Buy property to rent out or invest in index funds, what’s better? My 10-year condo investment experience

Reading Time: 12 minutes

Have you ever wondered which investment will perform better, buying a property to rent out or investing in an Index Fund or a 3-Fund Portfolio? Well I have.

In one corner, investing in rental property is a pretty popular investment vehicle and is often seen as a pretty safe and effective investment. Then in the other corner, for the FIRE community the often-touted simplest and most effective investment for building wealth is a long-term investment in a well-balanced portfolio of index funds. I’ve always wondered which would come out on top – so I decided to take a stab at trying to figure this out.

Normally this would be an extremely difficult comparison to make because the calculation would require accurate data of all cash flows related to a condo investment. Not only is the cash flow needed to first find out the rate of return for the condo investment, this is needed to then create the hypothetical investment simulation to find the return we’d get if the funds were used for stocks investment instead.

Well, lucky for us, I have just the data set and we’re about to dive right into it!

Hol’up! We ain’t got time for that! Let’s have the TL;DR

For those of you who are impatient, here’s a summary of what I’ve found.

I used my meticulously maintained property cashflow spreadsheet to calculate the optimal investment approach between:

  1. Buying a condo and renting it out; or
  2. Investing the funds in Index Funds instead of buying the condo

Conclusion: If I am able to sell the condo at a higher price than the valuation, it’s possible that the condo investment would have performed better than investing in index funds, though in most cases the index funds did better. HOWEVER, the best scenario involved renting out the condo AND using the rental to invest.

If that intrigues you, read on to find out the full details!

Disclaimer: Since this is just one data point for one condo in one time period, I do not claim that this is a scientific study and the results will not apply to all scenarios. The conclusions should not be taken as indicative of how your own investment will perform. Property investment is very dependent on location and market conditions and you should do your own extensive homework before deciding to invest. This should be taken as one example of how things could have turned out and not as investment advice.

How I got the dataset

In February 2011 my dad – who really believes in the merit of property as an investment vehicle – decided to buy a condo in Singapore.

Since he is a foreigner and I am a PR, he decided to make this purchase under both his name and my name. Given that he was also near retirement age, this also allowed us to take out a loan under both his name and my name because I was employed here. The idea is that he will be the one who pays for the down payment as well as the stamp duty and I will be the one making the mortgage payments. I will also be the one managing the condo, get it renovated and rent it out.

At the end, the idea would be that I will be slowly buying the property back from him by consistently paying the mortgage while ALSO paying him back for the down payment and stamp duty over time. I think this was his way to help me out financially while at the same time ensuring that I become more disciplined with money.

Due to this arrangement, I’ve kept detailed accounts of all cash flow related to the property in a spreadsheet. This includes the purchase price, down payment, stamp duty, renovation cost, property agent commission, property taxes, management fees, insurance cost, legal fees, and – of course – rental income.

This information will allow us to do all the necessary calculations for both the condo investment and creating a stock investment simulation for comparison. Let’s take a look at the property data, shall we?

Details of the property

The condo was purchased in February 2011 before the construction even started directly from the developer so we got a pretty good deal. Here are all the statistics of the property for your reference:

Configuration2 Bed 2 Bath
Purchase Price (Feb 2011)S$827,889.90
Furniture Voucher (Aug 2015)S$43,573.10
Size904 sqft
Purchase Price per Square FootS$915.64
Down PaymentS$174,297.30
Stamp DutyS$20,745.00

How we’re going to do the comparison

First, I have placed the data and the analysis used in this post into this linked Google Sheets for your reference to follow along.

I have split the dataset into 3 different scenarios which we will be using to compare performance:

  1. Buy the condo, get a mortgage and rent it out while servicing the mortgage.
  2. Instead of buying the condo, use the funds and all the mortgage payments to buy IWDA.
  3. Hybrid approach: Buy the condo, get a mortgage and rent it out – but instead of using the rent to service the mortgage – I use the rental income to buy IWDA.

