Becoming a landlord is the path of choice for many property investors. But far too many people become landlords without evaluating the responsibilities and expenses involved. The reality is that you’ll probably have to pay thousands of dollars in initial expenses even before greeting your first tenant.

Expenses you can expect to pay include:

• Initial Vacancy Cost: Chances are that if you don’t already have a tenant lined up to rent your property, you’ll have to wait anywhere from 1 – 3 months before you can find one. Until then, you’ll need to pay thousands in monthly loan repayments.

• Furnishings: You can rent out your property unfurnished, but that’ll reduce your chances of finding a tenant quickly. How much you spend on furnishing depends on you, but the more you offer (T.V., furniture, refrigerator, etc.) the easier it will be to find a tenant.

• Repair/Replacement Costs: If you’re renting out a resale property or your old flat, chances are you’ll need to repair or replace some of the fixtures and furnishings for your tenant(s).

• Property Agent Fees: If you’d rather leave the tenant search for a “professional” to handle, be prepared to pay an amount to at least a month’s rent to a property agent.

• Taxes: The tax on your rent isn’t really an initial expense, but you should definitely factor this into your decision to become a landlord, because Inland Revenue Authority of Singapore (IRAS) will tax up to 20% of your rental income.

Know What You Can Manage

There are two kinds of landlords – the landlord who’s very attentive to the needs of his/her tenants, and the landlord who just doesn’t have the time or energy to make monthly checks his/her property and tenants.

If you’re the latter, you’ll need to pay a professional tenancy management service to check up on your property, leave payment reminders, and collect rent. Otherwise, be prepared to handle that responsibility on your own.

Know Your Legal Obligations

Before you become a landlord, be aware HDB’s regulations on renting out your flat to ensure you’re not breaking any eligibility or occupancy rules. If you don’t you risk being fined or having your flat repossessed by HDB.

Here are some eligibility/occupancy obligations you should know:

• If you’re an HDB flat owner, you and your family will have to continue living in your flat even after purchasing a private property. However, if you receive approval from HDB, you can gain exemption from this policy.

• If you purchased a flat on the open market without a CPF housing grant (non-subsidized), you can sublet your entire flat after a 3-year Minimum Occupation Period (MOP).

• If you purchased your flat from HDB or on the open market with a CPF housing grant (subsidized), you can sublet your entire flat after a 5-year Minimum Occupation Period (MOP).

• Your tenants must be Singapore Citizens, Singapore PRs, or Non-Citizens residing in Singapore on Student Passes, Employment Passes, S Passes, Work Permits, Dependent Passes or Long-Term Social Visit Passes with at least 6-months of validity remaining.

• The maximum number of tenants you can have depends on the size of your flat, which is 4 occupants for 1- and 2-room flats, 6 occupants for 3-room flats, and 9 occupants for 4-rooms flats and above.

Finding the Right Tenants

If you’re renting out your property to earn profit from your investment, then you know success lies in finding a reliable tenant. But if you end up with an unreliable tenant who makes late payments, misses payments, or absconds – you’re only a few months away from being in a financial bind.

Thankfully, you can avoid bad tenants with the following strategies:

• Be Professional: Remember that it’s not just you who’s evaluating your prospective tenants – they’re evaluating you too. So if you wish to attract “good” tenants, you’ll have a better chance if you look and act professional when meeting with them.

• Use Conditional Advertising: This is the best way to filter out the tenants you don’t want. Instead of advertising that you have the “lowest rent in Jurong,” talk about how your property is “ideal” for professionals who work near the CDB area, or how it’s a “relaxing” neighborhood to come home to.

• Allow Compromises: If you find a tenant who has a stable job, great reputation, and is willing to commit to a long-term lease it’s worth compromising on things such as cooking or painting the walls.

• Don’t Focus on Rent Alone: Don’t just go with the tenant who agrees to pay you the most rent. Make sure you check on exactly what he/she does before you agree to terms. If your tenant is not making a fixed monthly salary or is involved in questionable activity, you’ll want to consider a more “stable” tenant instead.

• Build Relationships With Your Tenants: If you’re unapproachable or hostile to a tenant, he/she will be more likely to leave at the end of their lease. On the other hand, if you’re friendly and sociable, tenants will be more honest with you about things like renewing their lease and property issues like broken fixtures/fittings.