Essential Money Savings Tips for Landlords
As a landlord, you own a few properties and you are happy to collect passive income every month. On the other side of the equation, there are costs which can go north directions when you lose sight. Some money saving tips for landlords to help keep the cost of ownership in control.
1. Keep Track of Rental Expenses
It may sound straightforward but more than half of landlords do not consciously keep tab of their expenses. An easy way is to use an excel tracker to categorise your expenses into recurring monthly or one-time annual costs. Recurring costs are like mortgage payments, monthly maintenance charges, property tax while one-time annual costs can be capital costs like replacement of air-con units, painting of walls, agent professional fees etc.
Find a folder to deposit your receipts and keep your mortgage payment statement properly archived (for at least 5 years as required by IRAS). You will find it much easier when it comes to year-end tax filing to the Inland Revenue Authority of Singapore (IRAS).
2. File Your Tax Deduction
Atlhough landlords can outsource the pain of tax filing to professional accountants, it is highly advisable for landllords to be familiar with the main guidelines issued by IRAS on tax deductions. One fundamental aspect is understanding the difference between allowable and not allowable expenses. IRAS has outlined examples of allowable and non-allowable expenses that serve as good reference for landlords to be mindful.
The landlord has two choices when it comes to filing deduction of allowable expenses – the pre-filled rental expenses or the manual. The pre-filled method is simple, aim to reduce hassle of tax-filing by landlords. A deemed amount of 15% of the gross rental will be taken as the rental expenses and pre-filled in the online tax form. Landlords can in addition claim for mortgage interest on the loan taken to purchase the tenanted property. The manual method means that the landlord has to declare the actual allowable expenses. The excel tracker will come in handy. By doing own tax filing, the landlord can save on engaging professional accountants.
3. Keep Mortgage Cost Most Competitive
The biggest chunk of the cost is the monthly mortgage payment. It is worth to keep abreast of the latest mortgage rate and it makes most sense to start doing your homework to do comparsion of bank rates. Finding a reliable expertise in this arena, for example a banker or mortgage broker in a long haul relationship will help you to make an informed decision on the mortage rates and which bank loan deal suits you.
In times of uncertainity, a fixed rate loan for 2 or 3 year will give bettter peace of mind, locking in the same mortgage repayment each month and giving landlords better control. Do mark in your calendar when the loan deal period comes to an expiry, and revert to the floating rate will make a big jump to repayment sum. Refinancing is the most common way to renegotiate a new loan deal, or ask for waiver of certain bank costs or charges. Some banks may be open to consider additional requests in the bid to acquire new accounts.
4. Regular Check Market Rent Rates
Rental prices are largely determined by market forces of demand (tenants) and supply (availability) and can fluctuate from time to time. By knowing the market rent rates, you can better price your rental to maximise the returns of the tenanted property.
Undercharging your tenant is not ideal because you lose the potential income, but be careful overcharging will lead to high tenant turnover. Nowadays market rates are transparent, and with the prevailing use of online property portals like Property Guru, 99.co or SRX, tenants can search rental units by location, by estate and easily do comparsion. Statistics on past transacted prices of rental units are publicly available at government websites for HDB flats and private condominium housing.
It is a matter of time your tenant will leave for another place knowing they are charged excessively above market. So it is a fine line for landlords to balance.
5. Be a Reasonable Landlord
Last but not the least importance, be a reasonable landlord.
Why do you have to be a reasonable landlord? Put yourself in the shoes of a tenant. Will you want to rent from a terrible landlord? Highly not, after a few months tolerating and knowing your landlord is distant, cranky, not proactive handling your request.
Unexpectly, your tenants serve a notice to you, for early termination before the lease is up. As a landlord there is little choice but to quickly restart the marketing efforts, incurring cost of acquisition of new tenants. There is a risk of vacancy months and the gone rental income the longer your unit goes empty.