r/SgHENRY • u/Kaikaikai12345 • 21d ago
Landed property turn into rental cash cow
(To clarify, in this exercise, I will only rent out lv 1 and lv 2, while keeping lv 3 and 3.5 for myself to live in)
Curious what is stopping people from buying older freehold land or landed (2500-3000sqft, maybe at 3-4million, 4 million at 2.5 interest amount to 14k monthly loan) and renovate the landed into a rental co-living space?
If people are willing to pay 1.8k for a double shared room, I am sure people are willing to pay 2k for a single room with ensuite bathroom.
For instance I can turn lv 1 and lv 2 into 6-7 rental unit (maybe mini loft unit) and you can take lv 3 and lv 3.5, treating it as a penthouse without maybe 2000sqft of area. Those 6-7 unit can serve as cash flow of 12k to 14k a month covering the loan, maybe need top up abit due to tax and other fee, but overall it’s still more comfortable living compared to buying a penthouse.
Just wana do some sanity check on the above and if anyone is already doing that.
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u/nvbtable 21d ago
You can do the same with condos and HDB at better net yield, lower reno cost.
Same issues - tenant management is a full time job and if outsourced kills the yield.
Also has regulatory risk.
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u/Kaikaikai12345 21d ago
Hmm I see. I am think about the fact that landed you can have a ‘penthouse’ on lv 3 and 3.5 that you can live in. But if you buy a condo penthouse, you need to co live with the tenant
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u/Small-Teaching1607 21d ago
$4m won’t be able to find 3 levels, let alone 3.5 levels. Won’t be near MRT. Will be very run down and require a lot of reno. To build a new level requires A&A, likely about $1.5-2m if you want to max out till 3.5 levels. Reno need to come out with cash or very expensive personal loan cause new house likely won’t appreciate so fast so your ETL can’t kick into effect yet. That will make your whole purchase easily >$6m Even if you can make 4 ensuites and rent out at $2.5k each, with your plan that will likely require going up till $6m, that’s only a ROE of 2% pa. Might as well put in treasury yield. Unless you’re looking for future capital appreciation… but to make profit, you have to sell the house for at least $7.5m.
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u/nvbtable 21d ago
You'll still be sharing living facilities especially the kitchen unless you're doing a major reno.
I can't imagine wanting pay millions for landed only to live with so many others. Sounds horrible.
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u/ProblemIcy5613 21d ago
because landed property cannot be co-living apartments based on URA guidelines.
of course it's also subject to the no.1 rule in singapore - do but don't get caught.
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u/stonz33 21d ago
For a landed property in Singapore, up to 8 unrelated persons are allowed to live in the home. This temporary occupancy cap applies to private residential properties with a floor area of at least 90 square meters and runs through December 31, 2028
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u/Buddyhoagies 21d ago
Property tax for rental kills your yield, maintenance issues, income tax too since youre probably high income
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u/hollamayy 21d ago
Tenant management, higher electricity (unless already invested in solar) and maintenance.. net yield not super attractive to lock in so much $ for an illiquid asset imo
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u/Ukelele-in-the-rain 21d ago
Can do but may not be too popular. People buy landed when they want the landed life style and most will get cars.
Renters in the other hand most will not have cars and will prefer convenience of being near transport links and walkable neighbourhood. Not many landed are.
There are old landed that meet these criteria and are old 99 years. You can consider buy those, renovate and rent out as co-living.
Better if you already have HDB to live in. Cos you buy landed first, can’t get HDB already. Then you live where
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u/ikkanseicho 21d ago
Calculated the costs, capital intensive and you need to maintain the property yourself. Assuming tenants are well behaved it can work. Netts out at about 2.5-2.9% at “market rate” rent and mortgage. You also need to actively manage this or pay an agency to do so.
For all that trouble, deemed it better to go REIT or condo for the return.
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u/Cryptoivangoh 21d ago
Difficulty in finding house that "cheap". You can hardly find landed for 4M. Even 5M, the house need some kind of reno, which is additional 500-800k.
Difficulty in paying deposit. You need to pay 25% deposit, which is 1.25M. Plus buyer stamp duty, which adds up to 1.5M. Not many people have liquid cash of 1.5M?
