Rental income is one main reason why investors prefer property over other forms of investment. The rental provides cash flow and is resilient when economy is not performing well. Maximizing the rental yield should be a top concern on every property investor’s mind. In this article, we look at some common tips to maximize the yield in the context of condominium investment in Manila.
Price your rent
Do research on property websites to find the trending rental rates in your neighborhood for a property of similar size. You can find some of the reputable websites in the Philippines listed here. In fact, this research should have be done even before you purchase your property as part of your investment strategy. Price your rent competitively so as to attract tenants. Be open to some negotiation such as reducing the rent for a longer tenancy term. It is not uncommon for the tenant to pay up 6 months or even 1 years advance rental in post dated checks.
Engage a good real estate agent
As a foreigner who is unfamiliar with the local market, we always recommend that you find a real estate agent to help you rent your unit. An agent who is familiar with a particular area and has steady stream of tenant will minimize vacancy in your apartment. The agent can offer you valuable advice in terms of pricing your rental and can help you take care of your unit when you are not in the Philippines.
Furnish your unit
Most tenants are looking for hassle free move in. They will not be looking to buy a sofa or a TV if they intend to only stay for 6 months. Having these essential furniture and appliances makes it more attractive to potential tenants and you are less likely to waste valuable time looking for tenants who are willing to accept a bare apartment. Furnished units can also command a higher rental. There is no need to spend extravagant amount of money to renovate the unit. Just do enough to make the apartment a comfortable stay.
Reduce your overheads
The rent you collect upfront divided by your overall property investment is the gross rental yield. We need to consider the costs of renting and maintaining the unit as well so that we still maintain a decent net rental yield. Costs includes real estate agent fees if you hire an agent, property taxes, association dues, fire insurance and any maintenance or replacement to your furnishing. Buy furniture which are durable and less likely to deteriorate over time. Pay taxes and association dues in advance as there are early payment discounts.
Monitor rental trends
Property investment can be a long term commitment. Be sensitive to rental trends and be ready to make changes as necessary adapting to the market. In times of good, you should approach your tenant to negotiate rental to the prevailing market rate. Similarly, in times of economic downturn, it may be wise to drop rentals so as not to lose your tenants. Always remember that a vacant apartment will not generate any income for you. Less is still better than none.