At that time, we had two young children. We were fairly stable in our careers. We had moved from a Condo to HDB flat. After some years of living in a 99 year leasehold Condo, we realised that we didn't use the facilities very much and it wasn't very palatable to pay such high maintenance fees a month.
We decided to move closer to our parents and in-laws, so that it was easier for the child-care arrangements. Living near parents and/or in-laws is a great plus, especially if they help look after the young ones! Hence, we sold off our Condo and moved to a HDB flat.
We started thinking hard with regard to our children's future education, as well as our retirement. Money is hard to earn, but most easy to spend. Yes, we can be prudent and save & save. However, what do you do with the savings? Leaving them in a bank would earn paltry interest. Therefore, you need a plan.
Original Plan - purchase Singapore Freehold Property
That seems to be the dream of many people right? Buy some freehold property somewhere. After all, freehold land was very limited. Looked like Government would not allocate any more freehold land. We could sell the HDB and upgrade. So we looked, and looked and looked.
We didn't find anything that was affordable. And this was in 2008/9, when prices weren't as high as today (2014). Not only that, we were worried that if we committed to a significant private property purchase, it would mean that both of us had to continue working. Based on the financial calculations, much of our monthly income would be required to pay off the loan, i.e. feed the house.
Why Pay So Much to Feed the House?
This concept of 'feeding the house' got us thinking really hard. We already had a very comfortable place to stay (i.e. HDB flat). Roof over our head was secured. Monthly payments was very manageable.
If we 'upgraded' to a private property, what does this mean? Wiping out our savings is one thing. We will also be mortgaging our future income, to feed this house. It didn't sound very palatable to me.
UK, London Property Option Came Along
It was almost by chance. There was an exhibition going on in Singapore. That time, London Property was quite in the dumps. It was not too long after the 2007 crisis and crash. The wife did all the initial research, looking at the property's location and financial projections. It looked bite-sized.
Financial Calculations
The investment we first looked at was in Zone 2, right next to the Tube station. A one-bed would cost about £250,000. At that time, the SGD was 2.4 to the £.
The sums looked like this then.
We could get a 70% loan and the repayment was £850 per month, over 25 years.
We needed to cough up £75,000, which worked out to be SGD 180,000
There were also other costs like legal fees, stamp fees, furnishing etc.
Rental Income versus Loan Repayments
We did some research. Upon completion (i.e. TOP in Singaporean terms), we expected to be able let out the unit for £250pw. That would mean £13,000 gross a year. Subtract 12% management & lettings fees, we have £11,440 per year. Recall, the loan repayment was £850 per month, or £10,200 per year. There was still a £1K + buffer.
Property On Its Own
Therefore, once we completed the property, with the rental stream coming in, we expected that the property would at worst be cash-flow neutral, i.e. the rental income should be able to pay-off the housing loan, more or less. Maybe we have to top-up a bit here and there, but it wasn't expected to be significant.
Furthermore, given the good location of the property, we hoped for capital appreciation over the long-term. We figured that as long as we had the holding power, this property should do ok.
Property Feeds Itself
Doing such calculations was liberating. Why? Instead of us feeding the property we stay in, now it looked like we could invest in a property that could feed itself. After we cough up the initial 30% payment, it would look after itself and 25 years down the road, we would have a property fully paid up. As we were bullish on London, we felt quite sure that we wouldn't lose money, 25 years down the road. And therefore, we jumped in and bought our first UK London property at Montreal House, Canada Water.
Fast Forward to 2014
Looking back, we did not expect this property to do so well. We would be happy with a steady 3% to 4% increase in capital price a year. We have benefitted from the UK, London economy recovering (way to go Tories!) and also the chronic housing shortage.
Furthermore, the area we bought in has really matured and is in a much better shape today, compared to 2009. Our weekly rental has gone up from the initial £250pw to more than £300pw. This has made our investment cash-flow positive. Very happy to see the bank balance building up. Capital value of this property have also gone up very quickly, thanks to the housing shortage.
