Here’s the biggest problem with the baby boomers generation (now turning retirement age) — they have been sold the idea of an asset by buying into a HDB, and many are hoping to cash out upon retirement. After all, their HDBs should have been paid off by now after having serviced the mortgage for more than 30 years. But the question is: Can they really cash out?

I’ve seen enough cases of old folks with flats they bought for maybe under $100K, worth close to maybe $500K right now. If they are lucky, some place like Duxton can get them closer to $1m.

But the question is, can they sell? The house is in a constant state of mess after some 20-30 years of not having a chance to properly renovate with 3 kids and a ton of stuff in the house. What is not reported in the news is that a lot of these houses fetching good money are likely well renovated.

Even if they sell, what can $500K of proceeds do? If they sell the place, they’ll have to find a new place. How long can it sustain them? For Healthcare? Paying insurance premiums? Travels? I’m not even going to talk about CPF accrued interests here, which will return to their CPF Retirement Account (RA). After 30 years, this can be a hefty sum.

Houses, in general, are getting smaller, and it is becoming harder for multi-generations to live under one roof. If they get to live with their children — which is the best scenario — they can rent out the entire flat. Otherwise, they may sub-let a room or two to get constant cashflow from rental. It is true that HDB has the best rental yield of all properties in Singapore, but how many old folks really want to live with a tenant? After all, it’s time to enjoy a peaceful retirement.

Yes, HDB is a great initiative by the Singapore government to give everyone a home; it is also a great stepping stone that many fail to utilise. I’ve been telling my friends not to make the mistakes their parents made, but I think writing this into a blog might save more people.

1 – Keeping the HDB “till you die”

National Development Minister Lawrence Wong has already clarified that not all HDBs are eligible for SERS. What this means is that you are at the mercy of HDB to en-bloc your flat. If it does not get selected for en-bloc, it will continue to rot till it is 99 years old, and then the value of the property goes to zero.

Private 99-year properties are different in that they can call for a private en-bloc, which is more in control of the private owners.

It is OK to buy a BTO or a resale and be thankful for all the discounts and grants from the government. But don’t sit on those money. Keep it moving. Money that is stagnant does nothing. Buy with a plan to sell or upgrade (i.e. buy another) in 5, 10 years — this is important, because you will then also upkeep your property in a state where it is sellable/rentable. Remember this!

2 – Waiting too long to upgrade

Seek to continually upgrade from a HDB, and do that early. In a lifetime, we probably get two chances at an upgrade before we hit an age where we cannot leverage further. Each cycle is typically 5-10 years.

Always bear in mind that you can not leverage past the age of 65, which means that when at the age of 35, the amount of tenure you get out of a mortgage is at its maximum (30 years). At current interest rates in Singapore, it would be silly not to leverage. Although this may change, it is still low enough.

3 – Cashing out too early

It is quite often that I hear about people downsizing and cashing out on their current properties; I have had friends who moved from Serangoon, to Kovan, to Sengkang just to cash out on their existing property all too early. They (or their parents) will soon realise that they are out of options pretty quickly.

While it’s a good idea to cash out while the market is hot (e.g. sell your Clementi HDB for a million dollars, why not?) it is always a better idea to use such opportunities to upgrade or acquire additional properties for constant rental cashflow in future.

Happy property hunting.