Navigating Your Way Through Investing in Property in Singapore
Singapore’s powerful property market has earned it a reputation as an excellent investment sector. With that said, it’s easy to see why the country attracts a plethora of investors and speculators wishing to profit from the vibrant market conditions.
For decades, property investment has stood strong as one of the most popular strategies of investing in Singapore. Keeping a close eye on property prices and buying and selling property can yield brilliant results, high returns, and earn you regular passive income. If you are looking to purchase your first Singapore property or you are a seasoned investor wishing for a second or third, it’s important to do it right.
There are several paths you can explore toward a successful property investment in Singapore. Here we will explore them and how to successfully navigate the process.
Flipping Properties
Purchasing and selling a Singapore property quickly with a goal of making a profit, otherwise known as flipping properties was an incredibly popular method of property investment in the country during the mid-2000s. While there have been changes in the law designed to limit these types of real estate investment, it still remains popular today. The basic idea is to keep a close eye out for good investment opportunities by closely monitoring the real estate market.
There are three main strategies investors can follow, which include purchasing a competitively priced property in poor condition and restoring it before selling. The second is buying a home and relying on capital appreciation, while the third is securing an option to purchase (OTP) and transferring this onto a higher bidder quickly.
It’s important to outline the pros and cons of flipping properties. For starters, this option can be profitable if you monitor the market well. Secondly, refurbishing and selling property in Singapore can be a rewarding and fun project. The downsides are house flipping is reliant on capital appreciation which is out of your control. Also, making intensive repairs or home improvements before selling could impact your profit margin significantly.
Renting Out Properties
Many residents and expats in Singapore are active buy-to-let landlords that gain from the ability to earn rental income each month. You could follow in their footsteps too. However, there are numerous things to know in advance. These include the different rules impacting who can and cannot rent out different residential property types, as well as the advantages and disadvantages of being a landlord in 2022 and beyond.
The path toward property investment begins in the same vein as flipping properties. Firstly, you will want to seek out attractive investment properties in desirable locations that feature lots of nearby amenities. Rather than buying them to sell on, you will be looking to secure a stable rental income or yield by letting them out to tenants after purchase. If you’re looking for a home loan to secure a property, it’s time to check out Property Guru. They are specialists in home loan comparison services that can help you find a loan that aligns with your needs.
Next, it’s time to weigh up the pros and cons of renting out property. Firstly, you can earn passive income each month and put this towards your personal profits or mortgage payments. Secondly, renting out property in Singapore can be highly lucrative in the long run. The cons are the rental income is not always stable, and there are limitations on what you’re able to do or not do should a tenant not pay. Also, you may need to meet a minimum occupation period (MOP) to rent out an HBD flat.
Investing In REITs
Arguably one of the main drawbacks of flipping properties or buying a rental property is the sheer volume of capital Singapore residents and expats will need to raise to get things started. In many cases, investors will need a lengthy mortgage or an extortionate upfront deposit before they can get their hands on the keys. This is where real estate investment trusts come in as a potential investment alternative.
In simple terms, investing in REITs is like buying stocks and shares. However, the key difference is that REITs use the funds they build up to purchase and manage properties, rather than to run regular businesses. In most instances, REIT investors can expect a rental yield of anywhere between 5 and 8% per annum.
Some of the advantages of investing in REITs include delivering regular rental yields for investors over a sustained period. Investors can also enjoy passive returns, buy and sell a REIT at any time, and REIT dividends are not normally deemed as taxable income in the country. One of the cons is that investors have no control over performance or returns. Also, you will need to pay a fee should you wish for your REIT investment to be professionally managed.
Investing in property in Singapore can take numerous forms. All the investment strategies listed above come with their pros and cons. Before jumping in and purchasing a property to turn into a rental home, quick sale, or REIT investment, would-be property investors like yourself should think carefully about what options are most appropriate for someone with your circumstances.
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