This was how we started. And through this, we realised the power of passive income. We don't want to feed the property. We want the property to feed us.
And there has been no looking back since.
Back to About Us page.
We decided to move closer to our parents and in-laws, so that it was easier for the child-care arrangements. Living near parents and/or in-laws is a great plus, especially if they help look after the young ones! Hence, we sold off our Condo and moved to a HDB flat.
We started thinking hard with regard to our children's future education, as well as our retirement. Money is hard to earn, but most easy to spend. Yes, we can be prudent and save & save. However, what do you do with the savings? Leaving them in a bank would earn paltry interest. Therefore, you need a plan.
Original Plan - purchase Singapore Freehold Property
That seems to be the dream of many people right? Buy some freehold property somewhere. After all, freehold land was very limited. Looked like Government would not allocate any more freehold land. We could sell the HDB and upgrade. So we looked, and looked and looked.
 |
| We didn't find anything affordable for us. |
Why Pay So Much to Feed the House?
This concept of 'feeding the house' got us thinking really hard. We already had a very comfortable place to stay (i.e. HDB flat). Roof over our head was secured. Monthly payments was very manageable.
If we 'upgraded' to a private property, what does this mean? Wiping out our savings is one thing. We will also be mortgaging our future income, to feed this house. It didn't sound very palatable to me.
UK, London Property Option Came Along
It was almost by chance. There was an exhibition going on in Singapore. That time, London Property was quite in the dumps. It was not too long after the 2007 crisis and crash. The wife did all the initial research, looking at the property's location and financial projections. It looked bite-sized.
Financial Calculations
The investment we first looked at was in Zone 2, right next to the Tube station. A one-bed would cost about £250,000. At that time, the SGD was 2.4 to the £.
The sums looked like this then.
We could get a 70% loan and the repayment was £850 per month, over 25 years.
We needed to cough up £75,000, which worked out to be SGD 180,000
There were also other costs like legal fees, stamp fees, furnishing etc.
Rental Income versus Loan Repayments
We did some research. Upon completion (i.e. TOP in Singaporean terms), we expected to be able let out the unit for £250pw. That would mean £13,000 gross a year. Subtract 12% management & lettings fees, we have £11,440 per year. Recall, the loan repayment was £850 per month, or £10,200 per year. There was still a £1K + buffer.
Property On Its Own
Therefore, once we completed the property, with the rental stream coming in, we expected that the property would at worst be cash-flow neutral, i.e. the rental income should be able to pay-off the housing loan, more or less. Maybe we have to top-up a bit here and there, but it wasn't expected to be significant.
Furthermore, given the good location of the property, we hoped for capital appreciation over the long-term. We figured that as long as we had the holding power, this property should do ok.
Property Feeds Itself
Doing such calculations was liberating. Why? Instead of us feeding the property we stay in, now it looked like we could invest in a property that could feed itself. After we cough up the initial 30% payment, it would look after itself and 25 years down the road, we would have a property fully paid up. As we were bullish on London, we felt quite sure that we wouldn't lose money, 25 years down the road. And therefore, we jumped in and bought our first UK London property at Montreal House, Canada Water.
Fast Forward to 2014
Looking back, we did not expect this property to do so well. We would be happy with a steady 3% to 4% increase in capital price a year. We have benefitted from the UK, London economy recovering (way to go Tories!) and also the chronic housing shortage.
Furthermore, the area we bought in has really matured and is in a much better shape today, compared to 2009. Our weekly rental has gone up from the initial £250pw to more than £300pw. This has made our investment cash-flow positive. Very happy to see the bank balance building up. Capital value of this property have also gone up very quickly, thanks to the housing shortage.
This was how we started. And through this, we realised the power of passive income. We don't want to feed the property. We want the property to feed us.
And there has been no looking back since.
Back to About Us page.
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