Real Estate Investing 101A – A Prospect To Kill For

For a real estate investor, the wide range of properties on the market can present both opportunities and risks in the search for asset acquisition. There is a smorgasbord of high-rise residential properties and land to choose from in terms of price, design, construction, and location to suit one’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 in 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, the sweet sellers or real estate agents and the attractive decor of the display units can fool us. We can easily miss the fine print in glossy brochures or the subtle flaws in ready-made 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 interest of developers or vendors. Some agents can be quite cheap with the truth and provide unverified information to close the sale. Therefore, it is prudent to check 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 referral source.

Now that we’ve covered some of the pitfalls and pitfalls in property selection and investing, we need to take calculated risks and weigh our options in an enlightened way. This article will focus on the high-rise apartments that are flooding the property market in my home country of Malaysia. This is because many real estate developers are building high-rise residential units to meet the lifestyle aspirations of people seeking convenience, affordability, and security. Most of these high-rise developments come with a myriad of living facilities and convenience. These so-called lifestyle themed developments can come at a steep price in the form of a maintenance fee, vacancy rent, and appraisal fee. For the investor, the objective 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 tricky. If not, 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 upkeep of the property. As such, any expenses, such as the maintenance fee and the cost of repairs, will be reduced by the rental income derived from leasing the unit. For high-rise residential units, such as serviced apartments on commercial land, the vacancy rent, assessment fee, and utility bills are charged at higher rates than residential properties. Rental income is also taxable. The 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 cash for the property. However, the investor who prefers to borrow due to a lack of leverage can use the rental income to cover the monthly loan installments to be paid to the banks. Bank charges can also be offset against rental income before tax interest is charged under the law. For the 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 rates rise.

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 development. This is also valid for rental income.

Investing in real estate is also a good hedge against inflation, as it offers capital gains over a period of time. Depending on the location and the type of property (lease or freehold), capital appreciation can be 5-10% per year. Over a period of 5 to 10 years, a property can appreciate at such rates if the property cycle is expansive. 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 result in negative capital growth due to downturns and downturns in business cycles. Therefore, time is important in real estate investing. Additionally, if you purchase property in a location with plans for the development of MRT/LRT stations or transportation links to other major roads and highways, you can expect capital appreciation in the future.

When deciding what type of property to invest in, high-rise residential units get better rental returns compared to property on land, which offers a lower rental yield of 1.5-2%. This can be attributed to the lifestyle convenience provided by high rise serviced apartments that provide facilities like swimming pools, gym, sports and recreational activities, 24 hour security, etc. High-rise serviced apartments tend to appeal to younger families looking for such lifestyle conveniences. On the other hand, land ownership has higher capital growth simply because you sit on your own titled land, which is becoming scarce with population growth. It can offer capital growth of 5-10% per year, especially in freehold and prime locations. High-rise residential units with strata titles generally do not offer the same capital growth. Keep in mind that any capital gains obtained from the disposition of the property may trigger capital gains tax.

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 investing in the context of high-rise residential development. Let’s take a micro look at real estate investing 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 must inspect the unit for roof leaks or water leaks 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 as it requires the cooperation of the resident staying in the unit above and the property management corporation.

Water can see through the window between the frame and the cement or between the glass and the frame when it rains heavily. This is especially problematic for units on the upper floors. The rubber and silicone seals used in the construction of the window and frame 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.

Residents in the unit above may be a nuisance to residents in the unit below if noise is a significant problem.

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

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

From the Feng Shui perspective, the view from the balcony should contemplate a landscape of lakes or rivers, preferably in the southwest, east, southeast, or north. Common areas within the property, such as corridors and corridors, must 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 sight to kill in real estate investing 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 birth chart reading based on the Four Pillars of Destiny and Feng Shui consultation, please visit my website at http://www.bazidestiny.yolasite.com