Updated: 6 days ago
Recently, I've received quite a lot of questions from my HDB clients about their flats. Their flats have already reached past their MOP (Minimum Occupation Period) for a few years already and they would like to know how to "maximise" their HDB Flats as an asset.
A little knowledge is a dangerous thing. - Alexander Pope
Every snippet of advice my clients get from their friends seem "good". This made it all the more confusing for them to decide.
Most of the time, I would meet up with my clients. This is to understand their needs and wants better before I make proposals on their Property Wealth Planning (PWP).
WHAT IS MOP (MINIMUM OCCUPATION PERIOD)?
What is MOP?
HDB Website stated that MOP (Minimum Occupation Period) is the minimum duration that the flat owner is required to physically stay in the flat before they are allowed to sell it in the open market. At the moment, it's 5 years (https://www.hdb.gov.sg/cs/infoweb/residential/selling-a-flat/eligibility).
In other words, the flat owners MUST occupy the flat for at least 5 years after taking the keys. During this period, the flat owners are not allowed to is not allowed to sell their flat, nor buy any private residential properties. They are allowed to buy private commercial or industrial properties.
In addition, the flat owners are not allowed to lease out the entire flat. There is a small exception here. They can still lease out one of their bedrooms as room rental, provided that flat owners must still be staying there.
There are instances when MOP get disrupted prematurely. For example, the flat owner is posted to work overseas for several years. There are also cases where flat owners had to move to stay with a relative to take care of them. Those disrupted number of years do not count toward the MOP.
For example, Mr X started staying in his flat from 1 Jan 2010.
Later on, his company posted him out to be stationed in Japan from 1 Jan 2014 to 31 Dec 2014. After his posting, Mr X returned and continued staying in his flat.
Mr X's MOP should be met from 1 Jan 2016 onwards. That one year staying in Japan cannot be counted as part of his Minimum Occupation Period.
You can also check if you had met your MOP (Minimum Occupation Period) with your SingPass at the HDB website (https://services2.hdb.gov.sg/webapp/SX05AWSPCP/SX05PSPCPLogin.jsp).
What are the options?
Once you have met your MOP (Minimum Occupation Period), here are the following options that you can consider to take.
Case Study No 1 : Lease out your flat while staying somewhere else.
Case Study No 2 : Lease out one of your rooms while staying in your own flat.
Case Study No 3 : Sell your flat to upgrade to a larger resale flat.
Case Study No 4 : Sell your flat to upgrade to a condominium.
Case Study No 5 : Keep your flat and invest a new launch condominium.
CASE STUDY NO 1
LEASE OUT YOUR FLAT WHILE STAYING SOMEWHERE ELSE
Bill and Jane stayed in their Executive Apartment flat for 20 years. It's fully paid already and they wanted to get some passive income from their flat.
After meeting up with them, I found that they have two children. Both children are married and both wanted Bill and Jane to stay with them so that they could look after them.
I proposed to Bill and Jane to consider staying with their daughter during first half of the week, and with their son the other half of the week. They liked this proposal because they can spend time with all their grandchildren for the whole week.
I helped Bill and Jane to plan their moving out of their flat. Once it was vacated, I helped them to secure a tenant for their flat.
CASE STUDY NO 2
LEASE OUT ONE OF YOUR ROOMS WHILE STAYING IN YOUR OWN FLAT
Janet is a single and she has been staying in her 4-room flat for 6 years. She wanted to lease out her whole flat so that the passive income can help pay for her mortgage.
Her parents have already passed away and there were not enough room at her siblings homes.
So her next best alternative is to lease out one of the rooms in her flat.
We discussed about what sort of tenants to get and what are the common practices that other room rental landlords do. Afterall, she will be staying with a stranger and she must know what to expect and how to manage the new tenant.
CASE STUDY NO 3
SELL YOUR FLAT TO UPGRADE TO A LARGER RESALE FLAT
Yong Sheng and Li Yun have been staying in their 4-room flat for 10 years. They have a 6-year old daughter, Megan, and she will be going to Primary 1 the following year.
