Is Your Property Really Profitable?

Is Your Property Investment Really Profitable? 5 Key Ways to Measure Returns

Buying property in Singapore is often seen as a solid investment, but is your property truly making money for you? Many investors focus only on headline prices and rental income, without considering the full picture.

A condo that looks profitable on paper may not actually generate strong returns once you factor in costs like interest payments, maintenance, and taxes. Here are five key ways to accurately assess if your property is really giving you the financial gains you expect.

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1. Rental Yield – Is Your Rental Income Actually Worth It?

Many investors assume that rental income is pure profit, but that’s not always true.

How It’s Calculated

- Gross Rental Yield = (Annual Rental Income ÷ Property Purchase Price) × 100

- Net Rental Yield = ((Annual Rental Income – Expenses) ÷ Property Purchase Price) × 100

📌 Example:

You buy a condo for $1.5M and rent it out for $4,500/month.

- Gross Yield = ($54,000 ÷ $1,500,000) × 100 = 3.6%

- But if you deduct maintenance fees, property tax, and agent fees of $8,000/year, your Net Yield is:

- Net Yield = (($54,000 – $8,000) ÷ $1,500,000) × 100 = 3.06%

💡 Why It Matters:

A yield below 3% may not be attractive, especially if mortgage repayments are high. Resale appreciation might be the bigger play than rental yield alone.

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2. Return on Investment (ROI) – Are You Really Making a Profit?

Your property may have gone up in value, but did you actually make a profit after all costs?

How It’s Calculated

- ROI = ((Selling Price – Purchase Price – Costs) ÷ Total Investment) × 100

📌 Example:

You bought a condo for $1.5M and sold it for $1.8M. You paid:

- Stamp duty ($54,600)

- Legal & agent fees ($25,000)

- Renovation ($50,000)

Net Profit = $1.8M – $1.5M – ($54,600 + $25,000 + $50,000) = $170,400

- ROI = ($170,400 ÷ $1.5M) × 100 = 11.36%

💡 Why It Matters:

Many buyers forget to account for extra costs like stamp duty, legal fees, or renovation. When these costs are included, real profits may be much lower than expected.

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3. Cash Flow – Are You Breaking Even or Losing Money Monthly?

A property can appreciate in value, but if it’s draining your cash flow every month, it might not be the best investment.

How It’s Calculated

- Cash Flow = Rental Income – Mortgage Repayment – Expenses

📌 Example:

- Rental income: $4,500/month

- Mortgage repayment (75% loan, 4% interest): $5,500/month

- Maintenance, property tax, and agent fees: $500/month

💡 Reality Check:

- Total Expenses = $5,500 + $500 = $6,000/month

- Cash Flow = $4,500 – $6,000 = -$1,500/month (Negative Cash Flow)

💡 Why It Matters:

If your property is bleeding $1,500 every month, you’re losing $18,000 a year. You’ll need strong capital appreciation to make up for the loss.

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4. Opportunity Cost – Could Your Money Have Worked Harder Elsewhere?

Many buyers lock up huge amounts of cash in property, but is that always the best move?

Example:

- You put $400K cash into a condo purchase.

- If you had invested this in stocks with a 6% annual return, you’d make $24,000 per year.

💡 Why It Matters:

- If your condo’s appreciation + rental yield doesn’t exceed this 6%, then your money could have been better invested elsewhere.

- Property is a long-term asset, and you must be ready to hold for appreciation to kick in.

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5. Total Cost of Ownership – Are You Paying More Than You Expected?

Many investors only look at mortgage payments, but forget about the hidden costs of owning a property.

Common Costs That Eat into Profits

- ABSD (Additional Buyer’s Stamp Duty): 20% for second properties (huge upfront cost).

- Mortgage Interest: Over 25 years, interest can add up to hundreds of thousands.

- Renovation & Repairs: Can cost between $50K–$150K, especially for resale units.

- Property Tax & Maintenance Fees: Higher for investment properties.

📌 Example:

- If you bought a condo for $2M and paid 20% ABSD ($400K), that’s an instant cost that takes years to recover.

- If the property appreciates 3% annually, it will take nearly 7 years just to cover the ABSD cost.

💡 Why It Matters:

- Many buyers only calculate profits on paper, but when these extra costs are factored in, real gains might be much lower.

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Final Thoughts: Is Your Property Really Profitable?

🔹 It’s not just about rising prices – you must factor in cash flow, opportunity costs, and ownership expenses.

🔹 Rental yield alone isn’t enough – you must ensure the property isn’t draining cash flow each month.

🔹 ROI is what really matters – a strong gain on paper means little if high costs are eating into your profits.

Buying property is a long-term game, and while it remains one of Singapore’s best investments, making smart financial calculations ensures you buy the right asset at the right price.

Thinking about your next property move? Make sure you calculate everything before committing!

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