What does it take to own rental property?

Landlord Suzanne Lim shares the valuable financial lessons she has learnt from earning passive income by renting out property

Rachel Tan

MYTH 1: The landlord hat looks good on anyone. No stress, no hassle

FACT: “Not quite. You hear of people with multiple properties who seem to collect rent without any hassle. But being a landlord comes with many responsibilities, such as ensuring your tenant pays rent on time, especially if your rental income pays the monthly mortgage.

Property damage or loss is also a big concern. Should your tenant be careless and lose the access passes or mailbox key, or damage the furniture and white goods on your property, you will have to replace or repair them. Such events are unpredictable, so you need to be financially ready to deal with them.

Engaging a responsible — and responsive — agent matters, especially if you only have the bandwidth to monitor rent. Since you have to pay a commission anyway, let your agent handle multiple issues.”

MYTH 2: All you need is capital for the down payment

FACT: “Aside from the down payment applicable to the purchase, you will need to pay legal conveyancing costs and maintenance fees.

Prepare by channelling monthly savings and bonuses into your down payment fund. I also used some of my CPF monies to buy blue chip stocks in the years leading up to my purchase, which appreciated and paid for 15 per cent of the purchase price. Make sure you can support the monthly mortgage payments without relying entirely on rental income, which may come in late.”

MYTH 3: Properties located near an MRT station will appreciate in value

FACT: “While highly regulated, the property landscape is volatile and the days of flipping quickly for a tidy profit are over.

Being financially conservative, I decided on a two-bedroom option in a low-rise 140-unit freehold condominium that matched my budget and preferences. Settled in a quiet residential neighbourhood with proximity to an MRT station and shopping mall, it was a place I could see myself living in.”