Property investment is a trendy topic in discussions between friends and work colleagues. Quite often, there is one more informed fella that drives the discussion and fill all the loopholes left by others with his opinion that, most of the times, are not supported by data and facts!
I always laugh till crying when I overhear these kinds of chats between friends resulting in hyperbolic declaration that “Property Investment is Endgame” without any supporting and making sense information!
People need homes, and so do businesses when they are growing. There is a constant need for more space, people need places where to go for their shopping and entertainment and so on! How can property ever come to an endgame?!
Of course one needs to be very cautious when considering property investment, especially now that the market has been experiencing oversupply of certain type of properties and in some selected locations!
What I do before proceeding with a property investment decision is to analyse data and facts making economic sense out of them, then only I decide!
The following are some “money saving” tips all supported by data and facts.
#1 What To Look For
I always recommend looking for scarcity as, a scarce “property investment” product, will always have demand! Examples are, a high-rise with a McDonald’s drive thru at the ground floor or where all surroundings are landed or again a product with a unique characteristic that no other has!
I always look for areas of “lifestyle”, if investing in residential properties, because people like to enjoy their free time with “style” and possibly without the need of using a car! Walking distance has become a must have as most people do their best to comply with the reduction of carbon footprint.
I always choose uncommon locations because the too common locations are overcrowded by investors, the competition is high and you can easily understand that prices as well follow the uptrend!
I always pick locations with easy accessibility and well connected with public transportation, because we all are becoming more sustainable and trying to use cars the less is possible!
I always choose……my next destination wisely!
#2 Trust Data & Numbers Only
What makes a property investment good and highly profitable? It all depends on the WHYs we decide to invest.
If it’s for return on investment (ROI), which means rental, I’ll suggest looking for property investment in areas already fully developed and mature, with easy access to highways and public transportation, a wide range of amenities and, above all, I’ll carefully check the rental data. A great investment is the one that generate positive cash-flow.
There is a new project, going to be launched soon, in Damansara along the Sprint Highway. Prices there are very affordable, in the range of RM230,000 to RM250,000 for a studio unit. If I do a bit of math on the average value of RM240,000 with a 30-year loan @ 3.5% interest, with 80% financing a property investor will need RM916 per month for the mortgage repayment with a market rate for rental of between RM1,200 and RM2,100. Does this make economic sense to you?
Check on line occupancy level of different locations (in one of the many property online portals type a location and refine the search matching the type of property you want to compare and check how many listing there are per property name, the more listing will popup, the higher unoccupied number of units that property has) as several defined “good locations” have seen rentals moving from stagnant to downtrend and occupancy is at historical lows.
If I’m looking at capital appreciation, value increase on properties, I will investigate a different set of data.
First and foremost, let’s set expectations right by saying that property investment for capital appreciation is a medium/long-term game, 5 years and above. Forget the “BS” that sometime we hear of two/threefold increase in value in one year….. It Does Not Happen!
Having said that, I look first at what property developers have been and are going to launch, type of product, sizes, psf (per square foot) value, sales trend in the area. Secondly, I’ll go and check the data on secondary market transactions. Not for the values, of course, but to see if the market in the chosen location attracts buyers and, if so, how many transactions there have been, at which values and, via agents friends if the sellers are able to get the asked price.
Propenomy Golden Rule states that in real estate you need two factors to push up the value of properties: developers’ new launches with keep on raising RM psf (per square feet) value and an active secondary market with profitable (selling at higher value compared to purchasing price) sale transactions!
The Perfect Property Investment Location is the one where both the above factors are satisfied!
Believe it or not, there are few areas offering this “2-in-1” but I will talk about this towards the end of this article.
#3 Avoid Perception Based Decisions!
Perception, or the bad habit, we all have, to get influenced by others’ thoughts, ideas, and words, is always the worst enemy to rational choices! We perceive through online portals’ news, discussing with friends, listening to a RE agent or simply following what most people says, does, chooses and, at the end, we decide without doing a quick exercise of “fact-check”. Does this make sense?!
When the topic is money, big one as we are talking about property investment, we should analyse on our own without being influenced by others.
In property investment I will ALWAYS go and see the project location, drive through the surroundings, check out the competition, the occupancy rates, and the actual rentals. I want to see, feel, and touch what the location has to offer!
The following is a good example of a project that I’ve recently visited in Damansara!
Damansara (prime location) “Public Perception”
Damansara is one of the areas where property development has been the most active for the past many years. For sure a project there, as land is scarce and very expensive, should have a very high density and it will be extremely expensive.
Additionally, as there is no more land available for development, any new project in Damansara could be hard to access and surely not connected?!
Damansara “Facts and Numbers Check”
The new project that I’ve mentioned above, is easily accessible from the Sprint Highway and/or an under construction LRT3 station (completed by 2024), at walking distance. It is in a very mature neighbourhood with everything you may think of at less than 5 minutes drive.
Being a high-rise building, of course density is not low but, compared to other similar projects in the surroundings, for sure ends as one of the lowest!
Let’s Talk Lifestyle, a wealth of amenities is right at the ground floor of this new project, inclusive of the best US based drive-thru fast-food chain.
The moral is, we should never take our property investment decision based on what people are saying but go, see, feel, and touch by ourselves and then only decide!
Conclusion
Do not simply take a property investment decision guided by what others are saying, after reading this article, please go and verify by yourself, don’t trust me! Remember you will be the one paying a mortgage for 30 or more years making this a decision you need to take responsibility for.
In this temporary troubled market one last check to be done is on “who is the developer”. Check their track of record and since how long has been around and what others say about it. Plenty of online forum where to gather good information. Make sure that every information you receive can be confirmed.
My next article will explain more about the current and predicted property market situation in Malaysia and why I keep saying, “Worst Times Are Best Times”. Stay tuned for it, it will help making better property investment decisions. Remember to like this article and drop your comment below.
