9 Tips On How To Choose A Profitable Property Investment
How do you know if this property is worthy of your investments? As a beginner, you can mimic other profitable investors in the industry or you can do research into the reasons why some properties are unoccupied, look for properties that are in a school’s vicinity, and explore future huge infrastructure developments.
Although Singapore is a small country, the prices of properties that are on opposite sides of a road can differ by 10%. Hence, here are some quick hacks that you can use to kickstart your property investment journey.
1. Follow In Other Successful Property Investors’ Footsteps
As a novice, it is definitely beneficial for you to follow and take advice from someone who you might deem to be more experienced, knowledgeable, and have a better portfolio than you. Explore in a similar direction and do research on the properties these experienced investors are intrigued by. Engaging the services of a reliable property developer is also key.
2. Spot Big Chain Companies For Your Business Properties
Big companies such as McDonald’s and Uniqlo perform a comprehensive analysis of a location before deciding. Though you will not be able to do the same due to the high cost, you can do something similar.
For example, when Uniqlo began venturing into Singapore, they chose Tampines One and not along Orchard Road, which has the highest traffic volume. The decision should spark some form of curiosity in investors to explore into regions near Tampines One because Uniqlo would not have chosen a location with low foot traffic.
For Food and Beverage (F&B) spots, a traditional way is to locate prominent fast-food chains. Once you spot them, you would know that the traffic volume is relatively high in that location.
3. Figure Out The Occupancy Rates For Your Personal Properties
Many investors tend to calculate the rental yields in a region. Although valuable, seasoned property owners also consider occupancy rates when finding suitable properties to invest in.
The occupancy rate provides a clearer and more direct picture of the status of the properties in a region. For example, in February 2017, Sentosa Cove had a low occupancy rate in spite of the typical huge rental revenue. This figure suggested that things were not optimistic with the decrease in the number of well–to–do ex-pats.
4. Focus On Properties With Schools In Proximity (Not Only “Elite” Schools)
In Singapore, if your house is in the proximity of a school, the children in the household will have a higher chance of enrolling in that school. Hence, there will always be a decent amount of interest in homes near schools, especially the “elite” ones.
Why is this beneficial for property owners, even those who own properties near the “non–elite” schools? This is because the family will most probably stay put in this house for their children to attend the school more conveniently, which leads to a longer average rental period.
5. Uncover Gentrification Within Districts
Gentrification is the process of improving a district or region such that it conforms to middle–class taste. To put it into context, for example, the shops along the popular locations such as Jalan Besar and Tiong Bahru are where the trendier shops are. On the other hand, the places with relatively lower foot traffic house expensive cafes. Another observation you can make is that stores near corners are actually “atas” retailers, though they tend to appear “cheap” at first glance.
As a property investor, you need to know that gentrification happens naturally – it is rarely determined by the town council or the government. Hence, you should not fully depend on the Urban Redevelopment Authority (URA) master plan. Instead, you should go and take a look at the different districts to discover patterns that will be more useful to your planning.
6. Spot The “Ripple Effect”
When a district undergoes enhancement and the value increases, it will frequently affect the nearby locations, causing the “ripple effect”. If you are able to make a decision early and purchase before the “ripples” affect the nearby districts, you will be able to make a sizable profit.
To aid in your decision making, you can start by analyzing the final selling prices of properties in a district with its surrounding locations. A situation that typically happens before the “rippling effect” is that the final transaction price will differ by more than five percent between nearby districts.
A clumsier method is to simply identify districts with huge reconstruction works, such as Paya Lebar. The adjacent districts will get a higher chance of benefiting from the enhancements in the next few years.
7. Attend Property Auctions
Do take some time to attend mortgage sales. Although you might not be promised a fair price, you might snag rare opportunities in fire sales. Fire sales occur when the property owner is rushing to sell the property on hand due to its high cost.
If the reserve price is not matched during the auction, do not hesitate to reach out to the property owners personally. You never know – they might agree to make a deal with you offline.
8. Do Not Neglect The Older Properties
Buyers are not concerned with how long the property has been left on the shelf – they are more concerned with accessibility and satisfaction with the amenities.
This suggests that aged properties can possibly reap the same rental income as their newer counterparts as long as they reside in a good area. This is so as the selling price is less due to its age, so you will have a larger rental yield.
However, do not forget to factor in the cost for maintenance or repairs, and the demand for the property as it has fewer years left for tenants to stay in.
9. Take Note Of Huge Infrastructure Advancements
For example, the high–profiled High-Speed Rail in Jurong could potentially drive up property prices in the nearby areas. With more government infrastructure plans, the creation of new transportation hubs or roads can bring about a rise in property prices in the area.
Developments To Take Note Of:
- Business hubs such as tech parks will cause the employment rate in the nearby districts to increase which will drive higher demand and therefore price of properties in the area.
- Big recreation areas such as parks
- Elements that will reduce traffic and noise, such as “Car lite” districts, which will attract more families and individuals
- Creation of educational institutions
We hope that these nine tips were useful for you. If you want to be successful, keep a keen eye on upcoming developments in the area, and always read the news. Of course, if you want to play it safe or don’t have much time to spare, you can always just choose to copy the investment strategies of successful investors.