What are the costs of owning a Singapore investment property for passive income?

Breakdown of costs of owning a Singapore investment property as passive income

It is almost every Singaporeans' dream to have an investment property to provide a passive income. While many people feel that the only hurdles to buying their second property are the massive down payment, additional stamp duties and getting the loan approved, there are actually many other supplementary costs that you may not have considered.

Let’s take a look at some of them:

Property Tax

Property tax will be based on the Annual Value of your property. In a nutshell, Annual Value is the total rental income you will get annually if you were to rent your property out. If the Annual Value of Mr A's property is $42,000, his/her property tax will be $4,440.

The below table shows the incremental progressive tax rates for property tax:

Annual Value (AV) Progressive Tax Rates Property Tax Payable
First $30,000 10% $3,000
Next $15,000 12% $1,800
Next $15,000 14% $2,100
Next $15,000 16% $2,400
Next $15,000 18% $2,700
Above $90,000 20%  

Income Tax

While rental contributes to your income, by that same nature, it also contributes to your income tax.

How much? It depends on the income bracket you are in.

Assuming Mr A earns $120,000 annually from his employment as a senior manager in an IT firm and earns an additional rental income of $3500/month. His total gross tax payable before deductibles will be $14,290 out of which $6,340 are taxes attributed from his additional rental income.

Agent Fee

Your tenants will probably change after every few years and it is time to find yourself a new tenant! Most people will engage a real estate agent to help them lease out the property as they do not have the time and resources to do so. Commission for leasing are usually about 2 months for a 2 years tenancy and this add up an additional costing of $7,000 ($3500*2).


Flat Maintenance

To keep your rental property in tip top conditions, you probably would need to do some replacement of furniture, electronic appliances or repainting every couple of years. Let's keep it at a conservative amount of $500 per year.

Condo Maintenance Fee

The typical fees for a mass market condo unit with full facilities can range from about $300/month to $1000/month for luxury condo units in districts 9 and 10.

Mortgage Interest Cost

The biggest cost among all is unsurprisingly the mortgage interest cost and at many times can take up anyway between 30% - 70% of your monthly mortgage repayments.

Assuming an average private housing loan size of $800,000, Mr A will be paying $2,957 per month for a tenure of 30 years, on an interest rate of 2%. This comes up to an interest cost of about $15,820 per annum or $1318.33 per month.

Assuming if mortgage interest rate will to increase by 0.50% to 2.5%, Mr A will then now be paying $3,160 per month at an interest cost of about $19,794 per annum or $1649.50 per month.

Notwithstanding capital appreciation, the various cost can all add up and eat into your rental yield. Speak with us today for the best comparison of mortgage loans and keep your mortgage interest cost trim and fit!




Winnie Au | Senior Mortgage Advisor

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