Rental Yield vs Mortgage: Cash Flow Analysis | Homejourney Guide

Rental Yield vs Mortgage: Cash Flow Analysis – The Simple Rule

For Singapore investors, a property is usually considered cash flow positive when the net rental yield (after costs) is higher than the effective mortgage rate, and the monthly rent covers your loan instalment with a safety buffer of at least 10–20%.

This cluster article focuses on Rental Yield vs Mortgage: Cash Flow Analysis, and supports Homejourney’s main pillar guide on safe property financing in Singapore . It gives you a practical framework to stress-test cash flow, especially if you are planning multiple property financing, portfolio financing, or building a “property empire” with loans across several properties.

Core Concepts: Yield, Mortgage and Cash Flow

1. Gross vs Net Rental Yield (with Singapore Examples)

Gross rental yield = Annual rent ÷ Property purchase price × 100%.

Example: A one-bedroom condo at Punggol bought at S$900,000 and rented at S$3,200 a month.

Annual rent: S$3,200 × 12 = S$38,400
Gross yield: 38,400 ÷ 900,000 ≈ 4.27%

This is higher than the national average private residential yield of about 3.1–3.4% reported for Singapore in recent years.[1][6]

But serious investors in Singapore always look at net rental yield, which removes recurring costs.

Net rental yield = (Annual rent – Annual costs) ÷ Property price × 100%.

Typical annual costs for a private condo:

Condo maintenance: S$300–S$450 per month (S$3,600–S$5,400 a year)
Property tax for investment property (tiered, higher than owner-occupied)
Fire insurance, minor repairs, aircon servicing Aircon Services
Agent fees every 1–2 years (pro-rated annual cost)

In practice, many investors I speak with in areas like Tampines, Sengkang and Jurong West set aside at least 20–25% of rent as running costs. For older resale HDB in mature estates (e.g. Toa Payoh), I personally budget more for repairs because wear-and-tear tends to show up after the first year of tenancy.

2. Mortgage Basics: Rate, Tenure, and Monthly Instalment

In Singapore, most investment property loans are from banks such as DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, CIMB, RHB, Citibank and others, regulated by MAS.[1]

Key terms you must understand before analysing rental yield vs mortgage:

Interest rate type: fixed packages (e.g. 1.4–1.8% for 2–3 years) vs SORA-pegged floating packages, typically 1M or 3M SORA + bank spread.[1][4]
Tenure: up to 30 years (shorter if older borrower or older property).
Loan-to-Value (LTV): capped by MAS, lower for second and third properties and subject to TDSR.[1]

Your monthly instalment is usually calculated using an amortising loan formula. For a quick and accurate calculation, use the Homejourney mortgage calculator at Bank Rates or Mortgage Rates , which shows how changing tenure and rate affects monthly cash flow.

3. Cash Flow: The Real Number That Matters

For investors who care about monthly holding power, the key metric is:

Monthly cash flow = Rent received – (Mortgage instalment + Monthly costs).

A property with a slightly lower yield but very stable rental and long-term tenant (e.g. near One-North or Changi Business Park) can be safer than a supposedly high-yield unit with frequent vacancy.

Interest Rates, SORA and Why They Matter for Yield

Most bank loans today are pegged to SORA (Singapore Overnight Rate Average), the benchmark rate used by Singapore banks for floating packages.[1] When SORA falls, floating mortgage instalments become cheaper, which can turn a breakeven property into a positive cash flow one.

The chart below shows recent interest rate trends in Singapore:

Use Homejourney’s real-time SORA tracking on the bank rates page Bank Rates to see where rates are today before committing to any investment.

Step-by-Step: Rental Yield vs Mortgage Cash Flow Check

Step 1: Estimate Realistic Rent Using Local Knowledge

Rents can vary even within the same town. For example, a high-floor 2-bedder at Paya Lebar Quarter will command a very different rent from an older walk-up in nearby Geylang Lorongs, despite both being near Paya Lebar MRT.

For safer estimates:

Use URA rental transaction data and HDB rental statistics (from data.gov.sg and HDB portal).
Walk the area at night to see tenant profile (expat-heavy around Robertson Quay, student demand near SIM, NUS, NTU).
Check practical details tenants care about: sheltered walkway from MRT, noise from PIE/CTE, nearby bus stops, and food options (e.g. Chong Pang Market in Yishun is a major draw for tenants).

Then apply a slight haircut (5–10%) to your estimated rent for safety.

Step 2: Calculate Net Rental Yield

Example: You buy a 2-bedroom condo at Hougang for S$1,200,000 and expect to rent for S$3,800/month.

