A Property Investment Guide For Beginners In Malaysia

To identify the various root causes for each threat, I used the Ishikawa or fishbone diagram to depict the risk structure as shown below. An Ishikawa diagram shows the causes of an event and is often used in manufacturing to show where quality control issues might arise. It is an asset with limited liquidity ie it takes time to sell. Many do not have access to the resources needed to bring out their full leadership potential. That is why our content will always be free, and we would be forever grateful to those who help make that possible. I’ve read and accept the Terms and Conditionsand Privacy Policy.

One way to earn from property investment is to buy the property and rent it out to earn rental income. You should do some ample research beforehand to understand the type of property that you are buying, the location and the potential tenants that you want or may attract. This is the difference between the selling price and the purchased cost as reflected in the Sale and Purchase Agreements . The capital gain will be net of the various transaction costs such as legal fees, stamp duty, real estate agent commissions, and property gain taxation in Malaysia.

Renting out your property for income is the default option for most property investors. Like any investment, there are risks when investing in real estate. A REIT is a company that owns or finances income-producing properties. REITs are similar to unit trusts, where investors pool together their money and a manager decides which property to buy and/or sell. If the goal of buying properties is for investment in Malaysia, there is a need to view them as financial investments.

Her love of reading and outdoor sports has informed her desire to travel, explore, and connect with new people. The big negatives for real estate investment – low in liquidity, high transaction cost and lengthy transaction time… Well, the same holds true with real estate, considered a non-liquid investment. If the investor wants out quickly and is willing to sell at a loss, as he probably will his stock, he should be able to locate an immediate buyer.

Although inflation is a friend to real estate investors, however, inflation is an enemy to all homebuyers. There is always a big difference between a homebuyer and a real estate investor. You can see the power of leveraging demonstrated by real life cases in our previous article Why you want to take up a loan for your real estate investment?

Retail investments are similar to commercial investments, with different mechanics and prime locations, as retail properties refer to properties that are located in malls and other retail storefronts. This should not be a surprise because successful investors in other financial assets such as stocks and bonds are experts in their respective fields. The advice for any investor is that you should not invest blindly. I will show how each of them can be carried out in the following sections. While I have used some examples to illustrate them, the article is not about whether a particular property is less risky or whether the risk mitigation plan as shown is comprehensive. Rather it is to illustrate the approach so that you can adapt it for your own analysis.

Investment in industrial properties generate a unique level of income from both rental and re-sale, with significant fee and service revenue that may increase the ROI for the property owner. There are a 5 major types of property investments in Malaysia, namely Residential, Commercial, Retail, Industrial and Real Estate Investment Trusts , each with its own earning strategy, pros and cons. Find out as much as possible from real estate agents – such as whether the owner is looking for a quick sale and how long the unit has been on the market. This will give you an upper hand when negotiating the property’s selling price. Though property purchase is considered as a long-term investment, it can be used for a short term investment yield, think Buy to Sell properties.

Banks and life insurance companies recognise this fact, and they invest your money in real estate! While they pay you between 1 and 4 percent for the use of your money, they are making 10 to 20 percent on it. Before investing into industrial real estate, do note that it is a very niche market and often require specific professional maintenance and management, as well as a heftier upfront capital cost. As such, this type of investment are generally considered to be more risky. Industrial properties are properties such as industrial storage or warehouses and distribution centres that have long term agreements.

If there are new properties in your housing neighbourhood, it may affect your asking rent. Economy – The economic situation may impact the demand for the properties thereby impacting the asking rent. Changes in the home loan structure due to dire economic situations may affect the total amount of financing charges. Imagine the impact if you do not have interest protection clauses in your financing scheme.

Design & deliver projects Breathe life into old space, or create something brand new to help your people thrive. Invest in real estate Uncover investment opportunities and capital sources – all over the world. Transform with technology Take your business beyond its existing limits.

You can filter the pricing data points by area, building type, unit size and specific date ranges. Nevertheless, the quality REIT assets is important, hence investors must do their homework and study factors such as the location and income generation of the REITs’ assets. Rent is usually the main source of income as a REIT holds many types of commercial real estate such as offices, shopping malls, factories and hotels. I use a matrix to help do this with the various threats on the vertical axis and the 4 mitigation strategies on the horizontal axis. Compare the risks between different locations and/or types of properties.

Always remember also, you do not have to start out big in real estate investment. If you use the right techniques, you will be able to build an estate in real estate. You are using the principle that inflation is now working for you instead of against you. You are merely working on the principle that after many years you can expect your invested capital to increase in value, and it does not matter how small you start – that principle remains the same.

It’s like putting money in the bank each month, while this money is helping you to reduce the mortgage loan interest by lowering the outstanding loan amount every month. Knowing which type of property investment is suitable for you, and deciding on the right strategy are the two most important factors to succeed in the real estate investment market. Meanwhile, in long term investment, your “money” will be tied up for years. Considering you have the holding power to invest your monies for at least 5 years, your property will generate greater capital appreciation over the years as the house prices grow substantially.

For instance, NAPIC quoted the selling price of a typical terrace house in Johor at RM 316,693 whereas, in Kuala Lumpur, the same type of house costs RM 837,287. Sale & leaseback Evaluate the possibility of selling an owner-occupied asset and leasing it from the buyer to free up investment capital and ensure flexibility in your long-term real estate strategy. We keep on having babies but God quit making land a long time ago.

Properties in areas with robust economic activities will always do well. Nurses and doctors prefer to rent a place nearby to minimise their daily commute. You can depend on the steady stream of students as your target tenants.

New/Old Property – If you are buying a house that is currently under construction, there is then the construction and completion risk to consider. Check out the latest list of blacklisted Malaysian property developers. Or, if you are buying from an existing owner, you need to check the building compliance.

Small-office, Flexible-office or Small-office Versatile-office . These commercial units provide a lower entry point from as low as RM300,000 – RM400,000. SoFos and SoVos are usually built within a mixed development near popular business district and are targeted towards individual business owners, small startups, etc. Bank Negara Malaysia has recently lowered the Overnight Policy Rate to 1.75%.

A person without a strong financial standing may be forced to sell at a lower price because of cash flow needs. The asking rent could be lower if the owner has liquidity problems. In a real estate investment, this equity income can be a sizeable amount. Although you cannot spend it each month, when the time comes to sell or refinance your property, you owe less on the mortgage, so you will receive more money at closing.