Evaluating the potentials and possible return risks of a property is an important step when it comes to investing in real estate. Whether you are a beginner or an expert, a key principle of successful investment is intensive research and planning, to confidently answer WHY you are investing in that specific property and ensure it produces a worthy return of investment (ROI) in the future.
The landscape of Singapore is categorized into 3 regions: the Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR). Whether you are planning to invest in property in the CCR, RCR, or OCR, proper research and consultation with trusted specialists like our Property Giant Consultants should take place to consider 5 ways to make your property work for you:
Location is a huge factor in a property’s value. The major considerations of a location should consist of the influences that surround the property - the centrality, transportation, neighbourhood, schools, lot or unit, and future development plans by the government for that district.
The desirability of the location helps to drive demand, which then appreciates the property’s asset value over time. Hence, learning about the positives and negatives of a location is fundamental, and consulting with a property expert especially if you are a starter in real estate is a valuable investment of your time.
2. Entry Price
Besides location, another important factor is a good awareness of the property prices to avoid overpaying. Paying above the absolute price amount, also known as the “quantum price” of a property, can be a setback for your investment as it results in low to non-existential capital gain in the future.
Some factors that may affect the property price are:
- The size and location of the property, which should match the price you are paying.
- The launch date of a property, as the developer may stage the price to match their demand momentum.
- The balance lease, if you want to flip the property or resell later
Leverage is defined as the use of debt (mortgage) to increase the potential return of investment (ROI). It allows you as an investor to purchase a property that costs more than the cash you have available.
When it comes to investing a property, taking a loan as a mortgage to leverage your equity (cash) can be an advantage to your return of investment (ROI). This means purchasing a property with a down payment and leveraging on the loan to pay for the property, rather than having to pay the full purchase price upfront with your own money. This leaves you with the cash flow to purchase other equity such as gold, stocks, or other assets while the rental collected from the property that you purchased can be used to pay your mortgage.
4. OPM (Other People’s Money) Concept
OPM and leveraging comes hand-in-hand. OPM is a way for you as an investor to build income-producing property by using money from other sources besides your own. When you rent out that property you purchased with a down payment with a high rental yield, you are able to use that rental money to invest in other assets without using any traditional financing options.
OPM limits your personal risk and if used right, there is always potential for positive gains.
5. Rental Yield
A good property investment will produce capital appreciation of Rental Yield Over Time. When you buy a property and rent it out, this gives you the control to increase the rental fees over the years which results in an increase of your return of investment (ROI). Of course, inflation and demand are factors which also influence the rental yield.
Getting a good understanding of rental yield and how it is calculated will help you determine the potential profits or losses of the property you’re looking to invest in.
Invest Wisely with the Right Support
Investing in a property as a starter can be exciting and challenging at the same time. However, using these 5 Ways on How to Make Your Property Work for You will assist you in your real estate investing journey. If you find yourself needing some guidance, contact Property Giant Singapore at +65 6100 6199 and our Property Strategists will be more than happy to give a free, non-obligatory session with you!