Annual rent: 3,800 × 12 = S$45,600
Assume 1 month vacancy every 2 years ⇒ annual vacancy cost ≈ S$1,900
Condo fees: S$350/month ⇒ S$4,200/year
Maintenance & aircon servicing: budget S$1,200/year Aircon Services
Property tax (non-owner-occupied): assume S$4,000/year (check IRAS calculator for exact figure)

Total annual costs ≈ S$1,900 + 4,200 + 1,200 + 4,000 = S$11,300.

Net annual income ≈ 45,600 – 11,300 = S$34,300.

Net yield = 34,300 ÷ 1,200,000 ≈ 2.86%.

This is more realistic than the gross yield and should be used when comparing against mortgage costs.

Step 3: Work Out Monthly Mortgage and Interest Cost

Same property: S$1,200,000 purchase price, 75% loan (S$900,000), 25-year tenure, 1.7% interest.

Approximate monthly instalment ≈ S$3,700–3,800 (use the precise Homejourney calculator at ). Annual mortgage outflow ≈ S$44,400–45,600.

You can also estimate the annual interest cost in year 1 as loan × rate:

Interest ≈ 900,000 × 1.7% = S$15,300 (principal repayment makes up the rest of the instalment).

Step 4: Compare Net Yield vs Effective Mortgage Rate

From Step 2, net yield ≈ 2.86%. If your effective mortgage rate (including any known future repricing) is around 1.7–2.0%, the yield is higher than the rate, which is a good starting point.

However, you must also look at monthly cash flow:

Monthly rent (after vacancy adjustment): 45,600 ÷ 12 ≈ S$3,800
Monthly non-loan costs: 11,300 ÷ 12 ≈ S$941
Mortgage instalment: ~S$3,750

Monthly cash flow ≈ 3,800 – (3,750 + 941) = –S$891.

Despite a higher net yield than mortgage rate, this scenario is cash flow negative monthly. You must be prepared to top up nearly S$900 every month. This is where many new investors are caught off guard.

TDSR, CPF and Safety Buffers for Singapore Investors

TDSR & MSR: Why Banks May Say “No” Even If Cash Flow Looks OK

MAS’ Total Debt Servicing Ratio (TDSR) caps your total monthly debt obligations (including home loans, car loans, credit cards) at 55% of your gross monthly income. For HDB and EC buyers, Mortgage Servicing Ratio (MSR) further caps the housing instalment at 30% of gross income.

This means even if your projected cash flow is positive on paper, banks may not approve your loan if it breaches TDSR/MSR. You can quickly test this using Homejourney’s eligibility calculator on the bank rates page .

Using CPF Safely

CPF can be used for downpayment, monthly instalments and stamp duties (subject to CPF and HDB rules). However, over-using CPF for investment properties can deplete your retirement savings.

Many seasoned investors in areas like Jurong East and Bedok prefer to use more cash for instalments and keep some CPF untouched to allow OA to grow at 2.5% per year. Always confirm the latest rules on CPF and HDB websites before committing.

Multiple Property Financing & Portfolio Cash Flow

If you are planning multiple property financing or building a property empire, you cannot look at each unit’s yield in isolation. You must analyse portfolio cash flow and how each new property affects your TDSR, ABSD, and risk level.

For deeper strategies on several properties loan structures and portfolio financing, see these Homejourney investor articles:

Financing Multiple Investment Properties in Singapore: Homejourney’s 2026 Mortgage Playbook Financing Multiple Investment Properties in Singapore: Homejourney’s 2026 Mortga...
LTV and ABSD for Investment Property: Homejourney’s Safe Financing Guide LTV and ABSD for Investment Property: Homejourney’s Safe Financing Guide
Best Bank Loans for Property Investors in 2026 – Homejourney’s Safe Financing Playbook Best Bank Loans for Property Investors in 2026 – Homejourney’s Safe Financing Pl...

Portfolio Cash Flow Checklist

Before taking on another mortgage, ask:

After including the new loan, do all properties combined still remain cash flow positive?
What if rental drops 10–15% (e.g. during a downturn like 2024 rental correction) or vacancy stretches to 3–6 months?[1]
Are you comfortable if SORA rises 1–1.5% above today’s level?
Do you have at least 6–12 months of instalments in cash/CPF as an emergency buffer?

Homejourney’s bank rates page Bank Rates allows you to compare rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank and more in one place, so you can see how different loan packages will impact your portfolio cash flow before you sign.

Local Insider Tips for Safer Cash Flow

1. Choose Micro-Locations with Sticky Tenant Demand

In practice, I’ve seen far more stable rents in projects that are within 5–7 minutes sheltered walk from key MRT interchanges (e.g. Bishan, Paya Lebar, Jurong East) compared to condos that require a feeder bus.

If you exit directly onto the MRT concourse from places like Boon Keng MRT Exit A or Tiong Bahru MRT Exit B, tenants are willing to pay a small premium for the convenience, which protects your cash flow.