How To Invest In Property Prudently in Singapore
Financial development in property or real estate is considered profitable due to the high entry barriers compared to investing in, say, stocks and unit trusts.
Property investment is popular with Singaporeans looking to increase their income.
Having a daily monthly rental income is often seen as one way of enjoying affordable retirement for Singaporeans. When you already own a home, you ‘d need to know what would make it famous with investors and tenants alike before investing in a second house.
Leverage your money
You don’t need to have a huge chunk of money available to buy a property that costs S$1 million: around S$50,000 in hard cash and S$200,000 in your CPF. The main thing to make the most of is the tremendous amount of leverage your home loan offers.
But it’s important to understand how the home credits work. One should always look at ways of keeping costs down, either by refinancing mortgages at beneficial rates or by repaying them. There are also ways to find the cheapest rates out of the hundreds of packages available, and to avoid traps like obscure rates on boards.
Invest in your own home
When buying a second house to let out of your budget is a way out, the only choice is to use the current house as an investment type. However this can mean addressing certain restrictions.
It could mean buying a neighbourhood property that has good growth prospects but not one that you naturally prefer. The positive thing is that, over the years , growth can mean long-term payoff.You ‘re also going to want to grab value investments, such as a house priced exceptionally low due to its quality and location; but maybe a bus ride away from your place of work.
Focus on location
There are several considerations that find investors as well as tenants. The considerations include location of the land, tenure, public transportation modes and proximity to MRT stations, condition of the unit and its amenities, nearby schools, close proximity to shopping centers, home tuition and tenant regional centres such as business parks and offices.
However, there are other factors to consider for investors, such as scouring for larger developments with more units, as contrasted to boutique projects with lower awareness, volume of transactions, a smaller land footprint and fewer facilities. Developments of 999 years or freehold tenure are preferred, but this matters more to the owner than to the homeowner, as lease agreements last for a limited time period.
Identify factors for potential capital gains
Not every available building or property unit is situated in a convenient location that enjoys close vicinity to good academic institutions, the Central Business District, where most of the offices are situated, malls, transport hubs, etc.
In comparison to the more lucrative and common freehold or 999-year projects, prices are often affected when properties come with a 99 year leasehold. Prices for properties that are too old no longer seem to rise as much. This is particularly so if the property in question is not freehold or has a 999-year lease, as depreciation is beginning to be a consideration for the new buyer. We also advise investors to keep ahead of the growth plans of the Singapore government where significant capital is invested in the growth of infrastructure at these locations, which then pushes up capital prices.
Look carefully at your finances
If you think buying a house is translating into returns that will roll in for the next 15 years, you are in for a treat. A super-rich investor can afford to disregard small rises in repayments of home loans or maintenance fees. But the small costs will eat into your profits as a new, small-time investor.
You could lose money if you assert the flat 15 per cent on write offs instead of monitoring the exact costs of services and maintenance. If you don’t refinance despite being out there with a cheaper loan package, you lose the money.
If you were to lose every stream of revenue tomorrow altogether, your home loan would have to remain paid for another six months. This is the minimum at which to fire. You’ll need to sell your property during a major financial disaster. So if you don’t have six months, there wouldn’t be time for your property agent to market the home, hold viewings, negotiate and receive a reasonable price. The earlier you decide to divest yourself from a house, the less you ‘re going to make from it.
Or if you rent out the house, being financially stable for six months means you don’t have to move into the first client you’ll find just to keep the rent payable. Desperation is how property owners end up with negative rent yields, or bad tenants.
Source for a property unit popular with tenants
Another aspect that investors should remain aware of; one that is not quantifiable immediately but equally significant. That is, how easily they can rent or sell a house. Some assets out there seem like a steal and claim lower valuation, but when it is empty it might not be easy to rent out or sell. And this poses a major risk to the yield and cash flow of an investor.
When it comes to property types which are common among both investors and tenants, condominiums are usually favoured over landed property. Condos typically have higher returns for buyers, and lower maintenance costs. There is typically less time for vacancy among tenants too. For a small community of higher-income Western expatriates, however, landed properties may be popular as they typically bring their families for them, and enjoy larger outdoor spaces.
Find tenants quickly for rental income
One way to quickly gain attention among tenants is to spruce your property with a fresh paint coat and improve your home ‘s appeal, particularly if it’s not in great shape.
This other way to attract tenants is to give them a teaser of what the apartment might look like as their future home. Soft furnishings like curtains and lamps, even if you don’t want to invest in the unit’s furniture or privacy screens, can be done well.
If the prospective tenants are in a competitive market, you can schedule sessions for home-staging. Engaging media savvy property agents will also help to better market the property to tenants, especially those who already live in the area, and will soon be renewing their lease. If the estate has a lot of demand for rental units, the landlords can invest in good furniture, or employ rental services for home staging to quickly get more viewers and deals. Otherwise, the soft furnishings alone could be enough.
Key Areas To Maintain For Your Rental Property
Managing a rental property regularly is a crucial component of being a landlord. However, if you’re a property owner, you’ll always need to make sure the property is up to standard and in perfect shape for tenants. Perhaps one of the most stressful aspects of handling rental properties can be the handling of property maintenance demands.
