Real Estate

Real Estate Investing 101A – A Prospect to Kill

For a real estate investor, the wide range of properties on the market can present both opportunities and risks in the pursuit of asset acquisition. There is a smorgasbord of high-rise residential properties and home sites to choose from in terms of price, design, construction and location to suit everyone’s lifestyles and budget. Selecting the right property depends on many factors that interact to make it challenging for a novice investor. A good location that comes with good amenities and accessibility is a good place to start.

The decision of which property to invest depends on the aforementioned factors that can also be influenced by one’s own emotions. As much as one tries to be objective and practical, candy sellers or real estate agents and the attractive decoration of display units can fool us. We can easily miss small print on glossy brochures or subtle flaws on ready units. Developers tend to embellish their sales post with exaggerated value and benefits to attract potential buyers.

Be that as it may, one should always keep in mind the tricks of the trade employed by experienced sales agents acting in the interests of developers or sellers. Some agents can be quite cheap with the truth and provide unverified information to close the sale. Therefore, it is prudent to verify and verify the information with reliable sources. You can also research and compare data with other sources, such as the Internet and the community at large. Your friends, family and relatives can also be a source of referral.

Now that we’ve covered some of the pitfalls and pitfalls of property investment and selection, we need to take calculated risks and weigh the options open to us in an enlightened manner. This article will focus on the high-rise apartments that are flooding the real estate market in my home country of Malaysia. This is because many developers are building high-rise residential units to meet the lifestyle aspirations of people seeking comfort, affordability, and safety. Most of these high-rise developments come with a myriad of facilities and living comforts. These so called lifestyle themed developments can come with a hefty price tag in the form of maintenance fee, abandonment rent and appraisal fee. For the investor, the goal is to achieve a good rental return and capital growth in the coming years. A good rental yield for high-rise apartments should preferably be 5-6%. This will make it worth your time and effort to find and select a good property to invest in, which can be quite complicated. Otherwise, you’re better off holding cash in the form of a fixed deposit or putting your money in bonds or unit trusts that are more liquid when you need the money.

An investor has to pay for the maintenance of the property. As such, any expenses, such as the maintenance fee and the cost of repairs, will be reduced in the rental income derived from the rental of the unit. For high-rise residential units, such as serviced apartments that are on commercial land, the abandonment rent, assessment fee, and utility bills are charged at higher rates than residential properties. Rental income is also subject to tax. Interest on the mortgage loan taken to finance the property is the other major expense that will reduce rental income unless an investor decides to pay for the property in cash. However, the investor who prefers to borrow due to lack of leverage can use the rental income to defray the monthly loan installments payable to the banks. What is collected by banks can also be offset against rental income before tax interest is charged under the law. For a cash purchase, the investor has stronger bargaining power and is in a stronger financial position to hold the property compared to a purchase through a bank loan which can be risky when interest rises.

Finding tenants to rent the units in high-rise serviced apartments can be quick or slow depending on the density of such development within the locality. A high density development creates more competition for tenants compared to a lower density one. This is also valid for rental yield.

Real estate investment is also a good hedge against inflation as it offers capital gains over a period of time. Depending on location and type of property (lease or freehold), capital appreciation can be 5-10% per year. Over a 5 to 10 year period, a property may appreciate at such rates if the property cycle is expansionary. A property may also remain stable or unchanged in terms of capital growth compared to other properties in the same location. This is due to saturation or excess properties on the market. If an investor is not careful, a real estate investment can lead to negative capital growth due to downturns and downturns in business cycles. Therefore, timing is important in real estate investing. Additionally, if you purchase property in a location with plans for the development of MRT/LRT stations or transport links to other major roads and highways, you can expect future capital appreciation.

When deciding which type of property to invest in, high-rise residential units earn better rental yields compared to land-based property, which offers a lower rental yield of 1.5-2%. This can be attributed to the convenience of lifestyle provided by high rise serviced apartments providing facilities such as swimming pools, gym, sports and recreation, 24 hour security, etc. High-rise serviced apartments tend to attract younger families seeking such lifestyle amenities. On the other hand, land ownership has higher capital growth simply because it sits on its own titled land, which is becoming scarce with population growth. It can offer capital growth of 5-10% per annum, especially in wholly owned and prime locations. High-rise residential units with strata titles generally don’t offer the same capital growth. Keep in mind that any capital gains realized from the disposition of the property may trigger capital gains taxes.

In the end, the return on investment (ROI) from rental income and/or capital gain should justify the investment in the first place.

All of the various points clarified above offer a macro view of real estate investment in the context of high-rise residential development. Let’s take a micro look at real estate investment in terms of quality and workmanship.

If you are looking to invest in high-rise apartments or serviced offices (SOHO/SOFO), you should keep your eyes open as the devil is in the details. For ready units in a new development or subsale, you should inspect the unit for roof leaks or water seepage through the window. If the ceiling has water marks, it indicates that there is a water leak from the unit above. This leak issue can be challenging to resolve, requiring the cooperation of the resident staying in the unit above and the property management corporation.

The water can see through the window between the frame and the cement or between the glass and the frame when it rains a lot. This is especially problematic for units on higher floors. The rubber and silicone seals used in window and frame construction can crack and melt in the heat of the sun. Through the ravages of time, you can see watermarks appearing on the adjacent wall and below the window.

Upstairs unit residents may be a nuisance to downstairs residents if noise is a significant issue.

A developer with a good track record does matter in real estate investing.

On the plus side, high-rise serviced apartments can offer scenic views, especially for residents on upper floors. A sight to die for some may say. These units are also priced higher.

From a Feng Shui perspective, the view from the balcony should be overlooking a landscape of lakes or rivers, preferably to the southwest, east, southeast, or north. Common areas within the property, such as hallways and hallways, should be well lit. Any property that is subject to windy conditions is also not auspicious as the life force known as Qi is unsettling in such an area.

A view to a slaughter in real estate investment is a double-edged sword. You can make a “kill” after viewing a property or be financially “killed” by your decision, right or wrong.

For a natal chart reading based on the Four Pillars of Destiny and Feng Shui consultation, visit my website at http://www.bazidestiny.yolasite.com

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