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6 Ways to Improve Your Rental Yield

For property investors, the main goals are capital appreciation and rental yield. Many rent out their property for a consistent stream of passive income and are always looking to improve their rental yield.

But what is rental yield? Simply, rental yield is the percentage of profit you generate each year from your property. It is calculated by dividing the annual rental income against the value of your property. So if you own a $1.5 million property and your annual rental income is $42,000 ($3,500 monthly), the rental yield is 2.8% which is about the average rental yield (2% to 3%) in Singapore today. But is it possible to improve the rental yield to, say 4% to 5%?

Today we look at several things you can do to help you improve your rental yield:

1. Know Your Renters

There are many people renting in Singapore for whatever reasons. Expatriates posted to the Singapore office, factory workers, students etc. Knowing who will likely rent your place is key as you can then plan on renovations, furnishings and appliances to suit their needs. For example, expats might require a fully furnished place with branded appliances, whereas students may not. If your property matches what the renter is looking for, you’ll have a better chance of getting the rent you want.

2. Maintenance and Repairs

Always address repair requests by the tenants in a quick and timely manner. It keeps your tenants happy and also maintain your property in a good condition. The tenants would very much appreciate and you build good relationships and therefore, increase the chances of renewal/price increase. You will minimize the need for a major renovation/repair works after years of renting out.

3. Appoint a Property Management Company / Agent

When it comes to maximising your rental returns, engaging a property manager/agent is a good thing as he/she can help find the right tenants at the right price. As a busy investor yourself, you may not have the time to attend to repair requests, maintain the property and organize repairs. The property manager/agent will do all these for you and when necessary, carry out inspections to ensure your investment is well-kept. Of course there is a small cost to this but in the long run, it will be worth it.

4. Know Your Market

In order to keep rental increases sustainable, you must have an idea of the “market rate” within your location. Do your research and know how much the neighbours are charging to prevents overpricing or underpricing your property. Always ensure that your rental property is competitive with nearby comparable properties. Use the URA website for the latest rental estimates. With the latest data from URA, you can then decide your rental rate based on facts and figures.

5. Minimise Vacancy

Having a property left vacant is one of the biggest headaches for landlords. It means forgoing thousands of dollars of income. Think of creative ways to entice renters. For example, you can offer a slight discount for 6 months before reverting back to the original asking rate, offer 3 months of free utilities or even upgrading the current appliances. All these may cost you some money but the on-going rent you receive should be able to offset the cost.

6. Refinancing

Most home loans in Singapore offer low interest rates for the first three years, but rise significantly from the fourth year onwards. Many savvy investors look to refinance their home loans after three years. Refinancing your home loan can lower your monthly repayment and reduce the interests. This will in turn, save you some money and of course, increase your rental yield.

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