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.