How I pay $0 Per Month in Singapore - House Hacking

Summary

In this video, the speaker shares their experience of house hacking in Singapore, highlighting the financial considerations of purchasing different HDB flat sizes. They explain how a larger flat can generate more rental income, even though the upfront cost is higher. The speaker also discusses leveraging loans and the significant returns from renting out rooms. Throughout their journey, they emphasize the importance of diligent savings, planning, and learning from mistakes. The speaker concludes by reflecting on their path to buying their first home at 27 and the sacrifices involved in achieving this goal.

Takeaways

• 😀 The decision to purchase a larger flat (5-room HDB) is financially beneficial due to the potential for rental income from extra rooms.
• 😀 Leveraging for a larger flat allows the speaker to borrow 75% of the cost, requiring only a small cash investment for significant returns.
• 😀 The difference between a 4-room and 5-room flat in Singapore offers not just an extra bedroom but also a much larger living room, increasing potential rental opportunities.
• 😀 The speaker calculates a 55% return on investment from the additional cash spent on a larger flat due to the rental income generated.
• 😀 While subdividing a flat for extra rental rooms can be lucrative, it's not legally allowed in Singapore for HDB flats, and caution should be exercised.
• 😀 Condos provide more flexibility for adding walls and creating additional rooms, making them a safer investment for house hacking.
• 😀 House hacking can be a viable strategy, but it requires both partners to be on the same page, and clear communication is essential for success.
• 😀 Co-living with tenants can be challenging and may not align with everyone’s personal values, especially when it comes to privacy and family life.
• 😀 Safety concerns, particularly with children, must be prioritized when considering house hacking and renting out rooms to strangers.
• 😀 Financial discipline and long-term planning are crucial for success in real estate investment, as demonstrated by the speaker’s journey of saving and investing over many years.

Q & A

Why did the speaker choose a larger flat over a smaller one?

The speaker opted for a larger flat because the difference in cost between a 3-bedroom and a 4-bedroom was relatively small, and the potential rental income from an extra bedroom made it a more financially viable option. Additionally, they could borrow 75% of the cost, reducing the upfront cash needed for the extra room.

What is the opportunity cost mentioned by the speaker for renting out a bedroom?

The opportunity cost is calculated as the income lost by not renting out an extra bedroom. The speaker values the rental income at approximately $1,015.60 per month, which amounts to around $12,000 annually. This makes the additional bedroom profitable over time, especially with leverage.

How does leverage play a role in the speaker's decision to buy a larger flat?

Leverage allows the speaker to borrow 75% of the cost of the larger flat, meaning they only need to pay a smaller upfront amount of cash (around $22,000). This enhances the return on investment as the rental income from the extra bedroom can significantly outpace the additional cash spent.

What legal issues does the speaker mention when considering house hacking in Singapore?

The speaker points out that while renting out rooms in a 5-room HDB flat is financially appealing, subdividing rooms is illegal in Singapore. This could lead to legal consequences if caught. Renting out rooms in condos, however, offers more flexibility.

How does the speaker handle concerns about living with tenants, especially with children in the house?

The speaker acknowledges the concerns about safety, especially for families with young children. They suggest solutions like having grandparents or relatives live with them to ensure safety, or building partition walls to create a separate space for the family.

What challenges did the speaker face when trying to save for the flat?

The speaker faced significant challenges in saving money, including working part-time jobs from a young age, living frugally during their time in the army, and avoiding unnecessary spending. They also lost money on a bad investment in options trading, which delayed their progress.

How much cash did the speaker need to pay for the flat, aside from the down payment?

The speaker paid a total of $85,735 in cash, in addition to the down payment of $30,365. They also used $24,000 from their CPF savings, with a total cash reserve of $120,000 to ensure financial security.

What financial advice does the speaker give for those saving for a home?

The speaker advises viewers to track their spending and savings, gradually increasing their savings rate over time. They emphasize the importance of making savings a habit and being strategic with finances over the long term.

What is the significance of the speaker's first job in their savings journey?

The speaker’s first job at age 15, where they coached badminton, marked the beginning of their savings journey. They continued to save diligently throughout their time in the army, focusing on minimal expenses and avoiding unnecessary spending.

What will the speaker discuss in their next video?

In the next video, the speaker plans to discuss how they found an undervalued property, saving them nearly $150,000 compared to their neighbors, and how viewers can potentially apply similar strategies to their own property search.