Why did I use IWDA instead of SWRD or VWRA or a combination of ETFs? A few reasons:

  1. This helps keep the calculations simple;
  2. It’s been established long enough so it has data that covers the periods we need; and
  3. It holds equities that represent over 85% of the global market capitalization, it usually makes up the majority portion of a cap-weighted 3-Fund portfolio and will contribute the most to the performance of the portfolio anyway.

For all IWDA investments, I also used the USD/SGD exchange rate of that day to calculate how many shares are bought. However, in order to keep the simulation simple, I assumed that it was possible to buy fractional shares. This way I can simply divide and add the number of shares together to tally the final investment portfolio size.

Investment Returns on Renting Out the Condo

Since the property was under construction from 2011 until mid 2015, I was only able to start renting out the place from September 2015, about 4.5 years after we made the purchase.

So before we were generating any income or revenue from the property, there were a bunch of expenses that we had to pay for which continued for the life-time of the property:

  1. Down payment
  2. Stamp duty
  3. Mortgage payment
  4. Property tax
  5. Insurance
  6. Management Fee

Once we were able to rent out the property, we started generating income.

There were a total of 3 tenants between September 2015 and January 2021 – each progressively longer than the last. The details of each tenant rental information are outlined below.

Tenants Rental Contract Details

DescriptionTenant 1Tenant 2Tenant 3
Start DateSep 2015May 2017June 2019
End DateFeb 2017April 2019Jan 2021
Monthly RentS$2,800S$2,600S$2,600
Total Rental IncomeS$50,400S$62,400S$80,600
Agent CommissionS$2,100S$2,600S$3,593.41

I was able to get a relatively good rent for the first tenant, however in the 2nd and 3rd tenant, the rental market dropped and thus I had to take a S$200 reduction in the rent.

Some Cash Flow Information after 10 years (Feb 2011 – Mar 2021)

Total Rental IncomeS$193,400.00
Total Mortgage Payment-S$170,467.74
Total Management Fee-S$21,101.76
Total Agent Commission-S$9,371.41
Total Taxes, Insurance & Misc-S$17,872.11

In order to calculate the total rate of returns, let’s assume that we sell the condo in January 2021 after taking into account all of the cash flow.

Luckily around December 2020, I had a bank make an official valuation, which we will assume will be what we will be able to sell the condo for. Here’s some information around the sale:

Sale Information

Current Official Valuation (Jan 2021)S$1,080,000.00
Current Valuation per Square FootS$1,194.69
Price Appreciation30.45%
Remaining Mortgage (March 2021)-S$560,196.98
Seller’s Stamp DutyNone (Exceeded 4 years of ownership)
Agent Commission (2%)-S$21,600.00
Net Proceeds After SaleS$519,803.02

So after plugging all the cash flow (including sale proceeds) and dates into our trusty XIRR calculator, we get the annual returns over 10 years of…

*Drum roll please*

Actual IRR as of March 2021: 9.73%

Not too bad!

What if I was also able to get the same rent for the 2nd and 3rd tenants instead of the S$200 reduction? Well I did check that out too, and that gave me an annual return of…

IRR if slightly better rent: 9.98%

Better! But not by much and it’s hard to say if I would have been able to get the higher rental. Plus increasing rent may mean it would have taken longer to find tenants willing to take up the unit – losing the income all together.

Well what if instead of using the Bank’s valuation, we used the list prices I see for similar units on Property Guru and assume I can sell for that much (S$1,150,000)? OK, let’s try it… and that gives us these numbers:

Sale Information at Higher Sale Price

Property Guru List Price (Similar Unit)S$1,150,000.00
Price per Square FootS$1,194.69
Price Appreciation38.90%
Remaining Mortgage (March 2021)-S$560,196.98
Seller’s Stamp DutyNone (Exceeded 4 years of ownership)
Agent Commission (2%)-S$23,000.00
Net Proceeds After SaleS$589,803.02

That’s about S$70,000 more which gives us a rate of return over 10 years of:

IRR if higher selling price: 11.18%

Much better! So a higher selling price would give us a pretty big boost to the returns – if we are able to get it that is.

