If you plan to move to a new house, you know you need to sell the old one so you could afford your new dream home. But sometimes it makes sense to keep your old residential property as an additional property investment in your portfolio. If you lease out your property, you will have another source of passive income.
But in Singapore, you need to consider the real estate property laws so you would know how much your annual property tax would be for both properties. Also, if you plan to sell your property, you need to pay a buyer’s stamp duty. You should consult a competent real estate company who can help you get the best deal in the market. Here are some guidelines that can help you make an informed choice before you call up that property agent or seek the advice of estate management experts in Singapore.
When Leasing Property Makes Sense
If the house makes a good rental property, you need to have enough money to retain it as part of your investment portfolio, so you don’t have to put it up as collateral for your next property purchase. Also, you need to pay Additional Buyer’s Stamp Duty (ABSD) for all additional real estate purchases. if you are planning to relocate for official business but only for a short period, you should consider renting a flat for the entire period instead of buying a new property.
When to Sell Property
Singapore follows UK real estate property laws, and all property sales incur the SSD or Sellers Stamp Duty. All sellers need to pay this tax when they close the deal, especially when you sell the house within three years of purchase.
Consider selling it at a later time, as the SSD tax goes down after more than three years. Homeowners don’t pay the duty from the fourth year and going forward. Unless you are facing an emergency, you should wait until the liability period elapses.
Make the Right Decision
Before you make a final decision, consider your financial position. Even if you have enough capital to purchase property or even add to your real estate investments, you should still ask your real estate agent on the additional expenses you could incur.
The cost of the new property must not exceed 40% of your monthly income. The loan repayment shouldn’t cost more than you can afford. It would be safer to sell an old home and buy a new one.
If you plan to take a mortgage, you should be able to finance the mortgage for at least six months. Make sure to ask about interest rates, as they can be quite high, depending on the area and the kind of property you plan to buy.
What You Can Earn from Leasing Out Property
Most residential properties give a rental yield of between 2% to 3% per year. There are some exceptions to this range, especially in central locations (going up to 7%). If you have to rent out your property, make sure that the yield is substantial. If it’s below 2%, it makes sense to put it on sale. Consult specialists in estate management from Singapore for such investment decisions.
Explore Every Offer
Lastly, examine all possible target properties and offers. Someone might be offering a great deal for your old home. You should take the opportunity and reinvest your gains in another investment.
Singapore’s Real Estate Prospects in 2019
The Singapore government is trying to cool the market with higher interest rates and heavier taxes and duties, and in some ways has controlled increasing property rates. Since last year, prices rose by 7.4% in the first six months but now has slowed down to 0.5% since July 2018. Consider your financial position and the state of the market before you buy that new house.