7 things Singapore landlords MUST DO to survive 2021

As Covid-19 rages on, property investors are starting to realise that it’s not business as usual. While there’s still rental demand, some landlords could find it more difficult to rent out their property to others in 2021.

Moreover, government relief measures, such as deferments for home loans, will be ending soon in March 2021. If you’re a landlord/investor who is vested in property, here’s what you need to do survive 2021:

1. Don’t be in a hurry to lower rent

While you may be tempted to lower rental rates, resist it. It’s entirely possible for rental rates in some areas to remain the same, and still be drawing or retaining tenants. In fact, condo rents for most Outside Central Region (OCR) condos increased in 2020.

Do some scouting around in your development, or neighbouring condo units. Pay attention to how many more listings are appearing in your area, and check out a property portal like 99.co to see a updated list of rental transactions for your condo and your district.

Then, look at the listings themselves. Are the asking rents still high for your condo? If you notice a discrepancy between asking rent and actual transactions, consult your property agent on how to price and market your unit to tenants to obtain a rent closer to the average asking price.

If rental rates are indeed dropping and the agent feels that dropping rent would lead to a faster take up, then you should consider lowering your asking rent. Otherwise, don’t jump the gun.

If you do lower your rates, you should use the rates of surrounding properties as a peg. Don’t start a “price war” with other landlords by aiming to set a rate lower than theirs.

[Recommended article: Will rent go down in a recession?]

2. Reprice or refinance to keep mortgage rates low

One advantage of the current recession is that home loan rates have fallen substantially. The interest is likely to remain low, for as long as it takes the US economy to recover from Covid-19.

In case it needs to be said, lower interest rates and monthly repayments translate to higher net rental yield. As such, it’s high time that landlords start reviewing their current loan package, and checking for a cheaper option. This can be done by refinancing to another bank, or repricing (switching to a cheaper loan by the same bank).

There are some fees involved: Refinancing typically costs around $2,500 to $3,000, whereas repricing is much cheaper and can sometimes be free (check the terms and conditions of your current loan). Get in touch with a mortgage broker to working out whether the initial expense is worth it.

(Note: if you’re in danger of missing mortgage payments, you’ll need to take more drastic action like loan deferment. Refinancing alone isn’t likely to be enough).

3. Give better incentives for longer leases

During a recession, it’s common for leasing volume to go up (i.e. the number of Tenancy Agreements you sign), even as rental income stays flat or decreases.

This is because more tenants opt for shorter leases (six months, for example) in a recession, even if they actually need a home for longer.

There are two reasons why they would ask for shorter leases. One is job and income uncertainty. Second, with prices going down, they’ll be able to find or negotiate a new lease at a lower rate in six months.

Tenants on short leases can get expensive for a landlord, because you need to market the property all over again, and end up paying service fees (if you use an agent). So if this is your tenant’s sole purpose for getting a shorter lease, try and incentivise them to do otherwise.

It may be cheaper to lower the rent a bit, or even give concessions like a new TV set, mattresses, etc. than to end up with the cost of a new lease every six months.

Speaking of which…

4. Upgrading the property is always the best kind of incentive to give

Better furniture, new appliances, a bathroom makeover etc. should be your preferred way to retain tenants versus lowering the rent.

The simple reason is that, when you upgrade the property, the improvements will also act as a draw for future tenants, or raise the potential for higher rental income down the road. Some improvements can also add to resale value (although this is never guaranteed). If you just lower the rent, there’s really no advantage beyond retaining a tenant in the immediate moment.

Also, it’s easier to argue for increased rental rates later, if there’s visible improvement to the property (versus mumbling that “well, you know, now the recession is over“).

5. Be a present and communicative landlord

There is an increased possibility that you’ll need to negotiate with the tenant, at some point during the recession. As such, be more proactive than usual.

This can be as simple as calling up the tenant, to ask how things are holding up. The last thing you want is to look like the stereotypical evil faceless landlord. You want to tenants to realise that you’re not unethically squeezing them during a recession or Covid-19 outbreak, but that you’re also someone struggling to cover a mortgage.

If you have multiple unrelated tenants, by the way, empathising with even some of them can prevent collective action (e.g. when they gang up and demand lower rent, lest they all leave at once).

We know of some landlords who had food delivered to tenants during the circuit breaker period—this is a very inexpensive way to build rapport and retain tenants.

6. Give your agent an exclusive deal

Marketing a property is way harder during a recession, compared to normal times. It almost invariably results in higher marketing costs, with more time and effort being sunk into each listing.

Property agents have to bear the costs of marketing on their own. They have limited funds, and even more limited time; it’s improbable that every listing will get the same amount of their budget. And if your house for rent is a free-for-all for other agents to list, you can imagine how much effort each agent is inclined to put into marketing your home.

So, instead of non-exclusive agreements, work closely with one agent you trust, and be firm in asking how much the agent is really going to commit (e.g. ask how they will list the property, the prospects they’ve found each week, their various marketing methods, and so forth).

7. ‘Poach’ tenants from other condos

One of the reasons why rental transaction volume has remained high during the Covid-19 pandemic is because there are many tenants who are either downsizing or looking to move to a more affordable location in Singapore.

As a landlord, you can attract these tenants using a sneaky but not illegal method: Join the community Facebook Groups of city centre condos, or condos with a higher rent than yours, and assume the persona of a resident of that condo. Then post the following once you’re approved to join the Group:

“Covid-19 has hit me really hard and I’m looking to find a more affordable rental option in XXX location with YYY amenities for my family. I’ve come across this listing [link to your rental listing] which seems like a pretty good deal but does anyone have any other suggestions? Much appreciated!”

The post also let you to sneakily highlight the attributes of your condo, such as a nearby international school or a generously-sized gym. The trick is to make it sound as personal and non-salesy as possible, otherwise you will get found out and kicked out of the Group. (If you’re seeking single tenants for a small-sized apartment, remove “my family” from the post.)

Well, extraordinary times call for extraordinary measures, if you rinse and repeat this tactic across multiple condo Facebook Groups, you might just score a tenant in double-quick time.

Property is a long-term asset, and landlords should accept that these these dips happen

As a property investor, this won’t be last recession you face, even if it’s the first. Just don’t panic, and bear in mind that it comes with the territory. The key as always is holding power: purchase properties only when you can service the mortgage for six months without income. And never be purely dependent on tenants to pay your bills.

What problems do you foresee as a landlord in 2021?  Voice your thoughts in our comments section or on our Facebook community page.

If you found this article helpful, 99.co recommends How Malaysia’s lockdown shook up HDB rental demand in SG and Why was URA’s Q1 2020 Property Price Index ‘not as bad’ as expected?

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