As a landlord, you can determine whether you want to employ a professional contractor or DIY those work. Upkeep and maintenance of assets may be a full time work. Whether you have one of those already, it may be time to call in the pros to give you a bit of assistance. It’s important to understand that people such as plumbing or electrical problems need to manage these work. It’s also recommendable to recruit licensed plumbers and electricians.
Any smart landlord will list all rental property maintenance work, and execute all of those tasks one by one. The list would also dependent on the characteristics of rental property and the budget set aside by the landlord for that reason. We’ve created a brief guide on how to establish a maintenance budget on a rental house, among other items.
Also, you should develop your list of go-to contractors. It can be a huge time-saver, particularly if you do have multiple properties in different areas of operation. If you are using a multi-purpose handyman or experts, keeping your list of contractors handy will streamline the task of providing maintenance services for properties.
Checks regularly for pests
When it comes to pest control, whether it the duty of the landlord or the tenant has been the focus of debate. That said, it’s your duty as a landlord to ensure you provide your tenant with a secure and habitable premise. It means ensuring the property is pest-free until the tenant moves in. From there, holding it up is the duty of your owner. In this to be legally binding, though, make sure that you include it as part of the lease agreement in your rental house. Should you find any pests such as termites or mice, do not hesistate to contact a professional pest control service immediately.
Keep your rental unit clean by not leaving food lying around, keep the containers upside down when not being used, and periodically search your property for any signs of unclean waste or stagnant water. Seal the holes in your walls inside your leased property and patch leaking taps so rodents don’t have any sources of water. Condo management and municipal council also regularly carry out pest control / extermination activities, so keep as many windows shut at night to avoid any escaping cockroaches entering your home.
Check for damage and water leakage
Look for soft spots on walls , roofs and ceilings. Also, check if there are any water leaks under boilers and water heaters or perhaps a water pipe is leaking. The thing is that a persistent water leak can cause massive wall, roof, or anywhere it appears to be harmful. The sooner it is identified and removed, the better. And there is the danger of mold, which can shape too. This too will carry about a high expense.
Severe damage to water will undermine structural integrity in your home. That is why it is essential that you include this in your maintenance checklist for rented properties. The trick is to make sure you have the problem repaired before it gets serious. After heavy rainfall, and after snow and ice have melted, the perfect time to look for leakages. Look for soft spots at the ceiling while testing for water damage, inspect your boilers and the water heater. When you think there is a leak, immediately contact a waterproofing contractor.
Keep your air conditioning systems in good shape
It can be expensive to patch or remove an air conditioning system entirely. That is why it is important to take care of it constantly through routine aircon maintenance. Below are some ways to help you handle the cooling system in your house.
Not only can dirty filters raise the energy bill but they can also lead to system failure. And if it is the tenants who are paying the electricity bills. High bills will result in you losing tenants. You keep everybody satisfied by adjusting your filters periodically, and your air system runs smoothly.
- Remove water from standing place. It is necessary to get rid of the water that is stored daily in the humidity-moderating systems of your building such as drains pans. Stagnant water can also turn toxins and bacteria into a breeding ground.
- Wash the conduits of the blood. For describe the equipment frequently, using brushes, vacuums, and power washers. Getting filthy and dirty units can present a health threat to your tenants and can cause costly potential problems.
- Check bearings and belts. Check for straight edge of your belts, and clean them periodically. Belt mismatch will cause the pulley to groove and wear out the belt.
- Replace ventilation filters. Air filters usually aren’t costly. Therefore, keep an air filter supply on hand for easy replacement.
Maintain your water heater
Water heaters are frequently neglected during maintenance of the rental properties. And, if your water heater has not been repaired, then you know how expensive it can be.
Get an annual inspection done by professional water heater installers. Your water heater needs routine maintenance from qualified and licensed professionals, just like your vehicle.
- Wrap your water heater into a blanket of insulation. The insulating blanket helps to reduce the amount of heat loss at standby. The reduced strain will help extend her life.
- Drive a mini-flush to get rid of debris on your water heater. The sediment will decrease your water heater output, as well as corrode your tank. You might also put the mini-flush on your checklist for inspection.
- Reduce temperature setting in your water heater. This helps to lower the chances of overheating your water heater. You may also expect your electricity bills to save up to five per cent.
Clean the Sinks
Clogged sinks can be a serious nuisance. Cleaning them out during the spring once a year is enough to make sure you don’t get frustrated all year long. There is a simple, but incredibly efficient and inexpensive method to that end. First pour half a cup of baking soda into the sink. Enable it to stay there for 5 minutes before adding a cup of vinegar and hot water. Give it another five minutes before rinsing it for half a minute with hot water. And all your concerns about clogged sinks will just as well disappear.
Examine Caulking and Grout Between Tiles
The grout between tiles will crack over time and can remove the caulk surrounding the tub. You no longer have a waterproof seal when that happens, and water can leak through the surrounding walls or floor below and damage them. You will remove the caulking or grout as soon as you find any cracks or gaps, to avoid possible water damage.
