|
 |
|
 |
|
 |
|
 |
|
 |
|
 |
|
 |
|
|
|
|
|
T(65)6259 0880
F(65)6353 3070
1 Goldhill Plaza
#02-47
Podium Block
Singapore 308899
|
|
|
|
|
Gearing allows you to build up
your property portfolio:
|
|
|
Assume you purchased your first property for $100,000 by
borrowing $60,000 and using your own cash resources of
$40,000. This is a gearing rate of 60%.
Assume you repay $5,000 per annum of the debt, excluding
interest expenses.
|
|
Property 1
| Purchase
Price |
|
$
100,000 |
|
| Cash
Payment |
|
$
40,000 |
|
Bank
Loan
|
|
$
60,000
|
|
| Gearing =
$60,000 |
÷ |
$100,000 |
|
|
i.e.
60% |
|
|
|
|
|
|
|
|
|
|
|
At the end of three years, your debt level is $45,000.
At the same time, the property could have
increased in value by 15%, bringing the value to $115,000.
You
would now own a property valued at $115,000 with debt of
$45,000, resulting in a gearing ratio of 39%.
|
|
At the end of 3 years:
Property 1
| Original
Loan |
|
$
60,000 |
|
| Debt
Repayment |
|
$
15,000 |
|
| Remaining
Debt |
|
$
45,000 |
|
|
|
|
|
| Current
Value |
|
$115,000 |
|
|
|
|
|
| Gearing
= $45,000 |
÷ |
$115,000 |
|
|
i.e.
39% |
|
|
|
|
|
|
|
|
|
|
|
An astute
property investor would now refinance his property to bring
the gearing back to 60%.
This means you could re-mortgage the property to $69,000,
repay the $45,000 mortgage and be left with $24,000 in cash.
|
|
Refinancing
Property 1
| Current
Value |
|
$115,000 |
|
| Gearing
Ratio |
|
60% |
|
|
|
|
|
| Remortgage
= 60% |
of |
$115,000 |
|
|
|
i.e. |
$69,000 |
|
|
|
|
|
|
Debt
Repayment |
|
$
45,000 |
|
|
|
|
|
|
Cash
Remaining = |
$69,000
- $45,000 |
|
|
i.e. |
$24,000 |
|
|
|
|
This $24,000 could then be used to
purchase another property for around $100,000.
|
|
|
|
|
You would then own two properties valued at $215,000 in total,
with total debt amounting to $145,000 -- a gearing ratio of
67%.
Three years later, assuming the same debt
repayment schedule and capital growth, the debt would have
been reduced to $115,000 while the properties would have a
combined value of $247,250.
This would allow you to refinance
yet again to buy yet another property.
|
|
Property
Portfolio and Financial Status After Purchase of 2nd Property:
|
Current
Value
|
Bank
Loan |
|
| Property
1 |
$115,000 |
$
69,000 |
|
| Property
2
|
$100,000 |
$
76,000 |
|
| Total
|
$215,000 |
$145,000 |
|
|
|
|
|
| Gearing
=
|
$145,000
÷ |
$215,000
|
|
|
|
i.e.
67% |
|
|
|
|
|
|
|
|
|
|
|
