Thinking of investing in private residential property? It’s important to choose the right property for your portfolio and invest in one that can grow your wealth over the long term. Here are some factors you should consider.
1. Rental yields
A high rental yield is associated with higher rental income and this increases the chances that you can gain a positive cash flow on your investment. Check out the average rents for the area and ensure that you choose a unit that can command a decent asking price which can cover all your costs and expenses.
2. Vacancy rates
Check the vacancy rates for the development or area you are interested in. High vacancy rates are a sign that that the development is not very popular with tenants. It may also force landlords to lower asking prices to attract tenants.
3. Location, location, location
Location is one of the most important factors which you need to consider when choosing your investment property. You will be able to command a better rental price for your unit if the development is located near an MRT station and has amenities, shopping and eateries nearby.
If your development is near to a good school (or any school for that matter), families are also likely to sign longer leases as they would not want the hassle of moving too often.
4. Potential for capital growth
If there are plans for urban renewal or rejuvenation in the area, this could increase the chances for capital gains in the longer term. Check out URA master plans to identify areas which are slated for upgrading and infrastructure development.
5. Maintenance and repairs
As a landlord, you will be responsible for paying the maintenance fees and ensuring that any repairs are done promptly to minimise inconvenience to your tenants. An ageing property could come with high maintenance fees and may result in frequent repairs. This could eat into your rental yield. Therefore, choose your property wisely.
6. Know what your tenants want
What sort of tenant do you want to rent to? If you are targeting families, then a decent-sized unit with condo facilities that are close to schools would appeal to this group. If you are targeting young professional expats they may prefer living near the city fringes and be close to parks, eateries and public transport. Some expats may even prefer ground floor patio units or units which face the pool or greenery.
7. Leasehold vs freehold
If you are purchasing a unit for the purpose of earning rental income, then whether the unit is a 99-year leasehold or a freehold unit would not matter to your tenants. Location would probably be one of the key dealbreakers instead.
8. Brand new launch vs resale
Buying a resale unit would allow you to rent it out almost immediately instead of waiting for the TOP for a brand-new launch. If you are buying a unit for investment, buying a resale unit may make more sense.
In looking at a particular area, it’s important to consider the demographics of potential tenants. Units in the East such as in Simei or Tampines would appeal to people working in Changi Business Park or who work in Changi Airport. Developments near Clementi would attract university students of faculty of NUS or families with children in United World College. Areas such as Tanjung Rhu or Newton which are near the city fringes would appeal to those working in the CBD areas.