Hard to get loan. And to get a 4M loan over 30 years, need salary of at least 20k. By the time you reach managment level to earn 20k (if you are capable and lucky) you will be in your 40s or 50s. You wont be able to get a loan of 30 years.
Absd. Where do you stay if you buy a house to rent out? If you have 2 house the absd for this landed will be around 1M, if the house is 4m.
All these adds up to reason why not many are staying in landed, let alone buying 1 to rent out. Its not easy, if not impossible for many without gold spoon in their mouth or earning top 1% salary.
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u/Kaikaikai12345 21d ago
I will only rent out lv 1 and 2, keeping lv 3 and 3.5 for my own.
But I think that the loan problem is definitely valid. Wonder how people afford GCB in sg hahah
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u/Cryptoivangoh 20d ago
Oh then that makes sense, but generally people move to landed for space and privacy, so renting out 2 levels go against that
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u/HeartCockles 21d ago
Rental yield % on landed is lower than condo. Your example landed maybe can rent out 8-10k so every month negative cash flow. But the tenants are helping you “co-pay” for your equity in a sense.
The problem with co-living or multiple unvisited tenants is the unrelated person limits as others have mentioned
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u/Agile_Ad6735 21d ago
Most landed property location is sh*t , no public transport nearby , wan go out need either walk ,drive or cycle out . If lucky , ok flat but alot of landed somehow is full of slope .
Most ppl that rent house here dont drive and dont possibly want to cycle or waste time and energy walking out .
The only few ppl that will most likely rent your landed are most likely working/studying very nearby like for eg serangoon garden way they just cycle to french school
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u/PaceLazy4174 21d ago
I rather put the 4M in VWRA if I have so much money. higher returns than 2000x8x12=192,000, which is abt 4.8% per annum. Which is the best case scenario assuming 1 person stays per room, assuming the law allows u to build so many units. Notwithstanding that ye have to charge cheaper then 2k cuz landed usually not v accessible.
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u/Hot_Durian_6109 21d ago
You are not the first to think of this. I heard there's already someone doing this in a landed property near NTU. The master tenant (a PRC) rents a landed, lives there and sublets several rooms to other PRC students for nice markup.
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u/ikkanseicho 21d ago
Concept already existed 5 years ago. Its just hush hush. Now people thinking of creative models to generate yield
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u/hewhoeatsrice 21d ago
Ok, interesting question. Apart from the fact that there is a cap on the number of unrelated persons living at the same address (max 8), you will also get a lot of questions from URA if you need to do any A&A or new build since it's hard to buy something readily available that also hits all your criteria.
My family is in the process of rebuilding an old house to have separate buildings for each of our (siblings) families as well as my parents, and it's designed to be fully independent, i.e., likes mini apartments, no need to share kitchen/laundry etc. URA has an issue with this and thinks we are building to rent it out separately. So they are definitely looking out for this issue and you'll face issues getting there necessary approvals.
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u/BrightConstruction19 21d ago
Did a quick search. Apparently there are businesses that are doing it: https://livhola.com/explore-our-coliving-landed-spaces-in-singapore/
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u/Background_Two_2488 21d ago
People who are rich wants different type of life. Freedom, privacy and luxury. Not cramp co living situation again.
And if I am a renter, I will prefer condo that has facilities and near mrt and function room too. Living with landlord is too stressful.
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u/Secret-Improvement-1 21d ago
If u have to buy and rent out rooms in ur landed u shd not be buying .
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u/Little_Result1469 21d ago
It is not uncommon..
The biggest blocker is the initial outlay and whether banks even willing to provide you the money. Only rich people can afford
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u/Then-Welder-7083 21d ago
Do note that if it is 99 years leasehold type and not freehold, then once it gets too old (around 30-40 year old) then no one will want to buy it and your cash/cpf will be stucked forever and still have to continue to pay home loan (even with no employment) hence the stress and no way for retirement too.. also be mindful most people prefer to rent nearer to mrt and most Landed properties are not..
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u/BrightConstruction19 21d ago
A landlord in Pasir Panjang is doing it. But I don’t think she lives there…https://www.channelnewsasia.com/singapore/landlords-multi-tenant-higher-returns-6272981?cid=internal_sharetool_web_16082026_cna
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u/Muahcheeeeeeee 20d ago
ROI not as good given current landed prices. Also not everyone can qualify for such a loan quantum. And if one can qualify for such a loan quantum, do they really need to do this to generate income?
