Rules for Property Investors

Technology is making direct investment in real estate more accessible to the individual investor. It is no longer the purview of only big institutions with an army of analysts, bankers, accountants, and valuers. This is good news because the returns on cash are almost zero and volatile stock markets have become the norm.

The first thing to know about direct investment in real estate is that there are two ways to make money. The first is rental income while the second is capital appreciation.

Rental Income

I define rental yield as rental income divided by the purchase price. When looking at rental yield potential, though, check out a unit’s Rental X-Value and Sales X-Value for a good approximation of what return you could get if you were to buy that home.

As the screenshots below show, rental yields in Singapore are significantly outperforming cash.





Why are rental yields for Freehold properties (2.5-3.5%) lower than that of Leasehold properties (3.0-3.8%)? This is due to the fact that Leasehold condominium units sell at a slight discount to comparable Freehold units yet command similar rents.

Rule One: Investing in Leasehold properties, on average, will bring you a larger rental income.

Capital Appreciation

When it comes to rent, you are basically a price-taker. This means the market’s demand and supply dynamics will determine the rent you can charge and the numerator of the rental yield calculation. Therefore, the best way to maximise your rental yield is not to overpay when you buy the property.

Rule Two: Do your homework.

In analysing the various properties you’re considering, you want to look at a property that:

       a. Is in a location with strong growth potential;
       b. Is undervalued;
       c. Has a favourable rent to price ratio (gross rental yield).

One of the best ways to analyse a property is to work with your agent to identify potential opportunities based on data.



Rule Three: Be patient.

Keep your cool and think unemotionally about any and all decisions you make. A big part of the investment process is waiting for the right investment to come along and then:

       a. Making a smart offer;
       b. Negotiating the Right Price;
       c. Being willing to walk away if the deal doesn’t give you an acceptable rental yield.

Making the right offer is critical. The fear of bidding too high coupled with the desire to land a property under market value can make even the best investors lose their patience. Your agent and SRX Analyzer can help you keep your cool and focus on the cold, unemotional numbers. Your agent should have access to this amazing SRX Analyzer app that helps you find the win-win offer that will allow you to buy the home at the Right Price.



Rule Four: Be opportunistic.

Smart investors employ sophisticated real estate advisors who are in the market 24/7. As your advisor is running around Singapore doing her normal job, she will come across hidden opportunities and bring them to your attention. Most of them won’t work but all you need is one.



Finding an agent whom you can trust is a huge part of the investment process and requires the type of hiring processes found in successful companies. Start with SRX.com.sg as the track record of the best agents in Singapore are prominently displayed and verified in SRX Property’s Agent CV. Check out their CV and then invite them for an interview.

Rule Five: Manage your property like a business.

There are three ways to manage your property so it is a success:
       1. Keep your capital costs at a minimum;
       2. Maximise your revenue;
       3. Minimise your expenses.

Common sense? Absolutely. But here is a secret for how you can do all three better. Get your trusted agent to help you.

Work with your agent to:
       a. Buy at the Right Price using X-Listing Price;
       b. Construct a well-thought out, well planned financing strategy;
       c. Find a balance between renovation costs and potential rental income.
       d. If you’re going to furnish your property you need to strike a balance between the quality of appliances
           and furnishings and their respective costs. Factor in taxes and any fees into your property costs;
       e. Track your Rental X-Value via myPropertyTracker;
       f. Create a rental strategy with your agent;
       g. Employ your agent to deal with finding tenants, managing the tenants, and keeping expenses
           reasonable but fair.

Rule 6: Let your agent do the work so you can relax and count the rent money.

Here are some of the things a great agent will do:

       a. Investment Research;
       b. Negotiations;
       c. Valuation administration;
       d. Legal & tax administration;
       e. Financing administration;
       f. Leasing & rental services.

Rule 7: Track your investment with myProperty Tracker.



myPropertyTracker will help you track changes in rent as well as the competition. Also, SRX Property has added a new feature called myCapital Gain.



Real-time myCapital Gain will tell you when you have met your return-on- investment goals, at which point, you might consider selling the property and realising your gains.

Here is an important statement. The game of real estate investment, like any type of investment, carries a level of risk. So it’s important that before you begin investing in property, you thoroughly investigate the viability of this asset class for you. Consult people you trust before making any investment decisions.