Am I being Filial or Manipulative? A Weekend Discussion with My Parents on Housing and Retirement

Over the weekend I had a more serious conversation with my parents on the topic of money, in particular in the area of investing and properties.

My parents and I currently live in a 41-year-old 3-room HDB flat in a matured estate, one which is very close to many amenities and convenient for my dad and me to get to work.

As my parents are approaching 55 in a couple of years time, and my dad seriously considers to retire in a few years after that, they are considering to apply for a BTO flat around the region, in view that the HDB is already middle-aged and they want a bigger unit with 3 bedrooms, hoping to sublet one of the rooms for rent, and maybe two of them if I moved out of the house.

This will not only fund for their retirement income but also serves as a means to preserve the value of their assets, as while it's unlikely that they will outlive the HDB lease, they didn't appreciate the idea that the value of the property coming close to zero by the time they part and therefore leaving nothing for me.

From my perspective, I'm fine with them leaving nothing for me if that means they can enjoy their fruit of labour in their golden years and have an enjoyable retirement in good health. My family is a typical working-class who is far from rich, and my parents have been working diligently throughout their lives that I think it's only fair for them to enjoy their lives to the fullest once they settle into retirement.

The thing is, I also know my parents have always dreamed of living in a condominium, or even a landed property.

But as they are getting older and the property prices in Singapore are sky-rocketing, it indeed seems like a far fetched dream for them now.

With the economic uncertainty pouring in this year, my dad briefly mentioned that if given the opportunity that the property market crashes like how it was in the Great Financial Crisis, he would love to get a condominium to retire in.

So over the past weeks, I have been trying to milk hints out of them on their budgets and their preference, but I guess I was really bad at that (they got suspicious of me really quick) so I decided to sit down over a meal and talked to them about it.

I asked them if the property market really crashes, what kind of house would they like to live in, and what's their budget. They said they are looking at a 3-bedroom condominium in the east with a remaining lease of at least 70 years under $700,000, which they can afford with a 10-year loan after selling away the current flat.

I rolled my eyes.

With 3-bedrooms condominiums pricing at over one million in today's market, even if there is a crash it is unlikely that it will hit that level. I explained to them that it's disillusioning to have that kind of expectation, given the current circumstances, especially when Singapore is still attracting a lot of foreign investors to invest in the property in a crisis like this.

They have to acknowledge the fact that they had missed the boat in the GFC 12 years ago and be realistic about the current market. This is something that is still very hard for them to rewire. They still think back of the good old days when everything is relatively cheap and even gold was lowly priced.

Anyway, I don't think that that would be a property crash in Singapore anytime soon. Singapore is still a darling to the Asian investor because of its safe environment, established education system, bilingual and multiracial environment, ease of setting up businesses, economically healthy, and a relatively stable political system, something which is lacking in other parts of Asia.

In fact, I know a lot of Chinese investors from work and friends who are casually asking me if it's time to invest in Singapore property now and if I have any recommendations for them. They have made a lot of money in China over the past decades and are trying to diversify their investment. Singapore, being a Chinese majority country, is a very attractive place for them.

Back to the conversation with my parents, the couple of BTOs they have been eyeing for is due to complete in 2023/4, which means that we still have another three to four years to consider. I have to say that their more realistic plan for getting a new flat is entirely feasible because, with the sale of the current flat combining with their cash and CPF savings available after 55, they can afford a newer flat with an extra room without getting into any debt.

On the other hand, if they were to buy a condo, regardless of size and tenure, they can afford up to $800,000 with a less than a 10-year bank loan. 

So here's my offer: I'm confident that I will be able to save up $300,000 in cash by 2023 (yes, I'm raising a flag here, but who knows?). I'm planning to buy the current flat from my parents as an internal arrangement, which means that the property will still be under my parents' name, but I'm giving my parents the $300k (that's the resale value of our HDB ) in cash, so we save the all the transaction costs and they will have the cash to buy a private property. We will be looking at the largest private property under the price of $800,000, inclusive of ABSD, in the east for maximum space we can afford. 

