The biggest concern with this way of viewing this as a return is that selling the house at a high price means that the cost of the replacement property is similarly high.
Indeed, this is usually the case as property prices in Singapore are always on the rise. It's true that not everybody will be keen on playing this "property game" which so many people tout.
Although seller incurred interest, renov, property tax but he has stayed there for 5 yrs, if not for the house, he would hv to rent a place for the 5 yrs
You could definitely make that case. As the reno cost likely played some role in driving the final sales price and could be thought of as "'cost of goods sold". But since there was no clear definition of gross and nett profit for real estate, I decided to keep that number out of the gross margin for 3 reasons: 1) I wanted to capture simply the difference between the buying and selling price (without facroting other costs) and I felt the terminology "gross profit" was the most representative 2) This "gross" number is usually the headline number that is thrown around by reports and agents, without thinking about all the other cost like renovation. So I wanted to capture that in some form. 3) Because of 2, I wanted to show that there indeed is a difference in the profit margin after you factor in all the costs which people often forget.
Ah, when I mentioned deduct from gross profit and reduce net profit, I didn't mean reno cost would reduce gross. But only net. I.e. gross profit - other costs - reno cost = net profit. Can say in line with your message that a lot of cost are left out in the typical number thrown around. So for apple to apple comparison with stocks, would make sense to factor in the the reno cost as well (whether or not it adds value to the sale price). While no impact to the net profit, i also think worthwhile to consider the implied subsequent costs/opportunity cost. Assuming the home owner needs a property to stay, then there is a need to buy the next property at an (presumably) more expensive price than X years ago (X being the duration that he held on to the first property, or when he would have otherwise bought the property to stay). Subsequent reno/furnishings costs will also have to be purchased at a (possible) more expensive price due to inflation. Probably too difficult to calculate all these as there are many permutations and assumption to make - but definitely has an impact to the meaningful yield of the investment.
u sell high u going to buy high as well. look at there market around. you probably need minimally 600k to get a similar 5rm resale flat in a non prime location & lesser tenure, excluding the need to also renovate & touch up the new house, another 100k ($700k in total)
Thanks for making this video. Finally found a property youtuber who could do a comprehensive calculation of nett profit from property sale 👍🏻
Thanks, glad it was helpful!
Great background set up! I love it 😊
The biggest concern with this way of viewing this as a return is that selling the house at a high price means that the cost of the replacement property is similarly high.
Indeed, this is usually the case as property prices in Singapore are always on the rise. It's true that not everybody will be keen on playing this "property game" which so many people tout.
Although seller incurred interest, renov, property tax but he has stayed there for 5 yrs, if not for the house, he would hv to rent a place for the 5 yrs
This is true. I thought abit about whether these numbers should be included in the calculation or not.
Do you think renovation cost should be deducted from the gross profit as running costs as well and reduce the overall net profit?
You could definitely make that case. As the reno cost likely played some role in driving the final sales price and could be thought of as "'cost of goods sold".
But since there was no clear definition of gross and nett profit for real estate, I decided to keep that number out of the gross margin for 3 reasons:
1) I wanted to capture simply the difference between the buying and selling price (without facroting other costs) and I felt the terminology "gross profit" was the most representative
2) This "gross" number is usually the headline number that is thrown around by reports and agents, without thinking about all the other cost like renovation. So I wanted to capture that in some form.
3) Because of 2, I wanted to show that there indeed is a difference in the profit margin after you factor in all the costs which people often forget.
Ah, when I mentioned deduct from gross profit and reduce net profit, I didn't mean reno cost would reduce gross. But only net.
I.e. gross profit - other costs - reno cost = net profit.
Can say in line with your message that a lot of cost are left out in the typical number thrown around. So for apple to apple comparison with stocks, would make sense to factor in the the reno cost as well (whether or not it adds value to the sale price).
While no impact to the net profit, i also think worthwhile to consider the implied subsequent costs/opportunity cost. Assuming the home owner needs a property to stay, then there is a need to buy the next property at an (presumably) more expensive price than X years ago (X being the duration that he held on to the first property, or when he would have otherwise bought the property to stay). Subsequent reno/furnishings costs will also have to be purchased at a (possible) more expensive price due to inflation. Probably too difficult to calculate all these as there are many permutations and assumption to make - but definitely has an impact to the meaningful yield of the investment.
u sell high u going to buy high as well. look at there market around. you probably need minimally 600k to get a similar 5rm resale flat in a non prime location & lesser tenure, excluding the need to also renovate & touch up the new house, another 100k ($700k in total)
Indeed, the cost of replacement is going to be equally high
Alkaff vista is actually 5mins walk (covered) to potong pasir MRT, why walk to woodleigh MRT 😅
Oops 😂
Error in calculation -pls check