There’s this question that usually pops up amongst investors; when you invest in a new launch development and its achieving TOP(Temporary Occupation Permit) soon and you’re scheduled for your key collection, there is usually a dilemma.
If you’re not planning to list it for sale yet, as you are still within the Seller Stamp Duty (SSD) period, and you’re only planning to sell it probably in another one to two years later. During this period, you will probably decide to rent out the place rather than keeping it vacant.
There’re a few different schools of thought. The first school of thought is to keep the unit vacant because most tenants probably will have their own set of furniture that they are shipping from overseas or they are moving from another property. They have already bought certain furniture over the years at their previous rental properties and they might want a partially furnished unit or a totally vacant unit. Another school of thought is to fully furnish the place so that when the tenant walks in and looks at the current furnishings that are already provided, it helps them to make an easier decision in terms of portraying an emotional appeal.
Which should be the right school of thought? To leave it empty or to furnish it in order to prep for rental? Which one gives you a quicker uptake rate of rental?
The main objective of an investor, when you want to rent out your residential home, which you have bought for investment, is to keep the vacancy period low. That means we don’t want to leave a unit vacant for too long. Because, you become the tenant, you have to be the one servicing the full mortgage. You want to get it rented out soonest.
But the challenge surfaces because when a project receives TOP status, for example, if there are 500 to 600 units and let’s say there’s a good 30% of the owners who wants to rent out. It means that you will have probably close to about 200 different competitors. That would then mean that you need a couple of months to get a suitable tenant. Usually, if you notice, the moment the project is approaching its TOP date, the number of adverts for rentals will greatly increase. Thereafter, towards the 6-month mark to 9-month period, it will gradually lessen. This is because, in the earlier stages, it takes time for tenants to be aware of this new project that has just TOP-ed.
It also takes time for tenants to warm up to this new development. On the other hand, there will also be some tenants who prefer not to take a lease too early because there’s going to be the noise of renovations from some of the units that other owners are renovating for own stay. So there are different factors, but I think importantly there are some key strategies that you can use.
Take this unit for example, we actually helped one of our clients to select it during the launch period. And when it TOP in the year 2017, we actually advised our clients the right strategy, in order to be the first to get rented out which was to dress up the place. By dressing up the place we mean buying the furniture, positioning it as a fully furnished rental unit, throwing in some accessories to really make it feel homely. And true enough, it was rented out at the first viewing.
This is a three-bedroom compact model right here in the Jurong Lakeside vicinity. And because of that approach, the unit has a low vacancy period.
When the tenant first walked in and viewed the place, they saw the actual furniture provided. They felt that it’s comfortable, the furniture is suitable for their liking. And with the right furniture, they can visualise the size of the bedrooms. They could also see how does the dining table fit in, and the sofa, coffee table, TV console and stuff like that. So that makes the tenant comfortable, number one, and it makes it easier for them to make a decision, which is why they select this unit over the rest of the vacant unit. They don’t have to buy anything, there’s no guesswork on what the owners will be providing.
Now, if you want to position your rental unit, when it TOPs, as a fully furnished one, this strategy usually suits smaller units. For example, if it’s a one-bedroom, two-bedroom or a compact three-bedroom model. Because, usually what we notice is that tenants’ profile for the smaller units, they tend not to have their own furniture. Tenants’ profile for larger units, for example, four bedders or in the town/city area, probably they’re a little more of a seasoned profile kind of tenant, probably ex-pats that have been staying in Singapore for years, and they might have accumulated their own furniture or they might be shipping over their own furniture from overseas when they relocate to Singapore. So larger units, probably the better approach is to keep it partially furnished or vacant. Smaller units, it might be better to furnish it, so that your unit can stand out among the rest of the smaller units.
We hope that was helpful. See you in the next one.
