Property Investment : Landed or High Rise?

Property Investment : Landed or High Rise?

Location, location, location

When going into a real estate investment deal, the first thing that should be kept in mind is the location. The location of the real estate determines how close it is to the business district, schools, restaurants and also to public transportation which are a huge deal to the tenants.

Convenience is king

The second thing to keep in mind is the convenience for your tenants, whether there is a parking space, good security system, access to major highways and if you are renting out a condominium, its facilities and view could all help add value to your property also. However if all of the above is more or less the same for both landed and high-rise property, which one will you choose?

The most common way to earn a profit from your property investment is by renting it out. When renting your property out it is important to keep in mind how much return on investment you expect and stick to it. In terms of return on investment, a condominium will definitely yield the highest revenue. Even though a landed property may cost more, it does not necessarily guarantee a higher revenue than a condominium.

For a freehold landed property, the prices are more resilient to depreciation as there is land attached to it. On the other hand, a leasehold landed property’s value will stagnate or depreciate towards the end of the lease. Other than that, there are also a lot of regulations and uncertainties when going through the renewal of your lease. Therefore, if you are going for a short-term investment, it is advisable to hold on for 5 years before selling off your property.  Meanwhile, for long-term investments, it is advisable to not hold the property for more than 10 years if the lease is less than 70-years.

For landed property, the responsibilities for maintenance falls to the investor to keep it in good condition. Condominium properties rely on good maintenance to keep the building in good shape and the facilities in good condition. If the condominium management is subpar and leave the building to its own device, the building value will depreciate very quickly and at that point, it is advisable to sell your property as soon as possible.

Consider room for development

Another aspect that you should keep in mind when purchasing a primary property is the planned phases for the development. If you purchase a unit at a later phase, it will always be more expensive than purchasing one from an earlier phase. The prices for these phases are usually planned out much earlier beforehand and does not necessarily reflect the true market value at that point in time.

Therefore,  if you are planning to purchase a condominium at a later phase, look around for early owners and buy it from them rather than from the developer to avoid buying an overpriced unit.

Conclusion

In summary, always keep in mind your investment goal – determine whether you are angled towards short term/long term investment and then appropriately invest in your choice of real estate.

*This article was done in collaboration with Loanstreet.

 

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