Investment – Things to look out for

 

Considerations for Investments

There are many factors that affects the current value & future value of your investment property.

Factors include current property conditions, rental value & potential rental value, capital appreciation, government policy changes, government upgrading initiatives etc.

  1. Condition of existing property
  2. Ambience of the surrounding that the shophouse reside.
  3. Rental value
  4. Nearby upside potential
  5. Bank valuation
  6. Full commercial Vs Mix Commercial zoning

 

Investment Tips

For property investment, capital appreciation is a by-product of rental yield; it’s an age-old investment guideline by property investment gurus. REITs have been doing these all along. Eg. One classic example is new owner of Bugis Cube. They had bought at a very low rental yield but they initiated AEI(Asset Enhancement Initiatives) to improve on the rental yield and almost doubled their rental yield.

There are many ways to improve rental yield in order for capital appreciation to follow.

  1. Improve existing condition of shophouse. Looked for good tenants with established track record in their industry
    • Renovate the existing shophouse if the condition is in bad shape; don’t expect to get high rental if you want new tenant to renovate
    • If the area is good for F&B business, install grease trap & exhaust so it presents F&B tenant a feel good factor to part with high rental
    • A $30,000 renovation can get you a multiple effect in terms of returns.
    • Don’t underestimate the feel good factor, first image really counts a lot when tenants come to view your property.
  2. F&B, hotels or backpacker ready tenants adds stability to your portfolio of your shophouse and thus make it attractive for other buyers.

 

Before Buying

  1. Please check whether its’ full commercial zoning. Shophouses zoned commercial 1st Storey & upstairs residential can attract ABSD(additional buyers’ stamp duty)
  2. Get bank’s IPA(In Principal Approval) before parting with the option money.
  3. Get lawyer to do a search
  4. Check Road reserved for the shophouse; URA can reserve the front or back of the shophouse which will affect the bank loan and eventual selling prices
  5. There are shophouses in certain areas of Singapore that banks will not give out bank loans.

*Disclaimer – The above serves as a guide and in no way constitutes as an instruction to invest in shophouses. If in any doubt please approach your friendly lawyer for legal advice.