Hi Tankie,Originally posted by tankieCashflow turns negative when u factor in the mthly maintenance (I assume the above refers to a 3-rm condo) of aro' $300-$400. On top of that, other bigger expense items would be Property Tax and Income Tax (altho' u could max out the loan such that this is zero or minimal).Originally posted by Dennis
An example to illustrate:
Mr Tan owns a property costing S$600,000, rented out (rental income of S$2,500 a month). He took 80% Loan (or S$480,000 repayable over 25 years). With interest rates at 3%, his monthly Housing Loan instalments works out to only S$2,276 per month. Thus, he enjoy "positive Cashflow" on this property ie. Rental Income higher than Housing Loan instalment.
For what it's worth, mine is more than 1000x as my denominator is approaching zeroFYI, my Cash level is 3 times what I owe in Housing Loans.
yes, as your loan outstanding approahces zero, you almost enjoy the entire Rental income as PASSIVE income. Rental income can be like "Annuity Income". The difference is rental income can even continue after we are gone while Annuity income stops when we're gone.
Property can be a good way to preserve wealth. It is one reason WHY almost EVERY Rich person owns more than 1 properties. (Please make your own observation).
Things to note:
1. yes, imagine even if a person just BOUGHT a property today and get 80% Housing Loan, Cashflow is still positive. Might be slightly negative (by $100 to $200) if we factor in manintenance fees.
2. Ask yourself a simple question: is THERE any other thing you can buy ON instalment and the instalment is PAID by somebody else? (in this case, tenant).
I cannot think of anything else.
3. Unlike stocks that go down to ZERO, as long as a person has holding power, (able to pay Housing Loan instalment), in the long run, property prices typically go up (higher than inflation rate).
4. Please note that currently property prices are much higher than 2 years ago, risks have increased, rather than reduced. Thus, I hope any forumers considering to buy property to make sure that you are COMFORTABLE paying the instalments and good to STANDBY cash sufficient to pay for 6 months to 1 year of Housing Loan instalment in the event the property is NOT rented out (vacant for 6 to 12 months).
Also be prepared for the possibility that Rental rates can drop (it was about 50% of current rates back in year 2003/2004.
Do NOT over-borrow. Your debt-service ratio should NOT exceed 35%, (ie. total debt repayment divided by total gross income x 100%).
Only buy properties you can comfortably afford.
My comments is NOT to advise anyone to buy/sell/hold properties.