SURFER’S GIRL

TIPS FOR FIRST-TIME LANDLORDS

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Real life common encounters on property problems and some possible solutions are shared to benefit all international surfers to www.asiahomes.com.

Ref: 806091. How to rent out faster than others in 1998/99.
Subject: Foreign Owners of Singapore Properties
Comments: Be generous in a declining market & pay promptly

June 9, 1998

Over the last 10 years, the baby-boomer generation of Singaporeans have enjoyed almost full employment and a paternalistic government. Compared to the foreign owner (e.g.Hongkongers, Taiwanese and Indonesian who pay 100% cash), many first-time Singaporean landlords are not investment minded because the Central Provident Fund (CPF) contributions from the salary pays a large part of the mortgage. Therefore, Singaporean landlords lose their edge and become inflexible.

Too many do not understand the importance of early occupancy, the need to be flexible and to satisfy the Tenant's needs and how to motivate the realtor to give their property top priority, the post-rental services. In the last few months, one new condo is available every month, putting pressure on landlords to reduce the rental. The American and Canadian banks have increased their expatriate staff recently, but many Americans are leaving Singapore. Tenants have high demands which would be considered "unreasonable" 2 years ago.

Case study 1. A typical non-investment minded Singaporean Owner.

Asia USA has a lawyer-owner of a 4-bedroom UE Square Condo ding-donging with the tenancy agreement for the last 14 days. Our client (Dutch firm) has a lawyer who, to be expected, make several amendments in the interest of the Tenant and she felt that her amendments in the interest of the Landlord were ignored. Could be a case of post-natal blues.

• One main issue from the Landlord was that "assignment" of the lease must be subject to "approval of the Landlord".

The Tenant's lawyer took a few days to review her amendments (time is of essence for our Tenant as he would be leaving Singapore soon) with rationale given, proposing "permitted" assigns.

In proposing "permitted", who will be giving the permission? Another round of rejection by the landlord and 10 days had passed. Our client was asking whether she was really interested in renting her apartment? He left for the Netherlands as we persuaded him to see whether he could over-rule the corporate lawyer and agree to some of the amendments from the Landlord.

• The landlord wanted "Mr K", the Tenant's employee (occupant of the unit) to be the Tenant. This is a corporate lease and by making "Mr K" the Tenant, it becomes a personal lease. "Mr K" can never assign the lease or let another employee take over, unless the landlady approves. What if there is no approval?

The Tenant's lawyer is a "reasonable" freak. She made sure that "reasonable" is inserted in any clause such as "reasonable" legal fees "on a full indemnity basis" (whatever it means), "reasonable wear and tear" of the furniture and all other factors. y.

• A budget of S$5,800 was given by the Owner to furnish the condo with curtains, lighting, refrigerator, washing machine, dryer, quoting ridiculously low prices to support her offer. Obviously, this would not be sufficient for a 4-bedroom 2,000 sq. ft apartment unless poor quality curtains were bought. Sunblock curtains cost much more and were needed.

Another round of negotiations to ask for $12,000 furnishing budget (2 months' rental).

• Landlord now wants 3 months' deposit instead of 2 months' deposit for a 3-year lease. Readers interested in the ending, please email to drsing@asiahomes.com.

If our Dutch Tenant does not have his mind fixated on her unit, the whole matter would have been aborted as there is no shortfall of 4-bedrooms even in UE Square Condo.

Case study 2. A typical non-investment minded Singaporean Managing Director.

Asia USA was referred by an Owner (see Dressed to Kill the New Zealander Pathologist) to this corporation's manager. The corporation has the Tanglin Regency 3-bedroom for lease. It is not an outstanding unit as regards view from the living room.

Advices to new expatriate tenants renting new condos: Do be careful. Unlike most new condos, the Tanglin Regency developer did not provide wardrobe in the 2^nd bedroom or oven. A microwave oven was forgotten in the inventory. Costing around $300. The Managing Director of the company said "too bad" as the lease was signed.

Obviously, the M.D forgot the "post-sales service" and the possibility of referrals from existing expatriate Tenants to his company's other properties such as the new "Oleander Towers".

In this case, our agency offers to pay for the microwave oven and we have to be more alert the next time around. We would not bother with this corporation as there are many units, even in Tanglin Regency.

How to rent out your unit faster? Since there are so many inflexible, inexperience neophyte Singapore landlords, foreign owners have had a good time, renting out their units very fast. They need to as they pay 100% cash unlike most Singaporeans.

Asia USA gives priority to owners who ask us to help. Owners must help themselves. We still remember a busy Signature Park Owner who asked us to help rent his 4-bedroom. For last 4 weeks, his apartment is still like a war zone, with stickers pointing out defects and the marble floor unpolished. Generally, there will be no closing as no decision can be made by the prospective Tenant.

