3 Things to Know Before Becoming a Landlord

By Aaron De Silva / EdgeProp SG | April 19, 2018 4:00 PM SGT
For many people in Singapore, the dream is to have at least two properties to your name: one to live in, and one to rent out. The goal is to have the second property be a cash cow, providing a stable and passive source of income.
The reality of being a landlord, though, isn’t quite as straightforward. There are a bevy of financial, legal and even emotional and psychological issues to navigate. Here are some considerations you need to be mindful of if you plan on becoming a landlord.

Money Matters

Obviously this is the most pressing concern for many folks. How much outlay do you need upfront? What about running costs? If it’s a condo, who pays for maintenance – you or your tenant? Will your rental income be taxed? Will you even make money in the end?
First, the upfront costs. Let’s assume you take a loan of $800,000 on your second property. At an interest rate of 1.8% per annum (current bank rates range between 1.6% and 1.85% p.a.) for a three-year fixed package, you’re looking at a monthly mortgage of $3,972.
And that’s just the first three years. From the fourth year onwards, that figure is likely to increase, in which case you can consider refinancing.
When your property is finally ready to welcome its first tenant(s), you may find yourself having to wait for a month or two before that actually happens. This could be due to a variety of reasons. But the fact remains: the unit remains vacant while you still have to service the mortgage.
Or perhaps you’re mid-way through a tenancy. Suddenly, the tenant finds himself/herself retrenched, repatriated or relocated, and has to vacate the unit. Again you find yourself with a vacant property, and another month or two goes by without...