- Nixon Paul
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Changing Property Investments Trends
Property Investments are one of the safest and most conservative forms of wealth creation. It is also a good hedge against inflation.
However, careful consideration must be given to some basic facts. Location, Supply & Demand, and Rental Values to name a few.
Buying a property for RM500,000 and then selling it two years later for RM700,000 is considered by many as the way to invest. While many have successfully made profits in this manner, it is my personal opinion that this approach is risky and unsafe.
Conservatively speaking, when one invests in a property, the “Return on Investment” via its rental income or the “Capital Appreciation” over a longer period of time would be the way forward.
Property Investments are not for those who wish to make fast money.
Successful property investors have very differing opinions on what is deemed to be the way forward in terms of the type of property, location, and exit strategies. I list below a few varying types of properties.
Investing in Commercial Bungalows
Jalan Ma’arof in Bangsar and SS2 Petaling Jaya are good examples of how residential properties fronting busy main roads are now being used for commercial purposes.
Although these properties are registered as residential, the purpose of the use is commercial and the rental returns they generate in most cases are better than that of residential homes. The demand for these types of investments has steadily grown over the years.
Unlike shop offices, these houses offer private parking, larger land areas, better frontage, and the option to create larger built-up areas with renovations.
Commercial Bungalows have their limitations as well, the use of these houses is usually restricted to showrooms and offices only. The local authorities are quite clear about this and licenses to operate for commercial purposes are renewed annually. Should the commercial activities carried out at these houses pose a problem to the neighboring houses, the licenses are revoked.
Investing in Shophouses
Here location and the quality of the tenant is a serious considerations.
Unlike residential properties, most tenants who rent shophouses tend to rent for longer periods. There are hardly any maintenance issues as you are merely renting bare space.
Shop office investments in prime locations have generally proven to be safe even in challenging market conditions.
Investing in Foreign Properties
Many are of the opinion that one should spread one’s risk and as such invest, a portion of their finances in properties abroad as these investments may also see forex gains as well. (This is quite subjective as it can also work in reverse). Today the options are many, condominiums, student accommodation, nursing homes, etc. Over the last 10 years, there has been a dramatic rise in the number of Malaysians investing in foreign properties in the UK. Australia and Singapore are the preferred destinations.
Investing in New Developments
This is the favorite approach by most investors with the residential developments taking the lead. Many make decisions based on emotions.
New and trendy features that meet current trends with 5-star facilities to complement the development.
Landed developments in a Gated and Guarded environment are usually the preferred choice for those who have the budget. Condominiums are also sought after depending on location and price.
Further to the above, the purchase of a property from a developer is made easier by very innovative and flexible financing schemes. Minimum down payments with many other incentives being offered.
In conclusion, we have noticed that savvy investors tend to do the following:
- Keep their financing to a maximum of 70% of the purchase price.
- Always take a long-term view.
- If they invest in residential properties, the management and maintenance of the development are given serious consideration.
