3 Tips for Couples Planning to Buy Their Second Property

This article contains 3 tips for couples planning to buy their second property for investment.

========================

     Table of Content

• Your First Property Type?
• Financing Matters
• Where is Your Primary Residence?

========================

📌Tip 1 Your First Property Type?

     [HDB Owners]

• For couples who have bought a HDB flat as their first home, you can buy a second property in the private sector after fulfilling the 5 years minimum occupation period.
• As HDB does not allow decoupling after April 2016, Additional Buyer Stamp Duties (ABSD) will apply when you buy a second property.
• See my article on the pros and cons of paying ABSD for the second property in order to keep the HDB flat for rental income.

• The top 2 reasons to keep the HDB flat are: (1) Sense of Security (2) High Rental Yield.
• Many owners also regard their HDB flat as a backup home if they face any financial difficulties in future.
• Rental yield for HDB can be as high as 5-7% and this income can be used to offset their condo’s monthly mortgage.

[Private Property Owners]

• If your first home is a private property, you should only decouple when you are ready to buy your second property.
• The legal fee for decoupling is about $6,000 and you can buy your second property the next day after signing the papers
• After decoupling, each spouse will hold one property under their respective names.
• There will be no ABSD payable.

📌Tip 2 Financing Matters

     [HDB Owners]

• Keeping your HDB flat will require you to pay 17% ABSD based on the condo’s price
• Your HDB flat will need to be fully paid with no outstanding loans.
• Otherwise, your maximum loan for your condo, will be limited to 45% (for second home loan)

[Private Property Owners]

• During decoupling, buying spouse will need to take over the full loan amount for first property.
• The buying spouse will need to refund the CPF + accrued interests that was used by the outgoing spouse.
• The outgoing spouse’s income must qualify for the bank loan amount needed to buy the second property.

📌Tip 3. Where is Your Primary Residence?

• When planning for your second property, you will need to decide in advance which property will you be residing in.

[1^st Home as Primary Residence]

• For those who intend to stay in the first home, below are some questions for your thoughts.

1. How long do you intend to stay there?
2. Will lease decay be a concern for your HDB or 99-years condo?

• When the second property is for investment, the strategy will be very different from buying to stay
• You should buy where there is high rentability (e.g., near MRT)
• Be open to low floor condo units as they will be more affordable
• It is always safe to enter low when buying as investment
• Anyway, most tenants will not pay you $100 more for high floors units

[Staying in Second Property]

• You may want to consider a bigger condo since it is for own-use
• If you intend to stay for a long period, consider a freehold condo as there would not be a lease decay issue.
• If you need a bigger loan, you must plan a few years ahead to make sure your income meets the Total Debt Servicing Ratio (TDSR) requirements.
• For private properties, a minimum income of S$24,000 per annum is required.
• Rental, Bonus and commission can be included as part of your income but with 30% haircut.
• You will need to show the bank your latest notice of assessment and 12 months CPF contribution history

Like this Article or Video?

Check out more Condo Tips here