4 ways to make sure your old HDB flat is a decent retirement asset

There's been a lot of talk lately about how older HDB flats are an unwise purchasing decision.

Sure, the possibility of outliving your HDB flat is a good argument for an early death.

But whether you've already shelled out the cash for an old flat, or are living in an old flat your parents bought decades ago, there are still ways you can squeeze a bit more cash out of your home to boost your retirement, before the lease finally runs out, such as the following.

Rent out rooms in your flat

Since the resale value of your flat will fall on the tail end of its lease, if you intend to hold on to it in the long-term, the main way you can monetise it is by renting out the rooms or, if you have alternative accommodation arrangements, to rent out the entire flat while you live somewhere else.

If you don't mind living with others, you can earn a considerable amount even if you continue to live in the flat. For instance, I have a friend who lives in one of those two-storey maisonettes in a central mature estate, and earns around $24,000 a year renting out the spare rooms.

Sell the flat in under 10 years

For now, the demand for older HDB flats in attractive mature estates remains high, thanks to young couples who are willing to pay a premium for a good location and a bigger flat.

So barring a property market crash, you might still be able to get a decent price on your flat-but only if you sell it before it can get much older, say in under 10 years. Flats between 20 and 40 years old tend to not to experience huge falls in price.

It is when the flat reaches the age of 65 that it experiences the sharpest decline in value-or at least, that's what analysts have gleaned from past buyer behaviour. If you haven't sold your flat by then, you're probably better off living in it for the rest of its (or your) life.

So why would you want to shell out a huge downpayment on an old flat, only to sell it in 10 years' time? Well, some couples might want to live in a more central location to save time and energy commuting when their kids are young and need to be ferried to/from school and childcare. Others may not want to wait years for a BTO and decide to go for a resale flat, so why not one in a better area?

Apply for the Silver Housing Scheme

Selling your flat and downgrading is one way to use your home to fund your retirement. This gets complicated when you're living in an old flat, as you won't be able to sell it for much towards the end of the lease.

The Silver Housing Scheme enables you to sell your flat and buy a smaller, cheaper one.

You will have to make sure the value of your existing flat hasn't fallen to the point where the proceeds aren't sufficient to buy you a new one. Some or all of what's left of the sale proceeds will be paid into your CPF account. You will also receive a cash bonus of up to $20,000 depending on your income.

You must be aged above age 55, own a bigger HDB flat and have a monthly household income of under $12,000 to qualify.

Pray your flat will be selected for SERS

If your flat is selected for SERS, you've hit the jackpot. You get to trade in your aging flat for a brand new one with a 99-year lease, located not far from your previous home. You'll also receive cash from the government.

However, the government has warned that not old HDB flats will qualify for SERS (Selective En bloc Redevelopment Scheme). Whether yours will qualify depends on a combination of luck and smarts in picking the right property. For instance, you want to pick a flat in a central location that's likely to experience escalating land values. Flats that are in lower-density buildings also tend to be more likely to get selected for en bloc.

This is definitely not a strategy you want to bank your life savings on. But if you're already in the situation where you've got an old flat on your hands, you might want to start believing in the power of prayer.

The article first appeared on MoneySmart.

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