One thing that pulls down property returns is the agent commission, which is 2% of the sale price and roughly 4% of the net proceeds, which drags down the returns by quite a bit.

Now let’s compare this with our investment option.

Investment Returns Assuming We Buy Index Funds Instead

Now we take a look at how I would have done had I used all the money I dumped into the property and invested them into IWDA over the last 10 years instead.

In order to calculate the investment returns, for each of the payments that I would have made for the condo, I instead calculated the number of IWDA shares I would have been able to purchase at the time. As a part of this calculation, I also converted the share price of IWDA into SGD using the USD/SGD exchange rate.

For simplicity’s sake I assumed that fractional shares were a thing and just added the purchases together instead of trying to carry over excess cash.

In the last 10 years, IWDA increased from USD 30.02 on 8 Feb 2011 to USD 76.89 on the 22nd March 2021. Over 150% increase. Here’s a daily closing price chart over that time period (in both USD and SGD equivalent):

In terms of exchange rate, the USD/SGD exchange rate went from 1.27 SGD per USD to 1.34 SGD per USD, which is a 5.5% increase in the strength of the USD while the maximum swing between the bottom and top of the exchange rate was as high as 20%. Here’s the monthly USD/SGD exchange rate chart:

So how well would I have done?

Here are some numbers:

Total Funds InvestedS$427,239.31
Final Portfolio Value (21 March 2021)S$885,300.14
Gain / Loss ($)S$458,060.83
Gain / Loss (%)107.21%

Based on these numbers the annual returns as of 21st March 2021 would have been:

Investing the funds instead: 11.01%

Pretty impressive. This is better than both just investing in the condo and renting it out. Keep in mind that this was also going through the COVID-19 crash.

Let’s take a look at the portfolio chart over that time period:

This shows us something extremely interesting. It seems like the portfolio started clearly making a profit some time at the end of 2012 or early 2013… and it never looked back.

As you can see, even at the time of the large pullback at the end of 2018 / start of 2019 and the COVID-19 crash, the portfolio remained above its cost and stayed positive.

So it seems that the index fund did really well and we didn’t even have to have a large amount of cash lying round to get started – unlike property investment which will require a sizable down payment.

Is that it then? I guess we’ve exhausted all of our investment options? Not quite.

Let’s take a look at our final investment scenario.

Renting out the condo and use the rental income to invest in the Index Fund!

This one might need a bit of explanation.

As I was thinking about this, I was wondering if this was actually a valid scenario. Given that the rental income for the previous condo scenarios are already accounted for given that we assume that the rental will be used to make the mortgage and maintenance fee payments – it didn’t seem to make sense to assume that we can instead use it to invest instead… since we’d need to come up with another source of cash to pay the mortgage and maintenance fees; it seemed like an invalid option.

However, I remembered that I am actually using my CPF to pay for my mortgage monthly so the rent that I receive every month… isn’t really being used to pay for the mortgage – instead I’m just shoving it into the stock market!

This is likely the most likely situation for most people in Singapore. Most people who buy property will use CPF to pay for the mortgage anyway. So any other income that comes from the rent will either be spent, saved or invested.

So I wanted to check how the investment would fare if we assume that all of the cash inflow (to keep things simple I just used all inflows no matter what it was) that we received are used to invest into the Index Fund as well!

