HDB landlord-owner shares his experience in refinancing Tembusu Grand while managing room tenants

Many would assume that being a landlord is easy and a good thing, with rising rents affecting Singapore tenants. But not always.

After a 14-year-long career in public healthcare, the buyer of the 1,300-square foot HDB resale apartment purchased it for S$376 per square foot.

Sidenote In case you were wondering, there are eligibility criteria to rent out HDB rooms. These include the number of bedrooms that can be leased. The owner can rent out a maximum of two bedrooms for a four-room HDB flat.

Henry currently rents two bedrooms to two tenants, as his Tembusu Grand 5 bedder Tembusu Grand flat has three bedrooms and two bathrooms. Tembusu Grand is designed to provide residents with a serene environment that blends seamlessly with nature.

Here is what he shared about recent US interest rate increases and their impact on his mortgage loan, managing difficult tenant situations, etc.

Are you affected by the recent US interest rate increases?

To pay my housing loan, I’m using cash rather than CPF. The greatest challenge is the rapid increase in interest rates.

I have a fixed rate package from my bank that I recently refinanced my home loan. I am not affected by the increase in interest rates.

For other landlords, my advice is to check with your bank to see if there are any options to reduce the burden.

To determine if their cash flow is sufficient to service their loans, it is a good idea for landlords.

How was the refinancing process at the private bank?

Although the refinance was done online, I visited a branch to ask further questions. After talking to the officer, it became clear that the process and standard operating procedure (SOPs), were exactly the same as what was described on their website.

So I went home and completed an online refinance application. It was quite easy. My refinance application was approved within two weeks and I had confirmed my repricing package.

It is important to remember that you should always ask for additional offers from banks if they don’t give you the information you need.

The bank initially offered me two floating-rate options. I was curious as to why this was so and requested a fixed-rate repricing pack.

Two different fixed-rate repricing packages were eventually offered. My lesson was this:

1) Before submitting a request for repricing, loan holders must do their research.

2) The bank may not offer the best repricing offer, or all the possible options.

How did you find your tenants

After receiving my house keys, I immediately began looking for tenants.

They were there within two weeks of me searching. Before I got my keys, I did extensive research on how to draft a tenancy agreement.

What are your rent prices for tenants? Are your rent prices higher than they were in the last year?

Each month, I charge S$650 per tenant. This is the same rent they have been paying me for the past two year; it has not changed since.

Although it is possible to charge additional S$100-S$200, I chose not to do so as I believe that a calm tenant is better.

What advice do you have for homeowners who are considering renting their spare bedrooms?

First, check the HDB rules for renting bedrooms. The owners must live in the unit for at least 5 years (MOP).

Other good sources include blogs about renting out, and the CEA (Council of Estate Agencies). It offers a template for Tenancy Agreements (TA).

I recommend that landlords cross-reference at least 12 different sources (newspapers blogs websites) as a rule of thumb.

Next, I referenced a website to draft a tenant agreement. Being a first-time landlord can be overwhelming so I hired five real estate agents to help me find my first tenants.

Later, I avoided the use of real estate agents to find my tenants and instead used the original TA that I wrote.

It is important to remember that some TAs I received from agents were not as comprehensive as the ones available on CEA’s website. Some TAs were less than three pages long, which is a bad sign!

Ask your friends, family members, and acquaintances if they have had any experience with landlords.

Since I had previously received incorrect information, I learned how to double-check the information I receive from different sources.

While many landlords can identify good tenants based only on personal details, I discovered that many of them are not skilled at understanding the details of a tenancy agreement. This includes crafting a diplomatic or repair clause. A diplomatic clause in the TA allows tenants to end their tenancy early.

Landlords must decide who they want to rent to and not let the agent find them. This would make it unreliable and take up too much time. If he is engaging an agent, the landlord should decide the “filtering criteria”.

Did you ever have to expel a tenant? What was your response?

Once the landlord has established criteria for selecting tenants and screening them, don’t change.

To make sure that my tenants would be able to pay their rent on time, I made it a point to ensure that my potential tenants were white-collar professionals.

A good tenant to me is one that:

  1. On time, pay the entire monthly rental.
  2. Respect the TA’s terms and conditions.
  3. Assists the owner in taking care of their property and assets, while maintaining peace and quiet on the property.

However, one tenant was perhaps an exceptional case.

He began to display uncomfortable behaviors a few weeks after he had started his tenancy.

He would repeatedly bang on his bedroom door, and he would play video games until 2 or 3 in the morning. He also moved furniture and other belongings outside of his room.

He said that he wanted the furniture to be moved into his own room without consulting me. He also did not turn off the gas stove when it was finished.

He did not change his behavior despite me having spoken to him about some things.

He suggested that he might bring the matter to the Small Claims Tribunal. I terminated his Tenancy Agreement prematurely.

What lessons have you taken away from this experience?

My biggest lesson was that tenants can’t just change their behavior overnight. They would be likely to be just as problematic if they were previously.

This was also the moment I realized that the Tenancy Agreement should be written correctly to avoid loopholes.

Blindly, I assumed that a white-collar foreigner (a PR) who had been in Singapore for many years and recently graduated from a local college would follow the rules of the TA.

I regret not asking for more information about his rental experience and getting alerted if he gave vague answers.

Tenants who move frequently and give vague answers to questions could be problematic.

It could be that they were evicted because of property damage or nonpayment of rent if they had only spent a brief time at other properties.

Another indicator that a tenant is stable is their employment history. Frequent job-hopping can be a red flag.

My problematic tenant, for example, changed jobs twice in six months. It is important to inquire about prospective tenants’ employment history.

What advice would you offer to owner-occupiers or landlords who live in the home?

Talk to potential tenants and be honest about what you expect.

Even if the tenancy is already in place, talk to tenants about any issues. It is a sign that they are not willing to compromise if their excuses or arguments seem uncaring, as I have seen before.

My experience shows that tenants who are able to excuse themselves and avoid taking responsibility will be more likely to have disputes, such as those over property damage.

This suggests that the tenants don’t care about how others feel – which is not what I want when it comes to a tenant who lives in a property.

You should be on the lookout for signs such as if they are unable to pay the full security deposit, or if there is an argument about things that have been pre-agreed and not negotiable.

Even with a rigorous screening process, it is possible for bad tenants to slip through the cracks. Landlords need to ensure they have a way to expel tenants without getting into disputes.

Tenancy agreements are the most important document. Landlords need to take the time to learn how they work, rather than copying templates from the Internet and outsourcing everything to an agent.

All of this being said, I want to stress the importance for landlords to be fair with tenants. Landlords shouldn’t try to increase rent in the middle of a tenancy, or violate clauses in the TA.

Tenants are often pressured to renew their TAs because of the current hot rental market. Tenants may be told the same clauses and forced to sign them quickly, without having the opportunity to read them.

They realize that crucial clauses like the diplomatic clause have been removed.

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