Investing in Property: What you should look out for and how to rent it out quickly

Singapore’s high property prices can be attributed to the lack of space on the island. And where there is less supply, prices naturally tend to increase.

Due to the high barriers to entry compared to investing in stocks and unit trusts, direct investment in property or real estate is considered lucrative.

Investing in property is popular for Singaporeans looking to grow their income. Having a regular monthly rental income is also seen as one of the ways for Singaporeans to enjoy a comfortable retirement.

If you already own a property, before investing in a second property, you would need to know what would make it popular with investors and tenants alike.

#1 Know what makes a property unit popular with investors and tenants

There are several factors both investors and tenants look at. The factors include “location [of the property], tenure, modes of public transport and proximity to MRT stations, condition of the unit and its facilities, the schools that are nearby, proximity to shopping malls and tenant catchment areas such as business parks and offices.

For investors, however, there are other factors to consider, such as looking for larger developments with more units, as opposed to boutique projects where there is lower awareness, transaction volume, a smaller land footprint and 'fewer' facilities.

Another factor that investors should take note of is, how easily a property can be rented out or sold.

Some properties out there seems like a steal and are asking for lower valuation, but may not be easy to rent out or sell when it becomes vacant. And that is a huge risk to an investor’s yield and cash flow.

To determine how easily a property can be rented out, investors should check the development’s monthly rental volume to ensure the take-up rate is healthy and consistent, and that the available listings for rent are not over-saturated. Naturally, the higher it is, the better it will be. There is no particular benchmark, but comparing to neighboring projects, it is a good way to gauge the response.

For investors, condominiums generally are preferred over landed property as they have higher yields and lower maintenance costs. There is usually less vacancy time between tenants too.

However, landed properties can be popular with a niche group of higher-income Western Expatriates as they usually bring their families with them and enjoy larger outdoor spaces.

#2 Looking to sell in the future? Identify the factors that drive up the price of a property

Beyond the factors mentioned above, “demand is what drives up the price of a property”.

Not every development or property unit available is located in a convenient location that enjoys proximity to good educational institutions, the Central Business District in which most offices are located, malls, transportation hubs, and so on.

Prices are also affected when properties come with a 99-year leasehold, as opposed to the more lucrative and popular freehold or 999-year developments.

Prices for properties that are too old – usually those that are over 15 years old – tend not to appreciate as much anymore. This is especially if the property in question isn’t freehold or has a 999-year lease, as depreciation starts to be a concern for the incoming buyer.

Investors are advise to keep abreast of the Singapore government’s growth plans. Example of areas such as Punggol, Jurong, Paya Lebar, Tengah and the Greater Southern Waterfront as major [government] capital is invested into the infrastructure growth in these locations, which then drives up capital values.

#3 How much money should you be putting into your property?

Investors should ideally put in as little as you can, as the cost of funds are so low, in the current low-interest-rate environment.

A cut in interest rates by the US Federal Reserve encourages spending and borrowing for cars, homes, and so on. This means home buyers enjoy lower cost of funds and ideally should maximize leverage and retain more cash for seizing other opportunities.

Putting your funds into higher-yielding investments will help you achieve positive carry and improve your net yields.

Positive carry refers to an investing strategy that yields positive cash flow, which means there is more money coming in than out.

Investors should keep in mind that a rule of thumb for rental yields for properties in Central Core Region of Singapore is at least 3%.

For the Rest of Central Region (or RCR), yields should at least be at 3.5%, and for districts Outside Central Region (or OCR), yields should at least hover around 4%.

#4 How to have your property leased out quickly?

One of the ways to garner interest among tenants quickly is to spruce your property with a fresh coat of paint. It works like a charm and enhances the appeal of your home, especially if it isn’t in great condition.

Another way to interest tenants is to give them a preview of what their future home may look like in the apartment. Soft furnishings such as curtains and lights must be done well, even if you do not want to invest in furniture for the unit. This makes the property more homely than a spartan apartment.

A well-renovated property that is furnished tastefully will certainly draw more oohs and ahhs!

Should the potential landlords find themselves in a competitive market, we advise that landlords should arrange for home staging sessions.

In short, if the estate has a lot of competition for rental units, the landlords should invest in good furniture or hire home staging rental services to get more viewers and offers quickly. Otherwise, soft furnishings are more than enough, if there isn’t much competition.

source: edgeprop singapore

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TEO SHERRALYN

Property Advisor

I will like to change the way you experience property – by creating a hassle-free and smooth transactions, be it for buying, selling or renting.

All it takes is a call to kick-start the experience, I can be conveniently reached on my personal mobile for a non-obligatory discussion at +65 8866-5000 or email me at sherralynteo@sri.sg now.