If you are thinking of upgrading while still keeping your first property to earn some rental income, this article is for you.
First time landlords are sure to have this mantra on repeat – I have to secure a tenant ASAP as each untenanted month is a loss of income, which leads to the three most dreaded words: Negative Cash Flow.
Imagine not receiving any rental income to mitigate the cash payments towards servicing your new unit’s mortgage, monthly maintenance fees and renovations costs – oh, the horror!
Our first apartment unit was nearing the two-decade mark (it was purchased in 2000), so when my mom and I decided to put our former home up for rent, a lot of hard work, sweat and tears were involved in getting it ‘red-carpet’ ready.
My 18-year old, 1,033 sq ft apartment unit with 3 bedrooms was listed on 22 May. We received an offer on 10 June, and exactly 2 weeks later on 24 June we handed the keys over to the new tenant!
Let’s be real here, most upgraders and first-time landlords have little choice but to do D.I.Y renovations on their rental units due to financial constraint. I especially understand how tight one’s budget can be with a recently-purchased second property. Hence, that’s how I ended up as my own contractor-cum-handyman-cum-painter.
While I had applied the strategies found in my book, Property Buying for Gen Y, there were some new learnings which I gleaned along the way; after all, the learning is in the doing, eh?
Here are the eight pointers which resulted in my unit’s successful and speedy closing:
1. Set a goal and a budget
Before anything else, my mom and I sat down to discuss and make a decision on whether we should sell off or rent the place out. It might seem redundant but this step is vital as it helps you determine the next course of action.
My mom chose to rent out her property – the reason being that although the apartment is 18 years old, it is located within Jurong Lake District, which is touted to be Singapore’s future second CBD. Hence the capital appreciation potential is pretty robust. Also, since my mum is not working, the rental income will help to cover her mortgage cost and supplement her daily expenses.
With this in mind, we agreed upon a specific date and put forward an action plan to get everything done: to move out by 15 April and get the place ready for tenant viewing by mid-May.
Initially, we had set a budget of S$4,000, but we soon realised that we were too prudent and forgot to include the costs for professional cleaning, labour and other out-of-pocket expenses such as plumbing and electrical works.
We ended up spending S$7,000 – the lesson here is to remember to factor in additional repair costs for older homes. You will have to spend a little more than average to spruce up your (ageing) home. The investment will be worth it as nothing assures a tenant more than a homely and well-maintained unit.
2. Get a good real estate agent
Not everything needs to be handled on your own, secure some help by hiring a reliable agent. Getting a neutral party involved is important as they do not have any emotional connection to your property and hence, can offer unbiased advice.
Our agent’s tips went a long way in ensuring that our unit got rented out quickly at a fair market price – he was the one who pointed out that we should replace our toilet doors and get new starters for our fluorescent lights.
We were truly blessed, our agent even went above the call of duty by helping us change the faulty master bedroom door and light bulb before the handover. In addition, a quality agent will help you to screen prospective tenants, saving you from dead-end leads.
3. Do an inventory check & change faulty items
Bolstered by our agent’s sharp eye, my mum and I decided to remove our rose-tinted glasses and view our unit with fresh eyes. Having lived in your first home for many years, you tend to accept your property’s flaws as a normality over time.
For instance, we did not initially notice the dim lighting, the spotty toilet flush in the guest bathroom or the perpetually damp spot near our washing machine which caused an ugly stain over time (pictured below).
Only after doing a thorough inventory check did we realise that there were at least a dozen things which would require replacing. Take note that faulty lighting and sub-par plumbing systems are more often than not the two main culprits in older homes.
When changing the faulty toilet doors, my mom and I opted for an acrylic opaque slide and swing door which is more durable and resistant to wear-and-tear than the original plastic model that came with the property.
As a landlord, the safety of your tenant is of utmost priority as you do not want to be held liable for any injuries they may sustain in your property. One of our window grilles near the kitchen sink was almost coming off the wall so we decided to replace it too.
4. Refurbish the kitchen cabinets
Protest if you must, but the majority will agree that the kitchen is where the heart of the home is. This is also the first place which most couples will check out when scouting out a rental home.
A great way to give your tired, old kitchen an upheaval without breaking the bank is by refurbishing the cabinets! We decided to go for a clean, minimalist and modern look with a white colour palette as this design is timeless and easy to clean.
We also got a brand new cooker hob and hood; your new tenants would not want to cook off the back of someone else’s grease.
5. Consider chemical cleaning
Forget your typical sweep and mop routine, we are talking about the big leagues here, like chemical cleaning. A thorough cleaning is necessary for older apartments to get rid of stubborn stains and dirt which had accumulated over the years.
We engaged a cleaning contractor who cleansed the entire apartment for only S$300. It was money well spent as gone were the accumulated dust in hard to reach places (top of windows), tough stains in the kitchen and bathrooms as well as watermarks on our walls.
Do not underestimate the power of a gleaming, sparkling clean property to boost the energy of an old apartment. After all, we Asians are all about ‘chi’ or energy, so a property giving off good vibes will help rein in even the pickiest of tenants.
6. Give the entire house a fresh coat of paint
The key here is to stick with very light colours. This is because it is easier to capture the attention of a prospective tenant with a neutral colour scheme and repainting will not take up too much of your time (hire someone to do it otherwise).
My biggest regret was opting for a dark green colour scheme in the living room previously as it meant we had to apply five coats of white paint to cover it! It was so much work that it took three days to do cover the dark colour and even everything out. Check out the before and after images yourself:
A plus point of repainting is that the smell of fresh paint inspires confidence among the potential tenants; not only it’s a sign that you are a considerate landlord but tenants will appreciate the extra work you had put in to ensure their comfort and well-being.
7. Service the air-conditioning system
This is a must to ensure that your air-conditioning units will be in tip-top condition.
Moreover, servicing does not cost much, at most it is S$40 per unit. Be sure to highlight your good deed to prospective tenants and to casually drop the advantages of having clean air-cond filters – replacing dirty and clogged filters can lower your air conditioner’s energy consumption by 5%-15%, translating to lower electricity bills.
Here is an extra tip: Throw in a freebie for your tenant by scheduling annual air-cond maintenance works by a professional. These inexpensive tune-ups will ward off the need for a costly air conditioner replacement and help keep your tenants longer. A happy camper will have no reason to move out.
8. Study your property type before furnishing it
You will need to consider your property type and tenant demographic when deciding on the extent of furnishing – should you go with a partially or fully-furnished unit?
My mom and I went for the latter, given that our apartment build is catered for family living. We felt that most of our potential tenants; couples looking to start a family or a young family who is upgrading, will already have purchased some furniture themselves or are planning to do so.
Therefore we will only provide some of the basics such as the dining table set, kitchen cabinet, side tables, a master bed and mattress while other essentials such as sofa, curtains, TV and clothes storage were not included. This strikes a good balance, I get to cater to a wider market (design preference can vary greatly) and my tenants are still able to have some fun in completing the furnishing and decorating of the place themselves.
My parting words of advice: When it comes to closing a deal, it is always best for landlords to take a back seat and let the agent handle the backend work. Trust your agent and leverage on his/her experience in managing tenants’ expectations; this will save you loads of time and energy in going back and forth with potential renters.
To all the eager landlords out there, may these strategic tips assist you in securing a tenant match, as quickly as it did for me.