I will stay with them and rent out the entire HDB, which should fetch around at least $1800 per month (my neighbour next door fetches $2200 for the exact same layout). This amount will go straight to repaying the <10-year loan that my parents will be taking until the loan is fully repaid. If this amount is not enough to cover the loan repayment, I will top it out with my take-home salary and ensure that my parents don't have to worry about mortgage at all. On the occasion where the HDB cannot be rented out for whatever reasons, I will make sure I can still commit to the mortgage until it is paid up. Thereafter, any rental income from the HDB goes to me. I will also pay for the tax on the rental income my parents have to declare under their name if any.

This not only eases my family financial burden by a lot, but also allows my parents to be able to own a private property (which is their dream), and I get a source of passive income after 10 years. For the record, a newer HDB and a private property around the area that can fetch this level of rental income ($1.8k /month) will cost over $500k to $900k respectively.

This also lets me retains my rights to get another HDB flat when I get married or turn 35, and my parents can still rent out the remaining room(s) in the condo as a rental income for their retirement. The passive income from the current HDB flat will then be used to pay the mortgage of my new HDB and/or support my new family.

During the minimum occupation period of  5 years, I will save vigorously for the down payment for private property, and rent out the entire HDB after the MOP is over. This will allow me to have two sources of passive income from rental, which will be channeled to my new private property that I will settle down as a long term home. I do not intend to sell off any of the HDBs so the appreciation or depreciation of the property shouldn't affect me.

My expected budget for the private property will be based on how much I can afford as a single income, even if I'm married and my spouse is still working. This is so that we do not overstretch our financials and compromise on the quality of our lives because I still want to be able to afford the best for my family.

Going through this plan would mean wiping out my entire savings that I have accumulated over the past 3.5 years and even the next 3 to 4 years. However, the returns will be: 

1. Helping my parents to achieve their dreams of setting in a condo for their retirement,  
2. I can enjoy the facilities while staying with them,
3. Having a potential source of passive income from the rental at a very low cost, which could lay a good foundation in my finances
4. Having a private property to inherit or for my children to inherit in a very long future.

I wouldn't lie to say it doesn't pain me to part with my life savings and the higher potential gains if I were to invest in the market, but I think the returns are worth it from a family and a financial point of view.

Furthermore, I'm still in my twenties, which means that even if I were to start saving from scratch in 3 to 4 years later, I will still have time, albeit lesser, for me to amass wealth for my own retirement. Not as role models, I do know of many people in their thirties without any savings or property, and are even stuck with consumer debts who are just starting to pick up their personal finances.

This is just a plan I have gone through with my family and while they like the idea a lot and are excited about the possibility of having a private property under their belt, there could be many changes and the outcome may not even go accordingly as planned. I really don't want to disappoint my parents by getting their hopes high so I have strongly empathised to them that this is just a possibility, not an absolute plan.

For starters, after much consideration, they may still prefer a spacious and newer HDB than a smaller and older condo, which I will be supportive of. They will also be unable to get the same loan amount as quoted from the bank because it will be a few years down the road, and the loan amount diminished as they age because of the tenure, which means that unless my family could save more over the next few years, the budget would be lesser than expected. I may also not be able to save $300k in cash after all when the opportunity arises and the property market could go for another bull from foreign investors after the Covid-19 crisis and make private properties beyond our means.

On a personal note, even if my parents choose to go for the new BTO, I would very much love to keep the current flat because I grew up here and it's really a prime location with lots of convenience for staying in it and can fetch very high rental yield as an investment. I even thought of buying this flat on my own but I would still be far from 35 by 2023/4 and if I were to get married in the next few years, this is something that I need to discuss my future partner, and I doubt the chance of my partner wanting to buy this old apartment when you have the option of going for BTO or getting a newer resale flat.

That's it from me on the weekend discussion with my family. This may just be a plan on paper, and as an inexperienced and immature person who has yet weathered a full cycle of the financial crisis, there must be a lot of aspects that I have overlooked and not factor into consideration, which I welcome the readers to guide and point it out for me. 

Do you think this is a feasible plan? What may I have missed out? Am I being filial to try to achieve my parents' dream or am I just manipulative for my own financial gains, when they could have just peacefully settled for a new BTO? Is it even a smart move to wipe out my entire savings for this plan, or would it still be better for me to invest it in the market and aim to enhance my human capital to earn lots of money and buy another property for my parents in the future? Please let me know what you think and many thanks for reading.