Recently, quite a few people in Singapore want to be a landlord. Some HDB flat owners buy a condominium unit and rent it out. They are probably thinking “It is a wonderful to be a landlord. Every month I just collect rent from my tenants and shake my legs at home. In a few years time, I can quit my day job and retire. Life is wonderful, Ha ha ha.”
While I agree being a landlord is one way to earn passive income, being a landlord is more than that. A closer look reveals more expenses of being a landlord.
Say for example a landlord owns 5 properties and each property give him a monthly rent of $4,000. That will be total monthly income of $20,000. It sounds good till we look at the expenses involved in owning 5 rental units. The monthly installments for 5 units for example can hit $15,000 if we assumed each unit bank loan is $700,000 and 3% (conservative) interest rate. The monthly property tax can reach $1,000. The monthly maintenance fee for 5 units may hit $1,200 (each unit monthly maintenance fee is $250). This does not include expenses like home insurance, minor repair (eg: spoilt washing machine, water heater etc), income tax, commission by agents, vacancy cost etc…
After deducting the expenses, the $20,000 monthly rental income is left with $2,000. This sounds miserable after all the hard work of searching and buying 5 properties. It made you flinch after you know that there are one-time fees like stamp duty, lawyer fees, agent sales commission and furniture payable for the 5 units upon purchase. It is certainly not fun at all.
At work, we receive a pay for our work. In the case of the landlord, he is working hard to pay the government (in property and income tax), bank (in monthly instalment), maintenance company ( in maintenance fees).
Rich Dad Poor Dad’s book mentioned “it is not how much money you made ( in salary or rental income), it is how much and how long you can keep the money you made.” This statement sums it up.
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