Earning a return in real estate, acquiring a self-financing property, building up an annuity for retirement – there are many reasons to make a rental co-investment. In this practical guide, we will cover the essential concepts for success in real estate co-investment.
Where should you choose your accommodation? How do you to optimise the yield? What are the mistakes one should avoid in order to make a successful rental co-investment?
Why invest in real estate rental co-investment?
The question deserves to be asked because real estate rental co-investment is risky and involves large sums of money. As such, it can have a severe impact on your finances and your quality of life. But if so many people have embarked on the adventure, it is because it has many advantages.
The advantages of rental co-investment
It builds up additional income. The rents generated make it possible to build up additional income over a long period, or even a life annuity. This is what makes real estate an interesting asset to supplement your retirement. In addition, you are investing in a durable good which can potentially increase in value over time.
One of the rare co-investments that can be self-financing
When these three concepts (yield, borrowing and taxation) are optimised, the rental co-investment may reach self-financing. The rents generated become sufficient to pay the charges, repay the bank loan and cover the tax. The co-investment then finances itself and the investor for a small initial contribution and a property at the end of the loan.
The most seasoned can multiply the operations up to what their borrowing capacity allows them to. Sometimes, this goes up to several dozen apartments and houses. If you are thinking of real estate co-investment in Singapore, you should have the best solutions as well as the best consultants.
Choosing the right property in order to rent it out
This is the most delicate and essential part because it conditions the success of your rental co-investment.
To maximise the rental yield, the objective will be to acquire the cheapest possible accommodation that can be rented out under the best conditions (we exclude the specific case where you are looking for a rental property to occupy it later).
To choose the right property, you have to think about three levels. The city, the district and the accommodation.
Choose the city well
Choose a dynamic and attractive city. This increases your chances of renting it to a solvent population easily. It can be a city full of students, an area with a high concentration of businesses, or even a place frequented by tourists for seasonal rentals. Firstly, do a study to identify the main trends: population growth, main social categories, possible tension in the rental market, etc. You can retrieve very interesting data on the site.
Choose a city not too far from where you live, especially if you decide to manage everything yourself. As we have explained, making a rental co-investment is time-consuming and will require a lot of travel. If possible, try to choose a city that is less than an hour away by transport from your residence.
Keep yourself informed as much as possible
You will only find good deals if you know the city inside out. If an apartment is for sale at a lower price than the market average, how do you know if it is a good deal? Or if there is a rock eel (increased crime in this part of the city, with places suitable for nocturnal parties)? Keep yourself informed as well as possible. Of course, this will be easier if this is the city where you live or visit frequently.
