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The No Money Down HDB Case Study 1 Year Later: How did it work out Renting 3 Rooms and Living in Living Room?

This same time last year in 2015 I published a reader contribution where an acquaintance decide to take the path less traveled in renting out and living together.

You can read about the start of the case study here in this article.

What was unique about this case study was:

  1. They bought a 5 room resale HDB flat in Rest of Central Region
  2. They did it with a financing for the downpayment
  3. They refurnish his place so that they can live in the living room
  4. They rented out all 3 rooms of the HDB flat

What was great for readers is that through the case study in the previous article you can learn:

  1. To make things work you got to have enough time to acquire knowledge and think critically
  2. What is the bare minimum for living and how it can be carried out
  3. If you are hard up on money, the figures that you could look at to offset your home expenses
  4. If you are renting what kind of costs are you looking at
  5. How you can keep your CPF growing while having an asset that pays off by itself

My reader have came back and provided some numbers one year later. So I decided to share it over here.

Here are the annual income, expenses and cash flow as well as the monthly individual expenses categories:

HDB rent out three rooms

You can click to view a larger table.

Gross Rental Yield

As they are renting out the three rooms individually for $1,350, $1,100 and $1,100 respectively, the gross rental revenue was $42,450 versus $39,250 last year.

The main improvement was due to 100% occupancy versus last year where there are vacancy.

I realize over time after talking to property agents is that if you are unwilling to lower your rent, the vacancy could cost you $2000 a month when the home is left vacant, which will affect your yield for that year.

The more you are adamant of getting the best rate, the less productive your asset becomes.

On a resale HDB price of $628,000, this works out to a gross rental yield of 6.76%.

That is a high gross rental yield but then HDB seems to have a better gross rental yield versus condos.

The condos that I have been looking at seems to be in the range of 2.8% to 3% gross rental yield.

Perhaps if you are looking for rent, HDB resales are better there, even though that means you need to live in a condo.

Vacancy coming up

One of the tenant will be posting overseas and another one will have the work permit expiring this month, so there are much unknown there, although the couple should still be staying put.

With tenants there is a bit of an unknown but what we gather is that the tenants are really clean tenants and perhaps having good tenants that pay on time and no issues is better than charging market rate and having to handle numerous tenant issues.

The couple is being realistic in that this rental renewal they would most likely project a reduction in rental to $1,200, $1,000, $1,000 per month.

A look at expenses

I always like a glimpse of real numbers and what I noticed here is the advantage of the much lower property tax because this is owner occupied.

If this is non-owner occupied this amount would be much higher.

The furnishing costs are exceptionally high this year at $7,135 and likely to be a one off.

This would mean future cash flow yield will look much higher.

It is important that the mortgage principal and mortgage interest are separated so that Total Income can be computed and also Net Cash Flow.

Since mortgage principal is actually you allocating your cash flow to increase your home equity, it is not considered so much of a net cash outflow.

The property achieved a cash on cash positive yield, which is usually where revenue deducts the expenses, taxes as well as interest and mortgage principal payment.

This would mean the home finances by its renters, or that the renters help you build your equity.

Net Income Yield

Total Income divided by Gross Rental Revenue is 54%.

If we add back $4,000 out of the $7,000 furnishing cost the margin would be 63%.

A good rule of thumb used in the USA to estimate the net rental income is a 50% margin. It looks like in Singapore things could be a little higher.

But perhaps this would mean that a condo with a gross rental yield of 3%, after expenses, the net rental yield would be 1.8%?

In each property, the total return is made up of long term net rental yield (Yield) + long term compounded capital appreciation (CAGR).

I came to a conclusion that most are looking at only the CAGR. The rental is only to achieve a cash on cash positive return. In this case the home finances itself without you having to pay out of pocket, and use other people’s money so that you can flip homes at a higher price with minimal downpayment.

Unsecured Loan Status

From the first article, the couple use a 6% unsecured loan to finance the downpayment of $140,000. The monthly debt repayment is $3,300.

Half of this loan have been paid off, and the couple will increase the monthly repayment amount to $4,400/mth to speed up the repayment to 18 months form 24 months.


It looks like the couple’s extensive planning is working out quite well.

This may be rather extreme but I hope you picked up something you could do from this 2 articles.

Knowing the facts, working out the numbers to ensure that the plan is worthwhile is as important as the risk management part of “what if this happens to me, the tenants, the home?”

Many people couldn’t be bothered with thinking so much, do any planning, or think things will go their way, or always against them.

Some how fortune favors not only the bold but those who are rationally pessimistic, yet realistic to plan adequately before making big moves.

If you have similar stories and would like to share, do email me!

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Sunday 28th of February 2016

This couple is being too speculative. As you said its a bet that they can sell for a capital gain in the future.

Should anything happen to peak prices in the next ten years, like a prolonged collapse in rental and property markets of >30%, do wonder if they have any backup plan.

but all in all it just sounds like an illegal "minsu" operation which could be shut down and flat force sold should authorities find out.

if they are a couple i am betting either they are the "odd couple" or they won't be having any sex life at all.

of course since this doesn't make sense, a more likely scenario is the the living room is also being rented out and they are not telling you the whole story. They are probably living in another smaller rented place or with their parents and using this as an investment property (on paper make it looks like its their home).

Choon Yuan

Wednesday 17th of February 2016

Hi Kyith,

Below is HDB's rules on subletting. For those who are interested (states the max no of rooms and occupants):


Monday 15th of February 2016

It's really not that rare to live in the living room. Singaporeans are not exposed to the culture of it, but its fairly common in other countries. With some clever design and nice decor, living in the living room can be just like a hotel room! While I do appreciate some space for privacy, this idea is definitely going in the right direction to turn a liability into an asset!


Monday 15th of February 2016

Hi Anon, I think they are pushing way past the limits here, but like you said, in other cultures, a HDB flat can be seen as rather big. In that case, partitioning out the living room might not be too out of the norm.


Monday 15th of February 2016

Wow, live in the living room! That is really extreme.

Wonder what the couple do when they want to change clothes or have a bit of, err, privacy.


Monday 15th of February 2016

Hope they get caught and their flat confiscated. Don't see why this is even worth a case study. What next? Case study on illegal betting?


Monday 15th of February 2016

Hi Charlie, there are much take away a person can draw from this case study as well as the previous article, apart from the illegal angle. I am sure the readers who are willing to think out of the box can see how they can see this and reflect whether it will work well for them if they were in this couples shoes. If there is something that can be learnt from illegal betting, then I would also write on it.

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