Before you proceed to snap up the first condo you come across, know that your investment is infinitely better made when you’ve done diligent research. Because when all is said and done, the rental real estate field still requires investors to have a good understanding of what does – and what doesn’t – make for a money-making rental property.

So what makes a good rental property investment?  For answers, we looked at apartments and condominiums across Singapore that commanded gross rental yields of 4% and above, to identify their common characteristics.

Current gross rental yields are calculated by taking the annual rental income of the development and dividing it by recent resale prices of the corresponding project. To ensure consistency, we only considered rental and sales transactions involving one-and-two bedroom units, and projects with at least five sales and five rental transactions of such units from January 2017 to January 2018.

 

Private residential properties with rental yields of 4% and above from Jan 2017 – Jan 2018

 

Common characteristics of high-yield Singapore properties

Singapore’s rental market remains in the doldrums, despite signs of a property market recovery from last year. Overall gross rental yields for non-landed private homes from January 2017 to January 2018 are hovering just around 3.2% - the lowest in a decade.

What are some characteristics that set these high-yield rental properties apart from the rest? From the list above, we have observed the following factors:

 

1) Proximity to the city centre

“Location, location, location,” – surely you’ve heard this phrase often enough to know of its importance. And indeed, it is pretty much the number one rule in real estate, since a home’s value pretty much depends on where it’s at.

It’s also a clear key criterion for real estate rentals, as you can see from our list. Six of the eight properties yielding 4% and above are located in the Central Region.

Prime district properties located close to the Central Business District (CBD) also tend to see higher levels of rental demand. For instance, Lumiere, which had an average rental yield of 4.7% from January 2017 to January 2018, is smacked right in the CBD, and is just a stone’s throw away from International Plaza and Icon Village. Meanwhile, Suites at Orchard on Handy Road, which yielded an average of 4.1% within the same time period is less than five minutes’ drive or just two MRT stops away from Raffles Place.

Elsewhere, Alexis, The Centren, Kerrisdale and Burlington Square are all located in the city fringes of the Central Region.

 

2) Proximity to MRT stations

Based on our study, the majority of properties that yielded 4% and above from January 2017 and January 2018 are within 500m of the nearest MRT station.

In the prime districts, Lumiere is located 260m from the Tanjong Pagar MRT station, while Suites at Orchard is located just 112m from the Dhoby Ghaut MRT station.

Meanwhile, in the city fringes, Burlington Square is a mere 189m from Rochor MRT station. The Centren and Alexis are located 284m from Aljunied MRT station and 421m from Queenstown MRT station respectively. Elsewhere, Kerrisdale is located roughly 401m from Farrer Park MRT.

Find more properties near MRT stations here.

 

3) Distance to schools

Proximity to schools is another common characteristic of high-yield rental properties in Singapore, as observed in the cases of Haig 162 in Marine Parade and West Bay Condominium in Clementi.

For example, Haig 162, a 99-unit freehold development along Haig Road, is just minutes’ walk to Tanjong Katong Primary School and Tanjong Katong Secondary School. It is also within 1km radius of international schools such as the Canadian International School (Tanjong Katong Campus) and Chatsworth International School (East Campus).

Meanwhile, West Bay Condominium is about five minutes’ drive from the National University of Singapore (NUS), and is within 1km radius of schools like Waseda Shibuya Senior High School and Kent Ridge Secondary School.

Incidentally, both projects are not within 500m walking distance from the nearest MRT station. Find more properties near schools here.

While knowing some of the core characteristics of high-yield investment properties is vital in helping you find positive cash-flow properties, it is important to note that rental yield is just one part of the total return of investment equation. When considering real estate investment, it is equally important to pay attention to capital growth potential.

The general rule of thumb is, the lower the purchase price, the higher the potential for upside, and the higher the likelihood that rental yields will be favourable - such as this list of winning projects that won the EdgeProp Value Creation Award based on capital appreciation and rental returns. Read on for more!