LAW – Unlock values from your property investment

LAW - Unlock values from your property investment

Chris Tan advising the crowd on how to get the most out of their property investment

Foreseeing that law will be shaping the real estate trend in Malaysia for the next 10 years, Chris touched on the 5 latest legal trends covering the local real estate scene. Among them include the amendment of the Housing Development (Control and Licensing) Act 1966 (HDA) which includes new provisions that further solidify home buyers’ protection from possible risks including abandonment by developers.

“With 2016 being a buyers market and based on the fact that house prices will not fall, especially as Malaysia is marching towards a developed income status, there is no better time to buy properties than now,” opined Chris. Besides that, owners of strata properties now have their rights taken care of with the implementation of Strata Act 2013 on 1 June 2015.

 

PROPERTY INVESTMENT – A TEAM SPORT?

Elaborating on Miichael’s point of the emerging of new financing vehicles such as Sdn Bhd and Limited Liability Partnership (LLP), Chris shared that 2016 onwards will see the trend of property investment as a team sport gaining traction. As it is getting harder for most aspiring property investors to come up with sufficient funds themselves, LLPs would be the next viable choice.

What is an LLP?
An LLP is an alternative business vehicle offering a hybrid of characteristics between conventional partnership and a company. It is regulated under the Limited Partnerships Liability Act 2012.

Characteristics
• At least 2 members (No limitation on a maximum number of members).
• Limited liability where any debts and obligations of the LLP will be borne by its assets.
• An LLP may hold and own a property in its own name.
• Start-up costs are rather minimal.

To establish an LLP, there must be a written agreement between the partners to ensure that all their rights and obligations are formalised. One advice Chris had for individuals looking to form an LLP is to conduct a CTOS search on their co-investors to find out their legal status and to ensure that there will be no financial hiccups along the way. Chris explained that there are three models in property investment, the classic one being property trading where you buy a piece of property to sell it off at a profit. The second one is buying properties to collect rental income and lastly, the sale and leaseback option, where the owner of a property sells his property, and then leases it back from the buyer.

He shared that both institutional and retail investors are finding it harder to obtain or maintain their business premises especially in the current slow economy. That is why the third option is fast becoming popular among big companies as it enables for the facilitation of competitive market expansion. Besides that, companies are also turning to polling of capitals such as crowd-funding and Real Estate Investment Trusts (REITs) to acquire property.

ADDING VALUE TO YOUR PROPERTY

“The property market in Malaysia is now entering an era of low yield but high capital appreciation,” enthused Chris.

He explained that this is due to inflation and rising costs of living. Elaborating on how to unlock value from a piece of property, he shared the following tips:-
1. Buy a piece of property that is in a good location even though its condition is less than satisfactory. Carry out the necessary renovations yourself, making sure to not overdo it(use bank valuations of similar properties in the area) and then sell it off at a profit.
2. Buy a piece of property and renovate it, only to rent it out in parts. Here, the investor’s management or ‘land lording’ skills will determine a good rental return.
3. Rent a piece of property and carry out renovations to increase its market value. Then, rent it out at a higher price to obtain a profit. This option is more feasible for those who do not have sufficient capital to buy said property in the first place.
4. Rent out a piece of property in parts, where each room is let out separately. Also, you could rent out over shorter spans of time, where rent is charged hourly, daily or weekly.

Chris stressed that property investors should learn to generate more options to get the most out of their property investment, besides striving to add value to their property. Moving forward, he said that property management is key to unlocking better returns in the long run. He concluded by saying,” Do invest more time and effort in managing your property investment – it is a business after all!”.

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