Wednesday, October 31, 2018

Quick guide to becoming a successful landlord in Singapore

SINGAPORE: Renting out your property takes experience. After a few years, you’ll know which tenants will be great, and which ones will add therapy to your costs (judging from experience, the ones who go out of their way to impress you, such as by bragging about their high level job, tend to be the most problematic).

Until you’re a veteran who’s had at least six or seven tenants, here are some hacks to make things easier:

1. Keep note of the exact paints used
This is to make sure you can get the exact shade and colour for the inevitable touch-up. While most contractors can look at the paint and make a calculated guess, mistakes do happen – and there really can be a few hundred shades of white. Unless you want a patchwork effect on your walls, note down the brand, name, and product number of all paints used.

The other alternative is to just repaint everything in a new shade – but that can be expensive.

2. Use the 15 per cent rule for tax claims
In case you didn’t know, mortgage interest is tax deductible. But only the interest portion, and not the principal (this amount should be detailed in the regular letters from the bank).

In addition to claiming the mortgage interest, you can also make claims for maintenance costs. This can get a bit complicated – you need to list all the items and costs of replacements. So save some time: you can claim the mortgage interest, plus a flat 15 percent of gross rental income.

Note that you shouldn’t be too quick to do this if you’ve undertaken major repairs – the claimable amount could come up to more than 15 per cent.

3. Pre-arrange site inspections
In Singapore, landlords cannot disturb the peace and quiet of tenants with unannounced inspections. And quite frankly, no one is paying to live in a military barrack, so it’s best to lay off the stand-by bed. The problem is, you'll want to know when something is broken or falling apart as soon as possible.

A good example of this are floorboards – especially if you get fungal issues (it really is possible for mushrooms to grow in your condo toilet, even on the 20th floor). Once floorboards start to warp and rot, you need to quickly fix the issue. Let the problem stew for half a year, and you’ll have to rip out the entire floor.

Arrange to investigate your property every six months (with the tenant’s permission, of course). It’s good for them too, since it lets them update you on what’s faulty and in need of replacement.

4. Place plastic or vinyl on the bottom of kitchen cabinets
Kitchen cabinets have a tendency to spoil fast, especially if food spills on the various drawers or floorboard. And keep an eye out for cabinets that conceal pipes: If they leak, the bottom of the cabinet can start to rot.

You can ask the contractor to lay plastic or extra vinyl (from flooring) along the base of drawers and cabinets. Do not use towels or newspaper – not unless you want to cultivate experimental lab bacteria. That only works if the tenant is willing to change them regularly; and most won’t.


5. Make the place as bright as possible when trying to find tenants
Strong, white light – along with white walls and ceilings – give the impression of newness and spaciousness. Avoid yellow lights, or similarly coloured walls when trying to draw tenants. In particular, avoid using wallpaper.

If the wallpaper gets damaged, and that particular print is not made anymore, you will end up changing the wallpaper for the entire room. So whenever possible, just use white paint.

6. Keep in touch with your tenant’s situation
Send the occasional birthday card, and drop by to talk to the tenant. It’s not just about being friendly; you want to keep yourself updated on your tenant’s situation. If they have just lost their job and are looking for a new one, or are homesick and want to fly back, you’ll get early warning.

This will give you fair time to prepare your finances, to cover a month or two when you may have to look for another tenant. You don’t want to find out at the last minute or when the lease expires, that they have no intention of renewing.

7. Use renovation loans before personal loans
Whenever you need to make major renovations and you need a loan to cover it, always use a renovation loan first. The interest on this can be as low as 3 to 4 per cent per year, whereas personal loans tend to be between 6 and 9 per cent.

If you have just bought the unit, the mortgage banker may be able to get you a good reno loan deal with the same bank. Sometimes you can get six month interest-free loans. Alternatively, use loan comparison websites to find the cheapest deal of the month.

Whatever the case, always use the renovation loan first. Only use the personal loan for the portion that would exceed the reno loan cap (most reno loans are capped at $50,000).

8. If you want to renovate while the tenant is there, position it as an upgrade
So you want to install a feature wall, or a bathtub, or an air-conditioner. Only problem is, you don’t want to annoy the tenant with the sound and dust. The solution is easy: Tell the tenant you’ve decided to upgrade the place for them, at no cost.

This makes it a little more acceptable to most tenants (and changes nothing for you, since you were going to do it anyway). The key is to always phrase it as a benefit to the tenants, which really it should be anyway.

9. Paint the furniture and appliances
So the furniture or an appliance is faded, rusting, peeling, etc. It happens. There’s only so many times you can yank a fridge handle, for example, before the silver coating peels to reveal plastic. The same thing often happens with shower faucets, because it’s such a moist environment.

If it works though, don’t be too quick to junk it. Get the right kind of paint from a DIY store (tell the shopkeeper what you are trying to repaint), and just paint over the ugly bits. Most of the time, you’ll find the results are quite passable.

10. Started out as unfurnished, then buy over from the first tenant
Don’t want to furnish the apartment yourself? Here’s one alternative:

The first time you get a tenant, rent the apartment as unfurnished. Encourage your tenants to bring in their wardrobes, floating shelves, sofas, etc. When your tenant needs to move back home, offer to just buy over the furniture from them at a discount. Voila. Instant furnished apartment.

Of course, this runs the risk that they may not furnish it to your liking. But you can also pick and choose the bits that you want, and buy those over at second-hand prices. The tenant should be pretty happy to easily sell on their furniture rather than having to list and arrange hand over to multiple other people- as long as the price is right, of course.