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Should you SELL or HOLD on to your HDB or private property with 20% Rental Yield?

One veteran real estate property agent told me this.

There are some prospective clients that he finds difficult to convince them to sell his HDB.

Don’t get him wrong.

He is not the scam sort that tries to scam these folks with “right” theories to sell their HDB flats.

The difficulty to him to shift their thinking is this:

They bought their HDB flat in very early years and bought their 4 room or 5 room flat for less than $75,000.

In this more corrected property rental market, these flats rent for $2.2k/mth (26.4k/yr) to $2.6k/mth(31.2/yr).

The YIELD ON COST, which is the gross rental yield on cost of home purchase is: 35%-41%.

When they see the yield like that: it reinforce their views that this property should NEVER be sold.

To my veteran property agent friend, if you can collect 20 years of rent upfront, you should sell it and switch it to another better prospective investments and be done with the HDB flat.

My thoughts on this is this:

HDB is a unique and subsidized asset that

  1. follows inflation well
  2. provides a better rental yield in the same location versus private properties after factoring the cost of purchase
  3. you can only have 1
  4. once you sell and you have a private property after that, you can’t get it again

Due to that its a very valuable asset.

Evaluate based on Yield on Market Price

Evaluating based on yield on cost will lock you in a mindset that everything pales in comparison to this asset.

It is not a fair comparison.

A better comparison to use when debating with yourself, your family or with your agent is the gross yield on market price.

You will realize that the yield on market price is 4% to 5%.

When you look at it this way you can:

  1. compare it to history. is this yield lower than the yield in the same place in history (means your property could be higher than what its actually worth, good to sell)
  2. compare it to other HDB or private properties. There could be better properties yielding 6-7% with the same amount of risk and opportunity
  3. compare it to other assets such as stocks. If you look at this list of blue chip stocks, REITs and business trust, you will realize 4-5% might not be that appealing as a golden goose any more

My opinion is that if you intend to build wealth wisely, you should always have a consistent asset evaluation model. This will entail you to hold, buy or sell assets in a VERY SOUND MANNER.

Evaluate based on Value

Everything has a intrinsic value and a price people are willing to pay for it.

At times, prices people willing to buy gets blown way out of proportion.

What if your Seng Kang flat things, get blown out of proportion and they are willing to pay $700k instead of the prevailing $480k for it.

There are advantages selling here:

  1. You pocket 7 years of rent upfront, and not have to bother about vacancy, maintenance risk
  2. Selling the property above its intrinsic value allows you to ALLOCATE WISELY to an asset that is more value and attractive
  3. Doing #2 well compounds your wealth faster

The problem for most is that for #2, most people have a problem judging value.

The correct form of thinking is to shift away from a “I will search for  a Golden Goose and hold on to it forever” mindset


“I am well equipped to evaluate assets based on price I pay versus the true value of the assets and consistently optimize my wealth based on this premise”

HDB is something that folks find it hard to shake away, but easier for private properties.

The same principal applies.

It is also the reason folks having Starhub at $2 yielding 10% will never sell their shares.

If you would like to know more about my mental model to optimize a portfolio of assets, be it property, stocks, bonds, cash, stamps and collectibles you can read my evaluation model article here.

Let me know if you agree with this thinking.

I know HDB is something close to heart for many. For me I tend to agree with my veteran property agent friend, just that not many would think this way.

There is a fear of selling off your golden goose and you cannot find another.



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Sunday 23rd of April 2017

Any comparison of return has to be risk adjusted. A well located hdb next to mrt / hospital has much lower risk than say an office REIT. Use the monthly rents to buy stocks slowly should be the safer strategy vs sell hdb and throw all into stocks.

Just my 2c


Sunday 23rd of April 2017

Hi JK, i cannot dispute your point of view. Both look right. for the first one, the idea of risks could be abit qualitative and depends very much on the evaluator's experience. For the second if you do it monthly (if you have a lump sum) you might not get the return that you are looking for, versus the risk.


Monday 6th of March 2017

Hi Kyith, ddo you mind sharing your property rental spreadsheet template?


Monday 6th of March 2017

hi Eddy, you can go to File > Make a copy here >


Monday 21st of December 2015

Hi Kyith

Let's call it an investment property instead (regardless of HDB or Private Property). With this investment property, we get yield on market price is 4% to 5% excluding maintenance, council rates, and misc bills. Plus the added stress involved in chasing monthly rental and their upkeep. When we take taxes into account, our market yields might be lower again.

The proceeds from the sale of the property can reallocated to various equities which can possibly give us a higher tax free yield plus capital growth. No more maintenance, tenant stress, etc

However, it comes at the added market risk. Thus, it all boil down to our risk profile. Can we stomach volatility or we prefer keeping it status quo.


Tuesday 22nd of December 2015

Hi Collin,

Yes that is right. So I did not show even a closer comparison. I am actually giving a handicap to the properties. However, the thinking is over the long run in Singapore, properties is the way to go, not equities.

You need competency to invest in equities for the long term. Then again does that mean properties you do not need competency? Perhaps everyone needs to look at things from the value perspective.

Collin do you think from your experience including the maintenance, council rates and misc bills, the properties still make it worth while? Remember we are only looking at it from the rental yield angle.

The longer term return is rental yield + cap growth. so we are expecting 3% + 2.5%?


Sunday 20th of December 2015

One aspect you did not mention. By the time a person is able to accumulate a private property while retaining his HDB flat to rent out, he will be in his fifties or over. If he does what your veteran property agent advises, it will be suicidal for him. Most of us at that age would have difficulties getting another loan from any banks when they purchase another property. With a limiting age cap for bank loans at 65, the loan tenure can be as short as 10 years or max 15, the kind of monthly mortgage payment would be very high.

I am talking through experience and as an equally veteran agent. When a person is renting out his HDB, he may be using the rent from the HDB flat to pay his private property mortgage which he is living in or his HDB rent is a second income to accumulate for his retirement.

So your veteran property may err in his advise.


Monday 21st of December 2015

hi Frederick, there are many permutations to this and I think what was advise can't go really wrong. In this case we are talking about selling soemthing that is vastly overvalued and switching to something undervalued or appropriate for the means.

IF they have kept the flat, the price goes back down to where it was or perhaps even lower, with the rent reflecting on the appropriate market conditions, they would face the same issue.

It is never always that when you purchase a private property or when you paid off a HDB you are in the fifties. I have friends in their mid thirties who have done that.

Perhaps they can borrow a smaller amount but if they wait for the right opportunity to purchase the private property at more attractive valuations, things will turn out ok.

at the end of the day, its a matter of buying and selling based on valuations.


Sunday 20th of December 2015

How many property agents out there understand that home has more than just asset value? It has utility value that cannot be measured in absolute monetary value. When one has other asset value why one want to sell his/her home unless the utility value is damn low. They hate living in it!

.Home is either for living or staying. There is the great difference among us!


Sunday 20th of December 2015

hi uncle create wealth, i think if you have another dwelling, this home and that home can be the same feeling. ultimately this is more about a money angle look at things. if we factor in the intangible side of things, no day no night.

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