How To Spot a Good Investment Unit

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How do you spot a good property investment unit? For beginners, you can copy other successful property investors, or do your homework by checking the Singapore real estate market, vacancy rates, research nearby schools and check for upcoming major infrastructure developments.

In Singapore, we often find ourselves asking: How can this tiny island have so many property investment choices? It does not help that sometimes, being across the street will raise or lower the rental income by more than 10 per cent. It is true, there is a bit of property expertise involved in finding a good investment unit, but here are some quick tips that do not require a whole army of property experts.

1. Follow other successful property investors

While we are against herd mentality, this is one move that is always useful for beginners looking for an investment unit. Look around for a experienced investor, whom you consider fairly successful. They do not even need to be at the top of the property game, just more experienced and with a better track record than you. Look in the same general areas that they do, and try to find out which properties they are interested. Chances are, they know something that you do not.

2. For commercial properties, look for major chain brands

Using this analogy, major chain brands such as McDonald’s and Uniqlo, do extensive analysis before picking a location. While you cannot afford the same advisory services, you can take a page out of their book. For example, when Uniqlo first set up in Singapore, they picked Tampines One, a residential mall, instead of the usual Orchard Road location.

That was a pretty good hint for investors, to look around the same general area. They would not have set up there if there was a lack of foot traffic. For Food and Beverage (F&B) locations, an old method is to try and spot major fast food chains. If you see these in the area, you know that foot traffic is probably good.

3. For residential properties, check the vacancy rates

A lot of investors check rental incomes in an area. That is useful, but seasoned landlords are also careful to check vacancy rates when scouting for an investment property. This is a more immediate sign of the current situation. For example, in February last year, there were high job opportunity rates in the Sentosa Cove area. This was a good clue that things were not hunky dory, despite the usually high rental incomes associated with the area.

When buying a residential investment property, look for schools in the neighborhood. You probably know that, if you live near a particular school, your children are more likely to get in. As such, there is always good demand for homes near schools. But even if a school is not as famous, it still benefits the landlord. The reason is that, if the family’s children attend the nearby school, they are unlikely to want to move. That results in longer leases.

4. Visit property auctions to catch a bargain price investment property

Do drop by during mortgagee sales. While there is no guarantee you will always get a good price, you might find the occasional fire sale. This is when a property has become too costly for its owner, and they are eager to sell it quickly.  If the reserve price is not met during the auction, remember to approach the sellers directly if you can. They may allow to a private deal with you.

5. Look for aging properties

This is about hoping for an en-bloc sale. It is about rental yield. Tenants do not really care about how many years are left on the lease. All they care about is convenience and comfort. This means that even though it is an older property, it will be a good investment if it is in the right location where they could generate the same rental income as comparably newer properties.

Given that its price is lower due to age, you would effectively have a higher rental yield. All you need to do is to ensure that the price of maintenance or restoration is not too high. Also, you must be sure of its rent ability, as it is not easy to sell a property with an expiring lease.

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