There are several articles for locals on how to rent their units faster, written in www.asiahomes.com and found in Surfers' Girl Tips and Affordable Homes for Expatriates (Dressed to kill the New Zealander pathologist; The Doctor all realtors love).

This report is written to advise Foreign Owners of Singapore Properties, but the basic principles still apply to all Landlords. An investment property, just like any investment such as shares, must:

• produce income (rental).
• be occupied continually with minimal number of days being vacant.

Many first-time Singaporean landlords have this attitude: "I can afford to let my unit be empty in order to get what I want (usually above market rentals)". Unfortunately they complain that their neighbours "underprice" their rental units. We find many Hongkong and Taiwanese Owners extremely smart and flexible and the following tips may be useful.

1. Motivate the realtor to give priority to your unit. The standard industry's agency commission is one month's rent for a 2-year lease. A few Singaporean landladies with multiple properties offer 50% less and if the realtor has no alternatives, that would be the last property to be viewed. Many Hongkong and Taiwanese landlords offer above the industry's practice just to close fast. A cash bonus of $2,000 or an extra half or one month's commission as an incentive to achieve early occupancy.
2. Continual occupancy is the key to good rental returns for an investment property. The incentives offered put their units on top of the list for viewing for tenanted properties. Usually, such foreign owners have good landlord-tenant relationship and viewing before end of lease is not a problem.
3. Appointing a friend as a managing agent. A friend can be a managing agent and he may do a good job since he only has your property (assumption). The problem is that you do not pay the friend. Unless he gets direct contact from the Tenant through his advertisements, he will be losing money.
4. Therefore, he has to get the money from the realtor as many cases still involve co-broking (one party has the Tenant, the other has the Owner). On the other hand, the friend offers 80% of the commission but seldom advertise or promote the property since he is having a full-time job and has no need of the money. The 20% actually it may be a pittance and his time spent in odd hours opening the unit may not be suited to his life-style. He (referring to females too) may have dates and other lifestyle and therefore restricts viewing to suit himself.

   Citing a real case in a Fernhill Road townhouse. This old townhouse with leaking bathroom advertises $6000 rental by an Owner's friend.

   Advices to new housing agents: In such cases, there is a big risk you will not be paid the agency commission as you are dealing with an absentee Owner who may have no authority to act on behalf of the Owner. Get written agreement before commencing.

   The friend wants 20% which is $1,200 for a 2-year lease and said he could dictate to the other realtor what % he should receive. This kind of arrangement discourage co-broking with the friend of the Owner as the realtor with the Tenant does not know who will pay him.

   Advices to absentee Owners: What the Owner should do is to pay his friend for his time spent and for the advertisements. All agents should get full commission to motivate referral.

5. Appointing a realtor to manage your property. For foreign owners, It is best to get a realtor to manage your property but find one focussed in residential rentals not a "jack of all trades" realtor or one dealing mainly with sales!). Contact Asia USA Realty tel: (65) 9668 6468, email drsing@asiahomes.com or fax (65) 256 0501. We will provide free advice and take up management for the foreign owner if the unit is "rentable".
6. The problem with getting a good realtor active in residential rentals is that he may have too many cases and not enough attention is given to your property. Motivate him the motivation (see paragraghs 6, 7 & 8). The advantage is that he may have his network of personal contacts and co-brokers who know him to specialise in rentals and call him.
7. Appoint a realtor who has a Tenant-base. This means that the realtor really has "clients" (the Tenants coming into Singapore in a continual stream). Many realty firms do have such clients. You can find them in the Straits Times advertisements but whether they have the "heart and soul" to move your property (assuming it is rentable), is up to your rapport and fiscal motivation.
8. One and a half month's commission is recommended by Asia USA to be offered by foreign Owners. Same applies to Singapore Owners who have no time to market their own properties.
9. In this situation, the managing agent gets all or can give full commission to any broker and should be working diligently.

   All brokers look forward to the full commission to pay for the heavy costs of Straits Times advertisements. Since there is the 1.5 month's rental commission, the managing agent keeps 0.5 and the co-broker keeps 1.0 (the industry's standard) if he co-brokes. If he is successful, he gets 1.5 months. The Owner gets his unit rented out faster, if it is a rentable unit and the rent is closer to market rate.

   If the Owner takes the standard practice, the co-broker gets 0.5 months which is a common practice and therefore of no motivation to co-broking. He may as well go direct to Owners' listing and there are several of them advertised daily in the Straits Times and in Internet.

