6 Factors to Consider for Property Investment


Six Major Factors to Consider in Buying a Property for Investment

Of late, I have met many buyers who have the potential to buy a second or even a third property especially after going through a financial assessment. There is also this group of buyers who seems to be at very cool and at ease in getting new properties, albeit smaller properties and this is mainly those who benefitted from the recent collective sales. Their challenge is how to determine which is the best property to purchase.

In a simplify manner, let’s look a the Six Major factors to consider in buying a Property for Investment

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1. Location

The basic factor in getting any property is still Location, Location, Location. The condition, price and even sizes of a property can change but you cannot change the location of a property.

Prospect buyers need to stop looking at the current status of the neighbourhood around the property and start paying attention to the future development especially in Singapore. In this aspect, we have the URA Master Plan to refer to. The next Master Plan is due to be released in 2019, which interestingly will include underground spaces and their potential.

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2.  Tenure of Property

There is always the debate of freehold vs leasehold. Freehold are more expensive than leasehold and is attractive to hold for generations to come.   If the leasehold is 99 years, there will be issue to find buyers when there is only 40 year lease left because there is restriction in the use of CPF.

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3.  Accessibility

In Singapore, being near to a MRT Station makes a lot of sense to take advantage of the extensive MRT network. Tenants would appreciate this if they are not driving or do not have their own private transport.   Developers are also sensitive to this factor and would priced their properties accordingly.

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4.  Demand

Demand always play a big role in real estate appreciation. A good location will create desirability and in turn will create demand. Higher demand raises property prices.

In a property portal survey, it estimated 69% of the millennials (aged between 21 and 37) are living with their parents. The majority of 66% are looking to buy a property. This group will likely compete with buyers who have smaller units in mind for investment.

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4.  Amenities

Convenient amenities can be a major factor for a tenant’s choice and the types include:

  • Access to MRT
  • Access to Bus Stops
  • International Schools for foreign family
  • Schools or Institutes
  • Childcare Centres or Kindergartens to cater to the young kids
  • Wet or Supermarket to get groceries
  • Clinics
  • Bank branches
  • Parks
  • Prominent Hawker Centre or Eateries
  • Shopping Malls
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6.  Overhead Cost (Wear & tear, renovation, maintenance, cost of vacancy)

Wear and tear issue in an older property can be an annoyance and can be expensive to resolve the issue. There was this instance that there was a pipe leakage outside unit and caused the walkway to the unit to be wet. On checking with the management of the development, that fall under the responsibility of the owner. Owner had to bear the cost of the change of pipes.

The cost of renovation is usually correlated to the attractiveness of the unit. That would certainly help to attract and get tenants quickly.   This can also be discussed with the tenant such as the colour of the wall or additional storage space.

The maintenance fee for a prospective landlord is usually not taken into consideration upon the purchase of the unit. However, this is effectively the cost of a rental transaction. Another cost that a landlord should consider is the cost of vacancy when there is no rental income. Landlord should be realistic in their asking rental.

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