Tag Archives: Rental Income

Price cuts at prime central private homes too

THE sale is on for private residential projects in the prime central region, following price cuts for city fringe and suburban projects which helped developers move more unsold units.

Palms @ Sixth Avenue, a strata landed semi-detached project, is offering to absorb the 7 per cent additional buyer’s stamp duty which existing Singaporean home owners have to pay for a second residential property.

With this, prices will go from $5.3 million to $4.9 million for a 4,510-sq-ft unit, and from $7 million to $6.5 million for a 5,834-sq-ft one. The discounted prices translate to a per square foot range of $1,086 to $1,114.

The project will receive its temporary occupation permit (TOP) in the first quarter of 2015.

Meanwhile, Hallmark Residences along Ewe Boon Road in Bukit Timah is offering a discount of more than 10 per cent for several of its units.

A 969-sq-ft two-bedder, for instance, will cost $1.9 million, down from $2.1 million. Three-bedders will cost $2.8 million instead of $3.1 million, and four-bedders, $3.5 million instead of $4 million. An actual show unit will be open for a one-day-only viewing tomorrow, an agent told The Business Times.

R’ST Research director Ong Kah Seng said “it was only a matter of time” before core central region (CCR) projects started to cut prices. “They have been left substantially unsold for quite a long time, and generally buyers’ interest for CCR projects has been very weak. Well-located projects like these have hefty price tags, and previously, there wasn’t the total debt servicing ratio (TDSR) framework limiting large loans. Some buyers like to overstretch their loan limits by buying costly homes with high leasing demand and hence, investment potential. But they can no longer do so after the TDSR.” The TDSR, which requires financial institutions (FIs) to take into consideration borrowers’ other debt obligations when granting property loans, is aimed at strengthening credit underwriting practices by FIs and encouraging financial prudence among borrowers.

Developers of CCR projects feel compelled to cut prices as the TOP dates of their developments loom closer, because empty units paint a discouraging picture of the projects and buyers may turn sceptical about their investment potential, Mr Ong said.

Two other condo projects in the city fringes are also re-launching units at lower prices.

8M Residences along Margate Road in the East Coast is offering an 8 per cent direct discount on its one to three-bedroom units.

For instance, an 893-sq-ft three-bedder will now cost $1.6 million, from $1.8 million. Per-square-foot prices range from $1,832 to $2,015, a breather from the median $2,100 psf at which its units transacted until April 2014. Buyers may opt to take a 10 per cent “rental guarantee” package by purchasing at the current price and getting a 5 per cent cash-back from the developer annually for two years – even while renting out the unit and receiving actual rental income.

One Eighties Residences is giving a 13 per cent discount on its two-bedroom units and penthouses, which will now start at $890,000 and at $1.4 million respectively.

Derrick Poh, marketing and communications manager at Santa United, the developer, told BT of the Joo Chiat development: “We’ve received enquiries, but those didn’t turn into sales. Buyers are keeping a lookout and shopping around, expecting developers to reduce prices based on the current market outlook.”

In any case, the lull in the June holiday period is driving developers and agents to take any measures they can to move sales, “probably now more so with World Cup fever distracting buyers away from home purchases”, Mr Ong said.

Source: STProperty

How to Maximize Your Property’s Rental Yields

When I raise my rental income, I do it with my eyes closed. The minute I look in my tenant’s sad, watery eyes, I end up feeling like a war criminal. Or maybe I’m just lying, and won’t admit I’m a spineless wuss who backs off when they threaten to “leave and set fire to this dump”. (Hint: I go there with a fire extinguisher). But both ways suck, so how do you maximize your rental yields?

So for another $500 a month, the front door will actually lock?

The Three Methods

There are three methods for a landlord to maximize rental yields.
These are:

  1. Raise Rental Income (Difficult)
  2. Decrease Vacancies (Somewhat challenging)
  3. Decrease Overheads (Easiest of the three)

The third method should be constantly reviewed. You want to be keeping overheads down all the time. Here’s some pointers on each of the three:

1. Raising Rental Income

There’s plenty of ways to raise rental income.  Exactly zero of them are easy.