10. Owners to pay for the cost of Straits Times Advertisements. This will enable the Owner to determine the number of days of advertisement and to focus the reader on his unit. If the realtor advertises, he may put your unit as one of many and usually such advertisements cannot attract the attention of the prospective Tenant or co-broker. Just too many impressing everybody but not specific to get the reader to telephone as there are other specific units advertised. The advertisement cost is around S$30 for a 3-line advertisement/day. Asia USA recommends 3 times/week including weekends.
11. Pay agency commission on renewal of lease. Almost 100% of landlords do NOT practise this, thinking that they can save on agency commission. However, in a declining market, the realtor usually has the rapport with the Tenant since you are an absentee or busy landlord. When the lease is nearing expiry, the realtor will recommend another condo or bigger unit, in order to bring the bacon home to his family.
12. By letting him know well in advance that you do pay on renewal, you may forestall. However, if you are the inflexible landlord unwilling to fix things for the Tenant, calculating every cent (see www.asiahomes.com Affordable homes for expatriates Article No. Sulky Tai Tai, then, it is unlikely you will get a renewal.
13. Prompt payment of agency commission on signing of the tenancy agreement is the best advice and it is worth every cent for you in terms of renewal, referral and priority for your case. Since 99% of Singapore landlords are not aware of motivating factors to rent faster, are NOT investment-minded and are not in this category, imagine the immense advantages if you pay promptly. Visit www.asiahomes.com to read "Dressed to kill the New Zealander pathologist" and "The doctor all realtors love".

Hope above tips are useful for all foreign owners. Best wishes.

Anne Brocklebank.

P.S.
Exclusive marketing of rental properties by Asia USA for Foreign Owners.

We understand the problems of a foreign owner because we encounter the great difficulty in getting a good realtor and managing agent in Australia and a decent rental income.

In one case of a Gold Coast property, a gross rental income of A$1,500 could result in a net rental income of A$100 after deductions by the managing agent and there was nothing we could do. Every time the guest checks out, even after 2 days' stay, the managing agent charges A$60!

We do accept a few exclusive marketing rights to lease "rentable" properties from Foreign Owners. If there is a need to manage the Tenant, we charge 5% of the rental fees. If not, there will be no charge.

Recommendations for effective marketing still will be the 1.5 month's agency commission and payment of the Straits Times advertisements by the Owner. Please see form below and email drsing@asiahomes.com if you have further queries.

w Rent, sales & management of properties w Real estate investments
House Agent’s Licence No. AD041 - 07306B. See www.asiahomes.com for listings of
affordable homes for expats/advices to newcomer expat tenant/landlord/investor/housing agents!

Asia USA Realty (Singapore) asiahomes.com Pte Ltd, Blk 1002, Toa Payoh Lorong 8, #01-1477, Singapore 319074. Tel: (65) 254 2728, 254 3326, 254 7944. Mobile: (65) 9668 6468. Fax: 256 0501. Email: drsing@asiahomes.com. Internet: www.asiahomes.com

EXCLUSIVE AUTHORISATION TO LEASE

The undersigned Owner(s) grants Asia USA Realty (Singapore) asiahomes.com Pte Ltd (hereinafter referred to as the Realtor) the Exclusive Authorisation and Rights, for a period of 90 days from June 15, 1998, to lease the property known as …La Suisse #XX-FF, Swiss View, Singapore. The Rental Amount shall be S$4,000 - S$5,000. Commencement Period: As soon as possible after July 31, 1998. The Vendor agrees to pay the Realtor as commission for service rendered a fee of one month’s rental for two-year lease and reimburse the Straits Times advertisement fees if:

1. the Realtor procures a Tenant during the term hereof on the terms specified herein or

2. the Property is sold during the term hereof, by the Owner or through any source, or

3. the Property is leased or made unmarketable by the Owner’s voluntary act during the term hereof or any extension thereof, or

4. a Lease is made by the Owner within three months after the termination of this Agreement or any extension thereof to persons with whom the Realtor has negotiated thereof, or

5. should any monies paid on account of any Tenant be forfeited, then one half of the monies forfeited shall be paid to the Realtor provided the said amount does not exceed the commission.

Should the Realtor procure a Tenant before July 31, 1998, the Realtor will get a 2-months' rent as agency commission.

The Realtor is authorised to co-operate with other realtors in the marketing and lease of the property and may divide the above commission with such other realtors. The Owner authorises the Realtor to appoint sub-agents to assist the Realtor in carrying out the Realtor’s obligations hereunder or to assign this authorisation. The Owner shall utilise the "Letter of Intent" or the "Lease Agreement" forms as provided by Asia USA Realty.

The Owner agrees to make available to the Realtor and prospective Tenants all data, records and documents pertaining to the property, to allow the Realtor to show the property at reasonable times and upon reasonable notice and to place a "For Lease" sign on the property and not to commit any act which may tend to obstruct the Realtor’s performance.

The Owner agrees to pay the Realtor a Goods & Services Tax of 3% of the commission if required and warrants the accuracy of the information furnished herein in respect of the above described property and agrees to hold the Realtor harmless from any liabilities or damages arising out of incorrect, inaccurate or undisclosed information.

The undersigned warrants that he/she is the Owner of the above described property or that he has the authority to execute this Agreement and that he/she has made full and frank disclosure in writing in respect of all facts pertaining to the property.

For more information, email drsing@asiahomes.com

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