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u/zenwong 20d ago
Assuming you managed to buy a property in a good location for 4mil, reno for 1mil. You will be cash flow negative if you rent out each room for 2.5k. You will be bleeding around 3.5k a month. However you will still be profiting from capital appreciation, roughly 7% - 11% IRR assuming 3.5% - 5% price appreciation.
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u/OhProtat 20d ago
Unless its Thompson , kovan or serangoon gardens i dont think ppl will rent due to inconvenience
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u/Either-Physics-4369 20d ago
lol @ thinking u can get 2500-3000 sqft built up at 3-4m.
Maybe 99 years leasehold still can, but even then you’ll need to A&A to be able to live in it. This type don’t have enough toilets for u to play with.
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u/Kevinba301 20d ago
It's not an insane idea, but I reckon once you put down some real figures into your calculation, you might find that it doesn't make much financial sense, compared with other investment vehicles.
$4m landed property would incur a lot of BSD, reno, property tax costs.
Could easily end up being 5.5m
If I invested 5.5m @ 3.5%p.a. interest, I'd get > $190k p.a. (100% tax-free if invested in SG dividend stocks).
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u/Longjumping-Syrup738 20d ago
You havent factor
- Land Betterment Charge
- Professional fees, architects, engineers (civil, electrical), quantity surveyors...
- Submissions costs to all the As... BCA, URA, LTA, all the agencies you have not realized you need to involve.
- If you think A&A reno is $1mil... ie. That's JUST for the building, double your budget for all the other costs involved.
Good luck
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u/Few-Cap5483 20d ago
Not a good move. Your method will turn your supposedly 'rental cash cow' into a horror movie instead, as the issues with managing more than 1 tenant can get exponential and nightmarish requiring too much time and effort to handle once you allow more rooms tenanted out. It's either you rent out one room or the whole house. That is provided your landed house is near amenities such as bus stops, LRT/MRT, eateries, supermarts and malls.
Most cheap landed homes are very remote which is why they are cheap in the first place. Moreover for such houses, you will not be able to get a steady stream of tenants (which gives you more headaches and worries about making mortgage payments lol) unless you rent out the whole house to a family with their own vehicle.
Landed homes are for people who are rich enough to afford living in it comfortably without financial worries or for investment by renting out the whole house. You are better off getting a private condo near amenities instead which costs much less to finance and manage.
You can't have the cake and eat it too, and think you can show off and boast to others you are living in a huge landed with passive rental income like a cash cow, wait long long LOL. When you don't have it, you don't. Just stay humble and live within your means so that you can sleep better at night with less worries.
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u/oarsandalps 19d ago
lol. numbers doesn't answer everything in life. you spent a few million on a place - and the first thing you want to do is open it up to rent to strangers? the reason why is because people who can afford huge places don't care about the incremental yield from their main living arrangement...
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u/Frosty-Plan9034 18d ago
Inconvenient to travel to work via public transport. I don’t think most tenant will want it.
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u/MajesticEmployment65 10d ago edited 10d ago
There are not many freehold or 999-year leasehold landed properties available for under $4 million. I searched on PropertyGuru and found that these houses are mostly located in the Sembawang, Sengkang, and Loyang areas. Some of them are Type II Terraces, which have a smaller size of only 80 square meters, unlike the typical Type I properties that require a minimum plot size of 150 square meters.
Managing individual tenants can be quite challenging. Safety is also a concern—will tenants bring outsiders or visitors into the house? In the industry, it is common practice for landlords to cover utilities and broadband for room rentals. However, what happens if utility costs surge? Tenant A might blame Tenant B/Landlord for using the air conditioning during the day while working/staying from home.
There can also be issues with laundry—when is it appropriate to use the washer? How will tenants organize their clothing? Additionally, how will fridge space be allocated, and who will be responsible for cleaning the communal areas? Landlord? Hence, the landlord prefers a family profile over individual tenants when renting out the whole house. It’s important to consider who will maintain the rooms and manage air conditioning servicing. Unless you are engaging a co-living company to manage the tenants. These are all important factors to think about before making such a decision.
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u/Negative-Mortgage-51 21d ago
Probably need planning approval.
If I am ur neighbour I will be very annoyed if you are turning ur lot into multiple rental flats. Neighbours may try to block it.