Real Estate Investment In Malaysia

Then, identifying the various measures to manage them based on the 4 mitigation strategies. Real estate investing is capital intensive, if you don’t have sufficient funds, you may have to take out a home loan. Location – Location of the property will affect the capital gain. In the Malaysian context, properties in KL have higher capital gain than those in Johor. While there could be common underlying causes such as changes in Malaysia’s economic conditions, the impact on each of the groups of risks may be different. Other countries will have different market and statutory characteristics.

Let’s first understand the different types of property investments in Malaysia. Property or real estate investment is investment in a resource that is increasingly getting scarce. Similar to gold or silver, land is a resource that will appreciate in value and returns over time. Thus, property investment is becoming a popular option for aspiring investors. The real estate financial risk is the threat that the financial returns from capital gain and rent, net of financing charges may be negative. The financial position of the owner will also affect the capital gain and/or rental income.

As such they should also be assessed from a financial risk perspective. To be able to use this framework, you need a good understanding of the investment. This could include its location, rental and capital gains potential, and the financing challenge.

On determining the type of property you have set your eyes on, you should think about your investment strategy. This is the difference between rental income and the various running expenses such as statutory charges, real estate agent commission, building repairs, and income tax. Establish mitigation measures to protect against getting negative returns on investment. Project leasing Develop a compelling marketing strategy for your building using technology to bring the space to life to attract and secure tenants.

One thing to consider when investing in commercial properties, is that it requires higher upfront capital as the financing margin is usually less than 70%. Also, returns on commercial investments are highly dependent on commercial occupancy rates as well as the surrounding township occupancy, public transportation network and other factors. Note that, not all residential investments will give you the same ROI due to various factors, the main one being the property location. Thus, proper research is important so you acquire a property that is in a ‘preferred’ location, in order to maximise your investment return, whether in terms of rental collected or re-sale value. The focus of this example is not whether which investment property will generate better returns, but rather which has lower risks. The chart below summarizes the comparison for each of the threat looking at them from the combination of probability of the event happening and the impact should the event occurs.

It has 28-storeys, with 4 floors of retail podium and 3 levels of basement carparks. Breathe life into old space, or create something brand new to help your people thrive. Research & Consultancy Make sound investment decisions informed by the latest research, insights and advisors. Our research provides an understanding of complex challenges related to policy, property and social issues. Get insights into worldwide investment trends, evolve your strategy, and discover the next opportunity. Advise Get insights into worldwide investment trends, evolve your strategy, and discover the next opportunity.

But to be able to do this, you need to have a good understanding of the real estate investment process. Many tax systems treat rental income differently from capital gains. If you are like most investors, however, you have been programmed to believe that making a sizable profit on the sale of your real estate investment is not only desirable, it’s expected.

In other types of investments, you give your money to a financial advisor and they place it for you in a company’s stock, a bond, or a mutual fund. You have no ability to make operating decisions for the company you have invested in – you are at the mercy of its managers. It takes time to find them, but it is well worth the effort. The simplest definition of positive cash flow is that you collect more revenue, usually in the form of rent, than it takes to pay for and operate the property. It offers at least five different returns or ways of making money on investment compared to other forms of investment. Of all possible investments that are within the reach of the average investor, none offer the combination of outstanding benefits that are available to real estate investors.

This will affect the supply of units and hence your selling price. It is possible that new properties may make your property less attractive as they may not have the same facilities. Move into your first office, find a new one with room to grow, or develop a complete location strategy.

You will make a profit, but the more you expect to make, the longer it may take to locate a buyer. Sure, you can call your stockbroker or use your online trading account to offer your shares for sale… at whatever price they will bring on the market at that time. And, the way the market has been, there will be times that you have to sell at a substantial loss in desperate situations.

The OPR has a domino effect on home loan interest rates, hence you can expect to enjoy cheaper home loans in 2020. Find out what are the stamp duty and legal fees for tenancy agreements in Malaysia. Do your due diligence at the buying stage on the location, developer, and type of properties. One property is located in an established part of Bangsar where the tenant has paid all the rent on time. Competition – Rental rates are affected by supply and demand.

If you own properties long enough, you will meet some form of disaster. Examples are burst water pipes, water tank leaking, electrical wiring problems, roof leaks. There could also be changes to the government policy on credit thereby affecting your financing charges. Assessing the risk in the context of the impact and the likelihood of the occurrence.

These will influence the cause and effect as presented in the Ishikawa diagram. Accept – in some instances where the cost of mitigation outweighs the benefit of the mitigation strategies, it may be better to live with the risk. ATWATER An integrated development in Section 13, Petaling Jaya that consists of residential, offices and retail components that have been carefully planned to seamlessly complement each other. 28-Storey Headquarters Office Building in Kuala Lumpur Completed in 1986, the Headquarters Office Building is very well-maintained for its age.

As mentioned above, a good investment property should give you 2 things; a steady rental income or a positive monthly cash flow and solid capital growth over the years. The chart above covered the risk mitigation measures related to investing in real estate. An important point about the above risk mitigation measures is that they should be part of a wider asset allocation plan. Along this line, some of your savings/net worth should also be invested in other assets such as stocks or gold. These have a different risk profile than those of properties so you are transferring some of the risks.

In Malaysia, real property gains tax varies with how long you have held the property. At the same time, the Malaysian government has in the past amended the property taxation rate. Capital gain results from the difference between the selling and purchase price. This is of course after accounting for transaction costs and taxes. The selling price and rent will also be affected by how well the property is marketed. Having a high expectation of the selling price or rental may affect how long it takes to sell or rent the property.

Leverage is an interesting thing about investing in real estate. It’s more than likely you have heard the term Other People’s Money, or OPM. There are many forms of investment available in the market, but many people still prefer to put most of their savings in banks, cash value life insurance, bonds, etc. With the buying-to-sell strategy, you should consider if you have the necessary commitment to hold on to the property until it is sold, including the time to maintain the condition of the property.

Use market-based advice to leverage the terms of the lease, which may include a lease re-structure to optimise business objectives cost-effectively. Leasing Attract and retain the best tenants for your space and negotiate the most advantageous lease terms to secure maximum occupancy. Find & lease space Move into your first office, find a new one with room to grow, or develop a complete location strategy. This article is contributed by KCLau and Dr. Ong Kian Leong, both the co-founders of the first ever online property investment course for Malaysians, called Property Method (). In any event, do not shy away from investing in real estate because you cannot get your money back out as easily as you can in your savings account. Real estate investment is more liquid than many investors realise.

You also accept iProperty’s Terms of Use and Privacy Policy including its collection, use, disclosure, processing, storage and handling of your personal information. At the tenancy stage – focus on occupancy rather than rent as you will lose more waiting for another month or so to get an extra 10% rent. The other property is located in one of the newer townships in the outskirt of Klang where the rent has been paid late occasionally.