 |
| Building streams of passive income - a hard but worthwhile goal. |
THE MISTAKE
One of the biggest financial mistakes I've made is buying a 5-room DBSS flat in Tampines. I paid $722,000 for it, and even after $30,000 first-timer grant from the government, the flat still cost a princely $692,000. It is a lot of money for someone just fresh out of college. I must have been out of my mind when I bought the house, and AK's post (link) doesn't help me feel better.Well, it's not that we don't have our reasons for buying the flat. As compared to balloting for a BTO, which will have us waiting for 4 years or so, the DBSS was a sale-of-balance exercise and will be ready in a year's time. My wife and I really wanted to start a family while we are young, and so we went ahead with the purchase. I know I know. We could have bought a resale flat in a non-mature estate and that would have cost us a fraction of what we paid for the DBSS, and possibly be able to move in even earlier as well. I concede that there can be no justification strong enough for the purchase, and that's why I started off by admitting that this is a financial mistake.
Have I regretted buying the flat then? I am not sure. I still like the house and the location very much, and I think good things have happened after we moved in. I got a small promotion at work and my wife gave birth to a beautiful daughter. I am a little Pan-Tang this way, and I think the house must have brought us some good luck.
THE OPPORTUNITY
After my wife's maternity leave, she has to return to the workforce because my single income cannot keep up with the mortgage payment and the household expenses. As we wanted to minimize the potential for conflict between ourselves and our parents-in-law, we got a helper to take care of the little girl as well. At first, we tried shuttling between our own house in Tampines and my in-laws' place in Serangoon, but that proved too cumbersome. We reckon that it's not beneficial for the baby in the long term as well, since we always got to wake her up early in the morning, disrupting her sleep. I thus suggested that we moved in with either my parents or my wife's. Of course, my wife chose the latter as expected.Our house was newly renovated at this point. We only stayed there for about 15 months or so. When I suggested to my wife that we should rent out the house since we won't be staying there for at least a few years, my wife objected to it vehemently. She didn't want the tenant to spoil our furniture etc. I cant blame her for that, since it also took me a bit of self-psycho-ing to convince myself that this is the most sensible thing to do. After all, I really wished to reduce the "damage' that this "mistake" has caused us.
STRENGTHENING MY CONVICTION
It took a few more sessions of coo-ing and molly-coddling before my wife finally relented. Looking back now, it turned out to be a decision that both of us are thankful for making. We are now receiving $2,500 per month in rental income, and I insisted that we save up all of these monies to make early repayments for our mortgage loan. In 2 years' time, assuming that the cost of renting the house is about $5k a year (agent's fees, income tax, delta in property tax, and maintenance), we will be looking at an additional saving of about $50,000. This is amazing, as it takes little to no effort on our part to save this amount. Imagine if we can continue to rent out the house for a total of 5 years, we will be able to bring down our mortgage loan by $125k, and the cost of our house down from $692k to $567k. This figure is closer to what a 5-year-old, 5-room HDB in a mature estate will cost. Sounds less like a mistake now? Definitely!Besides the financial benefits, this experience gave me a taste of what receiving passive income feels like and strengthen my commitment and desire of building a substantial steam of passive income!