maximize the options available – If you think property asset is an important factor. And is looking forward to unlocking the cash proceeds and cpf fund from your current house.

Sell hdb buy 2 property | Case Study

sell one buy two

Mr Ang has been staying in a 4 room flat in Punggol with his family.

One month before the property reaches MOP in 2017, Mr Ang contacted me to find out more about his options and in essence, I have gathered that their goals were to:

1) Invest in a property with potential appreciation as their main priority

2) Utilise a low risk investment approach

3) Wait for the right opportunity

With the understanding that they do not require an immediate place to stay, I proceeded to work out both short-term and long-term plans for them.

With my recommendation, I sold the Punggol flat and went ahead to purchase a brand new 2-bedroom condo at Parc Riviera with Mrs Ang as the sole owner; at this point in time, we have not decided whether this property will be for own stay after its TOP or for rental purposes.

hdb upgrade to condo

DOWN-PAYMENT without savings

They have since purchase a 2-Bedroom Private Condominium without touching their savings.

upgrade to condo

Mortgage Instalments without CASH

They can even repay their monthly mortgage loan installments WITHOUT paying any extra cash from their own pocket.

Then in 2019, after going through detailed financial assessments and a clear asset progression road-map planned for Mr Ang, he also bought a 1-bedroom resale condo with an existing tenancy to generate immediate rental income.

Thereafter, with the good rental yields, the Angs decided to focus both properties for investments, reaching their final goal of low-risk investment and asset progression.

sell hdb buy condo

What Mr Ang says about me:

As a investor interested in taking advantage of the booming property market in Singapore, I needed a realtor with in-depth knowledge of the local market.

Using his understanding of the various sectors of the market, Rick generated a investment progression report and we decided to buy a condominium in a choice area with huge potential for multiple returns in the future.

Thanks Rick, I will definitely be doing business with you for a long time!

Conclusion

Now that you see both sides of the coin, it will do you well to mull over the idea of ‘Sell One Buy Two’.

Invest some time to calculate and plan out potential options before deciding on a suitable solution and do deliberate this further with your trusted agent on your preferences and strategies.

As you will come to realize, there is no ‘best’ solution, there is only one that is the most suitable for your finances and family’s needs.

In doing so, you will be able to determine if your move is a doomsday plan or an ingenious strategy.

After learning how you can multiply your assets, upgrade your family’s living standards, now learn how to execute this asset progression plan in a structured way in order to minimize your risks and gain maximum upside.

I will assess:

  • Your Current life situation / life stage 
  • Do an IN-DEPTH Financial quick calculation
  • I will only recommend proven methods and steps

You ONLY need 20 minutes to clear your doubts!

 

*you can expect comfort, quality and valued services throughout the process

Property Planning Session

With Youhome.sg property planning session, you will understand:

 

  • Understand your needs and goals – staying on track with your practical needs and priorities

 

  • Risk assessment – evaluate foreseeable risks in your property journey

 

  • Investment assessment – realistic estimation of buying property without cash

 

  • Property Asset progression plan – assess your potential short term to long term planning
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Self Introduction

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Rick Huang, Associate Deputy Group Director of OrangeTee & Tie, has been in the Real Estate industry for a decade.

He is driven, committed and is enthusiastic about real estate investments.

Today, he leads Team Youhome.sg, and together, aims to provide his clients with the best experience in their property journey.

The team focuses on understanding client’s personal finances and needs, and is determined about delivering the best solutions and results for them.

Amidst the hustle and bustle, Rick enjoy quiet time and indulge himself in the intricate art of tea-brewing and tea pot appreciation.

He would also take this chance to energise himself and reflect on his personal development and areas of improvements.

Youhome.sg Core Values

Apart from the tangible services we offer to all our clients, I would also like to share the fundamental values that my team and I bring to our work.

Quality

We strive to always provide our clients with the best quality service. With our market expertise, and customer-oriented service, we aim to meet all our clients’ needs.

Value

We aim to always maximise the value of your home. From coming up with creative marketing solutions and managing complex negotiations, we do our best to get you the best value possible.

Comfort

Our client’s satisfaction is our top priority. We commit to being with you every step of the way, to ensure your comfort in this complex journey.

Testimonials

I have successfully helped hundreds of homeowners just like you since 2010

Ms Claire
Ms Claire
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I am writing in to compliment Rick Huang for his invaluable service, for the sale of my Esparina Residences. The process was complicated but he was able to empathize with my situation and also provide brilliant advices that ensue the smooth transaction. In all, I am appreciative with his professionalism and human touch in this journey. Thank you!
Mr Ang
Mr Ang
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As a investor interested in taking advantage of the booming property market in Singapore, I needed a realtor with in-depth knowledge of the local market. Using his understanding of the various sectors of the market, Rick generated a investment progression report and we decided to buy a condominium in a choice area with huge potential for multiple returns in the future. Thanks Rick, I will definitely be doing business with you for a long time!
Ms Ho
Ms Ho
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I was sceptical about engaging a friend to sell our house. However, Rick has put himself out on so many levels just to ensure everything went smoothly, promptly and correctly at every stage. I trust Rick and would surely recommend him to anybody seeking to buy or sell a home! I do not usually post reviews but this is worth investing my time. Thanks once again..
Ms Malar
Ms Malar
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His service is beyond my expectations. Always going the extra miles to serve his clients.
Ms Jo
Ms Jo
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My husband and I started our home-search by ourselves but was met with issues soon enough as we were unsure of the important things and areas to look out for and we were also not experienced in the negotiation process with the seller’s representing agent. Soon after hearing our problems, I was introduced to Rick by a friend. The entire buying process quickly became swift and smooth; Rick understands our needs, puts our personal interest first, seals us a good deal and educated us along the way about the important things and areas to pay attention to. Thumbs up to Rick and we will recommend him to anyone for their home-search
Mr Eddie
Mr Eddie
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"In short, Rick did an amazing job. He sold our house at a higher than initially discussed price and got us a good deal for our purchase. Both my wife and I are impressed with his professional yet friendly approach. We will definitely work with him again and recommend him to anyone."
Mr Liew
Mr Liew
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Rick is a very down to earth person. No hard sell or pushy technique. He helped us in planning for upgrade and showing us how to invest in property with in depth property analysis report.
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This Post Has One Comment

  1. Hi really appreciate the in-depth sharing. But i do have some doubts on the risk level. Will contact you for a meet up. Thanks

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