It usually involves high capital expenditure, because it means splurging on upgrades and extras. And there’s no guarantee what the returns will be. Some ways to raise rental income are:

Just Raise the Rental

Straight up ask the tenants for more money. Because you’re in this to make money, not friends.

Before doing this, check rental rates in surrounding properties. You might get away with charging more than other landlords, if you have the right justifications. But frankly, even charging 10% more is a major challenge. Getting money from tenants is like pulling teeth from a live tiger.

If you don’t have time to research and bargain, consider getting a property agent to do it for you.  At the very least, get them to run a rental appraisal.

Interior Design

The right renovations could raise rental income. But this is hard to quantify. I can’t tell you, for instance, that marble counter-tops will raise your rental income by $X per month.

Most renovation packages cost about $30,000. If the designer has an unpronounceable or vaguely French name, it’s probably triple that. So even if renovations do raise your rental income, it might be a while before the rent covers the design costs.

I asked property investor Charlie Sng about renovations:

“You can raise your rental income by providing a fully furnished unit. So go for an inexpensive design, one that provides all the tables, chairs, cupboards and whatnot.  But don’t go overboard. No point paying $100,000 for a top designer, because there’s a cap to how much rent you can charge. I think a lot can be done with $20,000.”

Charlie says a “nicer” unit could have higher rental rates; up to 10% higher than surrounding properties. But again, no guarantees.

Upgrade to Match Tenant Needs

Protip: Avoid tenants who use words like “splatter-proof”.

You can do this if you know your tenants’ demographic (e.g. Are your tenants mostly students in a nearby University? Expat white collar workers? Blue collar workers?)

Try to include features that demographic will appreciate. Property agent Marcus Seet says:

“Students tend to appreciate things like Wi-Fi or cable channels. Retirees not so much. So if I know I have good catchment for that demographic, I might consider bearing the cost of such things.

In the last unit I rented out, the owner left his Xbox and games library there for the student tenant, which was much appreciated!

I might be able to charge higher rental rates, which more than compensates for the small extras. At the very least, it might reduce vacancies.”

2. Decrease Vacancy Periods

Vacancies create huge dents in rental yield. Fortunately, these aren’t common in Singapore; we’re land scarce, so most landlords have hordes of prospective tenants.

But some people, you know…they can’t find a heat stroke in a desert. So these methods are for them:

Lower the Rent

It might seem paradoxical. But let’s put it this way:

Say your property’s rental value is $4,500 a month, but you can only get tenants at $4,000 a month. Maybe nearby construction work lowered its value. So you lose $500 a month, and that sucks.

But if you insist on charging the full rate, and get no tenants, you’re losing $4,500 a month. A single vacant month would do more damage than nine months of undercharging. So while it hurts to lower the rent, it’s worse if you don’t.

Brace yourself for the occasional need to do it.

Maintenance is Key

Never skimp on maintenance. Charlie Sng explains why:

“I can tell you that if a place looks like the dog house, even if you lower the rent tenants will not want it.  If I offer you cheap rent, but the place is run down, the taps are rusty, the toilet is disgusting… will you take it? If you are like most tenants, you will say forget it, I rather spend more and be comfortable. They have to sleep there you know! I find the most important things are the front door, working power outlets, the air-con, and simple cleanliness. Every year I will re-polish the surfaces, and I don’t allow for any cracked tiles. If you don’t spend to maintain, you won’t even have tenants. What rental yield?”

Charlie adds that older resale flats, despite their good location, tend to have higher maintenance needs. Newer units require fewer replacements and upgrades.

If you’re renting out a condo, you’ll need to evaluate the management committee.

3. Decrease Overheads

The lower your home loan repayments, the higher your rental yield. You might consider refinancing into a cheaper home loan, especially if you foresee vacancies or drops in rental value.  Another way to lower overheads is to control maintenance costs.

For example, using paint instead of wallpaper: If the wallpaper peels, and you can’t find something similar, you’ll have to strip it all off the walls and lay a new pattern. With paint, it’s cheap to paint over peeling patches.

Likewise, using wider tiles can mean less grouting (the spaces between tiles) to clean. For more such information, raise your maintenance concerns to a contractor or an Interior Designer.

Source : Yahoo