IF YOU are among the lucky ones to have made a small fortune selling your home in a collective sale, you may be wondering what to do with your newfound wealth.
Instead of taking the conventional route and reinvesting the money in another new residential property or two, you may do well to consider the unusual alternative of putting your money in a coffeeshop instead.
These properties can give average rental yields of above 10 per cent - that is more than double the rental yield of an average residential unit.
The rental yield is the percentage of the property's original purchase price that is returned as annual rent.
Homes generally fetch rental yields of 3 per cent to 4 per cent, but some coffeeshops can boast yields of as much as 14 per cent.
One such property is currently up for sale in Ang Mo Kio at a price of $4 million.
The 12-stall coffeeshop pulls in a monthly rental of $45,000, which puts its annual yield at about 14 per cent.
One reason coffeeshops are able to fetch such good rental returns is that they are divided into several stalls.
And these stalls can be individually rented out for a larger combined yield than a single residential unit, say property agents.
Many coffeeshop owners also manage the drink stalls themselves, thus adding to their income as these stalls usually have the highest profit margins.
Also, coffeeshop properties are relatively rare, which adds to their allure as an investment option.
There are about 1,600 coffeeshop properties in Singapore, but right now only about 20 of them are on the market, said Mr Eric Cheng, senior division director of PropNex Realty.
He added that they can generally be classified into two tiers according to their cost, which is mainly based on location - those in Housing Board hubs tend to fetch higher prices - as well as other factors such as size and the number of stalls.
At one end are smaller properties costing less than $2.5 million, while the rest can fetch more than $3.5 million.
The most coveted locations for coffeeshops are Geylang, Bishan and Ang Mo Kio, said Mr Cheng.
He added that these properties 'make better investments than residential assets because they take a shorter time to break even - 10 to 15 years, as compared to 20 years or more for homes'.
Other coffeeshops on the market currently include a 3,800 sq ft property in Clementi.
The asking price for that is $4.2 million in return for a total of $26,000 a month in rent from its seven stalls.
Another one in Geylang, with nine stalls on 3,600 sq ft of space that yields a total of $57,000 monthly, has a price tag of $5.5 million.
For a smaller investment, a five-stall coffeeshop in Jalan Besar is going for $1.89 million.
The 3,000 sq ft property pulls in $10,200 in rent monthly.
However, Mr Cheng cautioned that would-be buyers should keep in mind that most coffeeshops are 99-year leasehold properties, with many being more than 20 years old.
fiochan@sph.com.sg
