By MoneyBees
Work out gross and net rental yield on a home you let out, after vacancy, property tax at non-owner-occupied rates, MCST, agent fees, insurance, repairs and mortgage interest, with the income tax on the rent.
Gross yield is a year's rent divided by the price. Net yield takes off what owning a let home costs you: empty months, property tax, maintenance or MCST fees, agent fees, insurance and repairs. Net yield is the one that tells you what the home earns.
Non-owner-occupied rates apply: 12% on the first S$30,000 of Annual Value, 20% on the next S$15,000, 28% on the next S$15,000 and 36% above S$60,000, from 1 Jan 2024. An AV of S$42,000 means S$6,000 of property tax.
Not always. IRAS sets the AV from market rents of similar homes, without furniture and maintenance, so it can be higher or lower than the rent you actually get.
Mortgage interest, property tax, fire insurance, repairs and maintenance, MCST fees, and the agent commission, advertising, legal fees and stamp duty to find or renew a tenant on a lease of 3 years or less. Loan principal, renovation and initial repairs are not deductible.
For residential property, IRAS lets you claim 15% of gross rent in place of your actual costs, plus your actual mortgage interest. You do not need records of the other costs. IRAS's example: S$60,000 rent less S$12,000 interest and S$9,000 deemed expenses leaves S$39,000 taxable.
No. IRAS does not let rental losses be set off against employment or other income, or carried forward. A loss on one let property can offset rent from another in the same year if all are let at market rates.
From YA 2022, costs and property tax during a vacancy between leases are deductible if you made reasonable efforts to find a new tenant. Interest before the first tenancy starts is not.
There is no official benchmark. Compare the net yield after interest and tax with what the same cash would earn elsewhere, such as T-bills or fixed deposits, and with the risk of a long vacancy.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).