Property Tips Revisited
It always pays to remind ourselves of the basic points to remember when looking for investment properties. Chan Ai Cheng revisits this well-travelled road.
Becoming a property investor is a great way to earn extra income if you are willing to think long-term. It is, however by no means easy money. Finding the right property requires a lot of knowledge and skill and without them, your investment might cost you dearly. There are many different ways to purchase an investment property. Real estate investors, trainers, coaches, property developers and real estate agents will advise you on the many different approaches and keys to doing it right. Even though you will find many ways to purchase, here are a few tips to make sure you are getting the most for your money.
Pick a Location with an Existing Market
Location is always the number one key. This point is applicable to any property purchase anywhere around the world - well located properties not only in terms of the neighbourhood location but also the particular unit or lot location. Within established locations and neighbourhoods, there will always be less favourably-located lots/units. Buying in the right location does not mean just the right address but includes also the right located lots/units within that address. This step is so important that it pays waiting to buy the right one or walking away from a seemingly good deal on poorly located lots/units.
When considering location, consider also your tenants. Who will be your most likely tenant and why would they want to rent your unit? Don’t Focus on Your Needs. While you are shopping for investment property, remember that you are not looking for a residential property for yourself. Keep in mind the needs of your potential tenants, like the property’s proximity to bus stops, taxi or other public transportation, their parking needs and etc.
Getting the right property will ensure that your property gets tenanted faster and remains occupied the most, at the best rental. At the end of the day, our objective of an investment property is to make money for us and not the other way round. So be mindful of the location of the property that you are looking to invest in.
Also a good idea to consider is an up and coming location but it’s probably somewhat riskier. Here you can never be 100% sure but it will show good returns should the location become more sought after. Do your research well and you will be smiling all the way to the bank.
Finding Out the Value
Value means differently to different people. Whichever way you look at it, you don’t want to pay more for something than what it’s actually worth. You must understand that buying your own home versus buying an investment property has different criteria and values. I know of home buyers who would pay a price above the “market value” because it meets with their requirements and they just simply really like it.
Sentiments like this is potentially dangerous when used in the context of choosing an investment property as the objective in the latter is clearly very different. You have to have reliable data on the property prices in the location that you have identified to invest in. The best places to get these are through the local real estate agent active in that area. They will know what the asking and transacted prices are which will give you a good guide before making your offer. It is also wise to cross check this with data on property websites, classified advertisements and your local banker. You want to get access to the data you need in order to make an informed decision.
This is the part that turns many aspiring property investors away from the game. The question of how I can afford it?
It is safe to say that smaller properties especially apartments, flat and townhouses, have always been more popular among tenants. Although rental yield is also smaller, it is easier to maintain and to market.
Buy What You Can Afford
Even though large, luxury properties will bring in bigger rental income, it is not advisable that you buy what you can’t afford. Always stay within your budget to ensure that you can afford the monthly payments even without tenants. You do not want to be in a situation where you depend 100% on your tenant’s rental to repay the loan instalments. It is good practice to factor a vacancy period of say 3 months in a year. There are instances of delay of payment by tenant or even non-payment and you need to be prepared for that.
It is good advice not to overgear yourself in borrowings. You must consider the financing for both the acquisition and the holding of the property.
Quite a number of property investors choose to purchase direct from developer as the entry is usually lower and there are packages that make it easier to own with attractive financing.
There are property investors who buy dilapidated homes and turn them around and sell them at good prices after that. This is also a very good property investment strategy for those who have the right team in place with some expertise in this sort of work. For one starting out in property investment, it is not recommended to embark on this strategy unless you have deep pockets and a team in place.
Appoint a ‘Buyers’ Agent’?
Sourcing for investment properties can be quite a task unless it’s your only job. It might be worth your while to consider appointing a “Buyers’ Estate Agent” to assist you with your search for investment properties. Real Estate agents can be a very valuable source as they are on the ground and about, checking out properties daily.
The recent gazette on the amendment to Estate Agency fees provides for the revision of fees to a flat 3% on the Selling Price. This serves as a guide for you when you are considering appointing a ‘Buyers’ Agent’. Look at it this way, I quote an avid property investor friend of mine, “If they bring you a good deal, what is that small fee?! Worth it!”.
Chan Ai Cheng
General Manager, S. K. Brothers Realty (M) Sdn Bhd
Registered Estate Agent, Board of Valuers, Appraisers & Estate Agents Malaysia (LPPEH)
Certified Residential Specialist, NAR USA
Registered Financial Consultant, International Association of Registered Financial Consultant (IARFC)
Member, Malaysian Institute of Estate Agents (MIEA)
Member, Institution of Surveyors Malaysia (ISM
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