After plugging in all of the numbers, the property sale is the same as above:

Sale Information

Current Official Valuation (Jan 2021)S$1,080,000.00
Current Valuation per Square FootS$1,194.69
Price Appreciation30.45%
Remaining Mortgage (March 2021)-S$560,196.98
Seller’s Stamp DutyNone (Exceeded 4 years of ownership)
Agent Commission (2%)-S$21,600.00
Net Proceeds After SaleS$519,803.02

As for the investment side of things, here are some of the numbers: 

Total Funds InvestedS$225,470.28
Final Portfolio Value (21 March 2021)S$434,504.69
Gain / Loss ($)S$209,034.41
Gain / Loss (%)92.71%

Then if we assume that we sell the property as well as the entire portfolio on the same day on the 21st March 2021, we would have the following annual rate of return:

Renting out the condo and investing the rent: 11.71%

Holy moly, that’s really good! Even better than selling the property at a higher price! Now that we’ve got all the results, let’s put this all together and compare each scenario and break the results down.


Since in each scenario the cash flows are different and the final amounts received end up being quite different, the only number we have that can be used for comparison is the the internal rate of return.

This is because in the case of the condo investment, the condo was generating a monthly return by providing rental income which factors into the rate of return. In the case of the index fund, there is no positive cashflow and only capital appreciation of the fund – this is mainly due to the fact that the index fund we selected is an “accumulating” ETF which automatically reinvests the dividends for us.

So to make visualization easier, let’s put the returns of each case into a table and calculate how much S$1,000 invested 10 years ago would turn into today had we invested it into each scenario:

RankDescriptionIRR$1k over 10 yearsGain (%)
1Condo + Stocks11.71%S$3,175217.5%
2Condo with Higher Selling Price11.18%S$3,016201.6%
4Condo with Higher Rent9.98%S$2,679167.9%
5Condo with Actual Rent9.73%S$2,614116.4%

Here’s what this would look like as a chart:

Based on the above result and chart, here’s how I’d break down this result and make a comparison:

  1. Suffice it to say that all options did better than doing nothing at all – so let’s get that one out of the way. That would have been the worst possible option.
  2. My actual situation, with the rent I actually got and using the bank’s appraised valuation, that was the worst result of the 4 – ending 10 years with about 2.6x what I started with.
  3. If I had been able to get better rent for my 2 most recent tenants, then I’d end with about 2.68x more than when I started – not that much better than what I actually got, so I don’t feel too bad.
  4. If I really wanted to beat the stocks investment, I’d really have to try to push my sale price up by more than 6% – which will give me about 3x more than when I started. However, it’s not beating the stocks investment by much.
  5. For stocks investment, I’d have ended up with 2.96x more than when I started.
  6. Though the best scenario out of the bunch was to rent out the condo, pay the mortgage with CPF and then use the rental income to invest! Doing this would allow me to have 3.18x more funds than when I started and this is assuming we sell at the valuation price.
  7. In all condo sale situation, the agent commission costs us about 4% of the net proceeds (since it’s charged on total sale price – this does drop down towards 2% the closer you are to paying off your mortgage), which is a pretty hefty amount when you consider that when I sell stocks, I only have to pay the commission and FX charge – which is no more than 0.5% of the trade value.
  8. All investment options performed better than leaving the money in CPF OA or CPF SA, so if you have significant funds sitting inside CPF unused and you have yet to use it to purchase a property, I think it’s safe to say that using it to purchase a property is not a bad choice.
  9. However, now with robo advisors that allow us to invest our CPF OA moneys into decent passively managed funds, doing that could also be an equally valid option – though their management fees are slightly higher than the DIY options – so the returns may not be as good as shown here.


Phew! This post ended up being waaaaaaay longer than I thought it would be, as usual, but I hope that it was interesting for you.

Do keep in mind that this was done using just 1 dataset, mine, and it may not be representative of all investment results and shouldn’t be extrapolated as such.

As with all things related to real estate, location matters and could have changed the results significantly for better or for worse. The time frame is also limited and a different point in time could also change the results significantly – the time frame of this analysis did start at the bottom of the biggest stock market bull run in history after all. If the timing had been different, the results would likely change quite significantly.

So I wouldn’t take this post too seriously or make investment decisions solely based on my experience here, but I think it is an interesting anecdote.

In this case, it seems like the best option is to at least invest – doesn’t matter if it’s index funds or property. Either option would have given great returns, better than leaving the funds sitting under a mattress, better than savings accounts and also better than CPF OA or CPF SA.

