Home Owners: Increase your rental yield!
“Property Owners increase your rental yield” – Ask us how?
For property owners!
Adobha is a pioneer in the co-living concept in Singapore. It is the first prop-tech company in Singapore which created an ecosystem to generate higher rental yield from residential properties by designing & operating co-living spaces. Established in late 2013, Adobha currently manages over 150 rooms under its co-living brand and the numbers are growing!
Co-living is the new way of living in Singapore and its gaining lot of attention. With raising cost of accommodation and uncertainty of duration of stay in Singapore, expats who come to Singapore prefer to stay in professionally managed shared environment, compared to renting whole apartments or renting a room in a house with live-in landlord.
What does this mean to property owners?
As a property owners, when you lease your property to a single tenant your rental yield is X but when you lease the property as a multi tenanted property, your yield is x+y! Y component is sometimes over 600$ to 1200$++ per month depending upon the location & size of your property! See the below example of comparison.
Standard Rental yield, Example:
Let’s compare traditional renting method to Coliving method. For sake of convenience consider a 4 bedroom property located in the east of Singapore.
|Cost of 4 BHK + Utility condominium||$1,100,000.00||$1,100,000.00|
|Current Rent / Month (2.8K – 3K)||$2,900.00||$3,800.00|
|Utilities + Internet fee – on actuals||NA||$- Actuals|
|Rent Collected / Annum – A||$34,800.00||$45,600.00|
|Property Tax payable / Annual Value * property tax % (Assume 2200 SGD as annual value)||$2,200.00||$2,200|
|Maintenance to MCST / 300 per month as example – C||$3,600.00||$3,600.00|
|Cost of Renting / Agency Fees paid / annum – D||$1,450.00||$- NA|
|Small repairs / Maintenance / Annum – E||$600.00||On Actuals|
|Any other fees / Property Management Fee/annum – F (approximate)||Not applicable||$2000.00|
|Cost of Housekeeping / 300$ per month – G||Not applicable||On Actuals|
|Gross Rent Revenue G.R.R (A – (B – C-D-E-F- G))||$26,950||$37,800|
|Loan is for 80% for 25 yrs. tenure||$880,000.00||$880,000.00|
|Bank Interest paid (rate 1.6% ) for 1 year – (Interest Expenses)||$14,080.00||$14,080.00|
|Rent Revenue after Interest Expenses (GRR – Interest Expenses) R.A.I||$12,870||$ 23,720|
|Tax on Rent after allowable expenses for non owner occupied property is 10% for first 30,000$
Allowable expenses are : Agent fee, repairs, Maintenance, Interest payments)
|Net Rent Revenue (That is final cash inflow post mortgage & tax on rent payment per annum)||$ 11,583||$21,348|
|Difference between traditional renting and coliving method: PA||$9765|
|Initial down payment||$220,000.00||$220,000.00|
|Capital Expense – Renovation / Furnishing 15K per room – approximate||$60,000.00||$60,000.00|
|Sum of all initial capital expenses – (Total investment)||$308,600.00||$308,600.00|
|ROI ( Net Rent Revenue / Total investment)||3.7%||6.9%|
Tax Reference: https://www.iras.gov.sg/IRASHome/Property/Property-owners/Working-out-your-taxes/Property-Tax-Rates-and-Sample-Calculations/
Thats an increase of 84% over the traditional method of renting.
Even if you assume 30 days of vacancy during a 1 year period, you still generate 6000$ more revenue compared to traditional method!
To summarise, when you convert your existing house from single tenant to a coliving space you tend to gain by these ways.
- Property is rented for longer duration without any “zero rent yield period”
- Rental yield is higher compared to traditional renting model.
Talk to us today to know more!
Co-living in the news:
“With co-living currently making up less than one percent of Singapore’s private residential housing stock, our research demonstrates there is a largely untapped market for the segment amongst the 1.6 million foreign population,” said Tay Huey Ying, head of research at JLL Singapore”
“Given the variety of potential models and concepts that operators could explore, we believe that over time, we’re likely to see co-living take a higher market share in Singapore as a broader tenant base continues to drive demand,” said Tay.
“The co-living concept and lifestyle offers an appealing alternative to millennials and professionals, thus the outlook for co-living concept appears positive,” said Ong Choon Fah, CEO of Edmund Tie & Company (ET&Co)
“In the near term, millennial expats are likely to be the main occupiers although the list of users could be expanded to include other groups such as foreign students, or even seniors as the concept could appeal to a broader age spectrum beyond expat or local millennials,” Rohit Hemnani, COO & head of alternatives, capital markets at JLL Asia Pacific.
“Co-living is becoming a trend as the younger generation cherish memories and experiences as assets rather than physical ones,” Wendy Yap, owner of CP Residences said.