When I met up with them, I was pleasantly surprised to note that Li Yun was expecting another baby. Yong Sheng said Li Yun was already in her third trimester and they felt that the current flat was too small.
They also wanted to secure a stronger chance of getting a place in a Primary School of their choice for Megan.
After an in-depth discussion with Yong Sheng and Li Yun, they decided the next best option for them was to get a 5-room resale flat nearer to the Primary School of choice.
We then worked out the financial calculations to see whether to buy first and sell later or sell first and buy later.
Buying first would enable them to move into the next property with lesser stress. Afterall, moving house and renovating your home are one of the most stressful things in life. Yong Sheng doesn't want Li Yun to be stressed over this so this was their top priority.
CASE STUDY NO 4
SELL YOUR FLAT TO UPGRADE TO A CONDOMINIUM
John and Sally stayed in their 5-room flat for 7 years. They have two children who were still going to primary school.
After attending a recent birthday party at a relative's condominium, they saw how much their children enjoyed the pool party. Their relative gave them a "tour" around the condominium and they were convinced that this is the lifestyle they wanted to provide for themselves. They felt they deserved to come back to resort-like home and let all the work stress melt away.
After going thru and in-depth financial calculation with them, they were surprised to learnt that their "purchasing power" increased by double if they were to buy a condominium instead of an HDB flat.
Also, they were amazed that they could "cash out" by adopting the equity term loan approach later on.
CASE STUDY NO 5
KEEP YOUR FLAT AND INVEST IN A NEW LAUNCH CONDOMINIUM
Kee Siong and Heather were in their forties. They have been staying in their 5-room flat for 18 years. They wanted to plan a legacy for their only 8-year old daughter, Lily. They felt that with property prices getting higher and higher, they were worried for Lily not being able to afford a property on her own later on.
After going thru and in-depth financial calculation with them, they were confident at purchasing a private property.
I showed them the market trends for both resale and new launches. They realised that the capital appreciation for new launches were so much faster than that for resale condominiums. This confirmed their initial belief that property prices will always appreciate in the long run so they had better hedge it with a new launch.
We scouted for several new launches and finally they decided to buy a 3 Bedroom Deluxe at The Florence Residences. The TOP date for this new launch is March 2023 so they felt very comfortable with the progressive payment schedule. The key thing that made them decide on The Florence Residences was that it is near 2 MRT Stations - Kovan and Houngang Stations.
Once the new launch is ready to take key, they have the flexibility to decide which of their two properties to lease out.
At least now, they were relived that they had managed to hedge something for Lily, their daughter. At the same time, should they need more cash in their silver years, they could always cash out with the sale of one of their properties.
This was truly thinking ahead with their Property Wealth Planning.
Last but not least, there were more details to every option listed above because each came with certain requirements.
If you want to rent or sell out your flat, you have to make sure your flat meets the Ethnic Quota Eligibility.
If you want to upgrade to a larger flat or a condo, you have to do a detailed financial calculation to make sure you can afford the next property stress free. You may have to take note of the ABSD (Additional Buyer Stamp Duty) as well as meeting the Basic Retirement Sum if you were to use your CPF monies when two properties are involved.
Also, you have to work out a suitable timeline to match the funds transfer in sync with your house-moving and renovation.
There's just so much more to cover under each of the options highlighted above. That's because your situation is unique and the final strategy has to be customised to suit you.
Do call me for a 90-min free consultation if you wish to do more with your rental property so that your interests as landlord is well protected.
Anthony Yeo is a Senior Associate District Director of OrangeTee & Tie, and has helped 450+ home owners successfully find buyers and tenants for their properties since 2009.
Being certified for ACTA and NLP Masters Practitioner, Anthony has successfully groomed and mentored many top million dollar producing agents.
In 2019 3rd Quarter, Anthony received the award for 2nd Top Recruiter in OrangeTee.
Throughout his career, Anthony has helped many clients grow their wealth through selecting great property investments and managing their portfolios actively through Property Wealth Planning.