Tips For Managing Rental Property Maintenance
One of the key reasons most landlords run into difficulties is because they are passive rather than constructive. Too often they appear to ignore any of their rental problems for months, or even years. So when things start to intensify their state of fear is set in. The property all of a sudden requires a new water heater, the pipes are all clogged, the boiler needs fixing, and so on. The list can be pretty long. The only way to escape a pit like this is to maintain periodically.
Would you want to spot problems early on in your rental property? If so, then routine property inspection are required. Regular checks will help make sure your asset is in good shape and secure.
Here are 8 tips suggested by our professionals to help you handle the management of rental properties more effectively:
1. Defines roles
Create a comprehensive lease with straightforward obligations of the lessor/lessee. The rental contract is one of the greatest security tools you have while handling demands for maintenance of tenant property. This can prevent you from making repairs obviously induced by neglect on the part of the contractor.
A successful maintenance plan for properties begins with a signed lease. Make sure you explain the obligations that you and the tenant / s have following the move in. In general, tenants have to take care of routine repairs such as clearing garbage, changing light bulbs and slight maintenance problems.
Hold contact lines still available. Not all demands for land repairs are easy to accommodate. You may need to collect quotes, look for a specialist, wait for outside repair needs and other factors when the weather is right. Overall, please make sure to keep in touch with your tenant so there’s no risk of creating confusion or irritation. When you are interactive and open with your tenants, they will be willing to be truthful in exchange with you and keep you aware of any problems that might arise. If you can communicate effectively with them, you can prevent conflicts and misunderstandings.
2. Create a management timetable
When formulating a plan for preventive maintenance, you’ll find it easy to identify the minor problems before they become expensive problems. Include a lease agreement allowing tenants to contact you in a timely fashion if they have any maintenance problems or pay a fine.
Please remember that all devices have a lifetime. Knowing how long they ‘re going to last will help you plan ahead and prevent major problems. When you know the washing machine is nearing the end of its life, then it’s smart to start looking ahead and purchase a new one when you find a great deal. In doing so you save a great deal of money and stop needing to purchase one as a matter of urgency.
3. Setting up a maintenance fund
Below are a variety of ways to help any landlord determine the maintenance price on a rental home. Several forms of formulations are discussed below. Yet you would end up spending about the same sum of money on operating costs in most situations.
A good landlord is ready for just about any emergency. Have a reserve fund readily available to help solve any issues quickly. By setting up a slush fund for rental property maintenance, you’ll be prepared for unexpected requests for rental property maintenance to begin pouring in. Particularly relevant if some of your rental properties have outdated appliances or structural problems that you are closely monitoring.
4. Record the property condition
You will chart the state of the place before new tenants move in. Take videos or photographs, and make a list of the damaged items. You can prevent conflicts by getting pictures of what it looks like, and it also demonstrates that you have no intention of withdrawing security deposit from the tenants.
Do your own due diligence on routine maintenance. Through performing preventive maintenance and doing each property’s at least annual walk-throughs, you can nip loads of maintenance problems in the bud before they get bigger and more pricier. When switching tenants, always ensure that end of tenancy cleaning is performed. Make sure the tenants have a clear picture of the condition you expect your property to be in after tenant moves in.
Whether you’re managing multiple rental properties or just one, using the same flooring, paint, hardware, and appliances in all of them is very convenient. It will save you time and energy, and will in any case prevent misunderstanding. When one of the tenants wants a paint bucket to fasten a wall, you’ll know precisely what colour they need.
5. Store all receipts and records
Hold documentation of each and every repair. We know this sounds boring but when tax season rolls around, you’ll be grateful! The company will pay off much of the costs incurred in preserving the rental property. Even if you can record those costs, you can only reap tax breaks or credits. Owning rental property is a company in its own right, and certain maintenance repairs and improvements that fall into the company expenses category and can be tax-deductible. Hold all of the records and receipts, and note down the repair date. Working with an experienced tax advisor, who can make sure you are consistent with local laws, is a smart idea.
7. Consider the estate appealing to prospective tenants
Take a minute and consider if you would like to stay in that space or not before you invite new tenants to your house. All new tenants deserve to be living in a newly painted and deeply cleaned house before moving in. You have the obligation of giving them a property ready to move in.
Tell the guests if they think the property needs enhancements and improvements. If their proposals are reasonable, they should be taken into account, and enforced at some stage. If the property contains carpets, you should have them sanitised and cleaned professionally. If there were also pets, you might want the carpets removed and replaced depending on their circumstance.
8. Making the most of automation
Forgotten easily, your tenants may overlook to replace batteries for the smoke alarm. It’s a smart idea to spend on batteries that last longer, and have tamper-resistant fixtures that automatically turn on. Consider setting up front yard and backyard motion lights or solar lamps, lockable and programmable thermostats, and automatic bathroom ventilation.
Basically, daily management of your rental property always depends on the relationship you have with your tenants and on their cooperation. Therefore it is important to maintain a good landlord-tenant partnership. Keeping a well-maintained property can help draw the right occupant to you and increase the value of your house. So, keep up to date with your maintenance checklist for rental properties.