If you are able to rent out the property while paying the mortgage payments using your CPF funds, then using the rental income to invest into index funds will give you the best returns.

However, if you need to choose between one or the other, I’m in favor of the index funds or use your CPF to invest into robo advisors mainly because it’s much cheaper and easier to get started which means it’s very accessible to young investors.

Index funds are also a lot more liquid compared to property, you can buy and sell on a daily basis and it’s also possible to sell parts of a portfolio if you need funds for any reason – which is much harder to do with a property.

If you have to buy a property to live in anyway, it’s of course better to use the CPF to purchase the property and then use your cash to invest. This was explored in more detail in my previous post on renting vs buying here.

Well I hope that you found this analysis useful and if you have any questions or comments, please leave them below and I’ll be happy to answer!

Until next time!


6 thoughts on “Buy property to rent out or invest in index funds, what’s better? My 10-year condo investment experience”

  1. Does the last scenario (rental into stocks) factor in the interest needed to be paid back to CPF when you sell the condo? That might change the numbers significantly?

    I know this probably opens a can of worms and makes the calculation very complex.
    Maybe just to hear more about your thoughts/insights on this CPF part of the equation.
    (Some people might just take it as “all go back CPF”, so doesn’t matter? Or just use to buy another house?)


  2. Hi, Interesting but too many “IFs” for me in the article. The condo investment was only marginally performing better, which I think carries too many risks. Also you bought from developer and waited almost 5 years before you could start earning on it. Approximately every 10 years a major renovation should be done to the unit AFAIK. Years ago when I lived in SG (year 2013) as an expat I asked the agent I rented through the property to prepare me some calculation of buying a property in upcoming DUO project. On S$1.2M unit the total stamp duty (ABSD 15% + stamp fee 3%) was S$210,600. Also EP expats (that are not PR) do not have CPFs, so they cannot offset it against the property purchase. Also no furniture voucher or any cash back plans included in DUO investment.

    How about that?

    – the approx. rental value for DUO unit I intended to buy was estimated at S$54,000 / year
    – approx. S$3600 annual maintenance fees
    – S$2,250 (yearly agent fees on 2 year contract)
    – unforeseen in house maintenance fees (not calculated)
    – major renovation every 10 years (not calculated)
    – property tax + rental income tax (progressive residents rates)
    – if I leave SG and keep renting out, 22% rental income tax

    In my opinion you were just super lucky it worked for you better than stocks. The stamp duty you paid is not even 3%, so I am not sure where does it come from if PRs have to pay 5%+3% and your father is a foreigner. Only SG citizens have ABSD waived on purchase of 1st property, while you mention only stamp duty amount which is not even 3% of the property value. By the way ABSD to foreigners have also been increased again from 15% to 20% (+3% stamp duty). Ah yes I just checked the timings, you were lucky because you bought the unit in Feb 2011 – but same year later 5% ABSD was introduced for PRs.

    It certainly doesn’t look great to me for non PRs living in SG to invest in the SG property vs stocks. Since there are no capital gains in SG, stocks is the obvious choice unless someone wants a diversification of the investments.

    • Hey Seb! Thanks for commenting and I completely agree with you! I think maybe it didn’t come across that clearly in the article – I would certainly not have gone with the property investment if I have the option to make that choice again today.

      As you mentioned, “all the stars aligned” in just the right way for this property to provide us with the return that is just slightly better than just a basic index fund (which also wouldn’t have required as much work in finding an agent, signing paperwork, tracking of rent payments, paying income tax etc.)

      It’s very clear that the government policy here is specifically designed to discourage speculative property investments – especially by foreigners. Overall stocks won hands down.

  3. One thing that gives me pause is that your calculation seems to disregard the opportunity cost of using CPF to pay the mortgage. Those sums could have been directly invested in the stock market instead, albeit the returns would have been stuck in your CPF account.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.