What it is
Holding cost covers everything that keeps running whether or not the property is earning you anything, mortgage interest, property tax, maintenance and sinking fund contributions if it is a condo under an MCST, fire insurance, and ordinary repairs. It is separate from the one time costs of buying, and separate from the principal portion of your mortgage instalment, which builds equity rather than being a true cost.
How to work it out
Add up a full year of these recurring costs, then divide by twelve for a realistic monthly figure. If the unit is rented out, compare that monthly figure against expected rental income to see whether the property is cash flow positive or negative, see the cash flow entry for how that comparison works in full.
A simple illustration
Take a hypothetical condo unit with mortgage interest of roughly $2,000 a month, property tax working out to about $150 a month, MCST maintenance of $350 a month, and fire insurance around $20 a month, that comes to roughly $2,520 a month in holding cost, before any principal repayment. These are illustrative round numbers only, not a quote for any actual unit, actual maintenance and tax figures must come from the real MCST statement and IRAS assessment for that specific property.
What beginners get wrong
A frequent mistake is forgetting that property tax jumps to a higher rate once a home is rented out rather than owner occupied, see the property tax entry. Another is underestimating MCST maintenance on newer condos with more facilities, gyms, pools and function rooms all cost more to run. A third is budgeting only the mortgage instalment as "the cost" of owning, and ignoring everything else that keeps running in the background, including the gap between one tenant leaving and the next one moving in.
What to check
Get the actual MCST maintenance figure from a real management corporation statement rather than an estimate, run the property tax at both the owner occupied and non owner occupier rates depending on how the unit will actually be used, and budget at least one to two months of vacancy a year when modelling holding cost for a rental unit, rather than assuming it will always be tenanted.
Have a question about your own numbers?
Winfred runs the real figures for your situation before you rely on a rule of thumb. This is general education, not personalised advice, book a call to talk through your own case.
Book a free 30 minute callWinfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H). CEA R073319H. This page is general property and investing education only and does not constitute financial, investment, or legal advice. Verify current figures with IRAS, HDB, CPF Board, or MAS before making any decision.