Singaporean landlords today should know that there are other ways to increase the potential for a higher rental yield aside from just raising rental rates.
For instance, property management companies can optimize investment returns on your behalf by handling renovations and upgrades. Another way involves free incentives such as offering to pay for utilities to attract tenants. Vacancy rates can affect your bottom line, even if there’s only one unoccupied unit in your property.
Renovations, Upgrades, and Lower Expenses
When you decide on an aggressive approach for boosting the rental income capacity of your assets, it requires an upfront investment. Like any other aspect of the real estate business, landlords could earn more when they spend more. This becomes evident when you remodel or renovate your rental properties.
However, don’t just splurge and expect a makeover project to provide a significant increase in your property’s value. While some people are willing to lease a residential space with the latest amenities, not all renovation work offers the same level of investment returns. Focus on a unit’s bathroom or kitchen before planning to upgrade other facilities. You could increase your rental price by up to $100 per month from remodeling these two areas alone.
What’s the Current Average on Rental Yields?
Once you decide on a renovation plan, look at the prevailing market rates for rental spaces in your community or district. As of April 2018, the average rental yield in Singapore reached between 2.5 percent and 3 percent. The median rate today might not be that different, although it’s possible to increase yield by up to 4.5 percent.
If you spend $1 million to remodel only the units’ kitchen areas, you should have crunched the numbers to find out the possibility of incurring losses in the future, particularly from vacant units. A property management company should be able to help you with a decision on just how much you could spend, and they could even arrange everything for you.
The Best-performing Properties
Since condominiums are the most common type of leasable properties, this market segment offers the best insight on the industry’s performance based on rental yield. Newer projects often fare better than older buildings, so it’s essential for your portfolio to be maintained if not renovated every year.
In 2018, the J Gateway condominium in Jurong East recorded the highest yield rate at almost 9 percent year over year. The Ocean Park development in District 15 provided the best yield with rental rates only falling 0.6 percent since 2013. That’s nearly on par with the 0.4 percent decline on average rental prices compared to figures in 2018.
In the end, there are several ways to enhance the income potential of your rental property, but most of these require help from a real estate management expert. When choosing a property manager, you have to make sure that the company has a legitimate Management Corporation Strata Title. It’s better if they provide financial services apart from the general building maintenance and management.