Singapore Property Buying: Buying a property in Geylang

BUYING A PROPERTY IN GEYLANG

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Recently in 2007, a friend of mine bought a property in Geylang. The property is in decent condition, it’s Freehold and it is about 1000 square feet. With all the promises of KALLANG Expansion and being near to the city, etc. It seemed too good to be true at S$400,000. He was planning to lease it out for S$1500/- per month.

So here is the calculation: -

Rental revenue         —  S$1500 x 12 months = S$18,000
Downpayment 20%  —  S$80,000
Cost of Financing           S$320,000 @ 2.5% — S$8,000
So the Return of Investment — (18,000 – 8,000) / 80,000 = 12.5%

So 12.5% gains is quite OKAY right?

So he went to the bank and tried to borrow money, the banks told her, sorry you have to pay 30% to 35% downpayment.

NOW, new calculation: -

Rental revenue        — S$1500 x 12 months = S$18,000

Down payment              30% of 400k — S$120,000

Cost of Financing          S$280,000 @ 2.5% = S$7,000

So the Return of Investment = (18,000 – 7,000) / 120,000 = 9.17%

SUDDENLY, there is an extra S$40,000 to pay up.

Luckily he has a lot of cash.

People can avoid these pains if they get a PRE-APPROVED LOAN. Just provide the unit number, development name, the banks can usually reply to you in 1-2 days to give you a YES/NO answer. Do bear in mind that some banks may say NO and you have to go check with some other banks and wait some more days. So it is a tedious process. A Independent mortgage consultant such as http://www.propertybuyer.com.sg

can quickly help you get a loan pre-approval (and subsequently get you the best fit loan). So you can put your mind at ease to buy the investment property/home of your dreams.

This is just a simple calculation which does not YET include the Rental property tax of 10% p/a. Conservancy charges, maintenance and depreciation of property as most tenants will want you to re-furbish it, and it can cost $$$. Don’t forget stamp duty, lawyer’s fees, fire insurance, surveying cost, etc.

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