Read? Home for Living and not for profit taking (4)
Let re-visit the story of ex-neighbour who used to live one floor below.
After selling his 4 rm HDB flat and he bought another 4 rm HDB flat which is a few bus stops away from his previous flat.
So as case study, let us simplify some figure to make it easier to understand the Maths involved.
Cost of 1st flat = $55K
Sales of 1st flat = $300K
Paid back to CPF OA including back-date interests = $100K
So profit = $200K
Do you think that he made $200K multi-bagger profit on his 1st flat?
Let continue with the Maths.
His 2nd flat is just few bus stop away from his 1st flat and the 1st flat is just one bus stop away from MRT.
We can safely assume that the selling price of 2nd flat is definitely lower. Let assume $50K cheaper at $250K. He took a new 20 years loan of $150K with a bank after offsetting paid back to CPF of $100K.
Now he has $200K cash and $150K debt.
Did he actually make $200K multi-bagger profit on his 1st flat?
What is your answer?
A. He made $200K multi-bagger profit.
B. He didn't make any multi-bagger profit, his profit is just $50K i.e. $300K - $250K
C. He didn't make any multi-bagger profit. He made some profit. He swap $150K debt for $200K cash.
My answer is C. What is your?