Property investments are investments in land — a scarcer commodity compared to gold and silver. It is possible to invest in these resources in many different types of property, each has its advantages and disadvantages. The following five main types – commercial, residential, industrial, investment and real estate. We will talk about ways to earn money through property ownership. Lets break down the myth of real estate investment.
Investing in Malaysian property may seem like risky business, especially for first-timers. Before you invest first investment property, you have to think wisely about what can be the best property investment to buy in Malaysia.
To your rescue, Ewen Sim has attempted to make you take the best decision about the best property investment by justifying many angles and factors in her video. Read more here!
1. How to define the ‘best property investment’
When evaluating the best investment properties, the paramount factor is undoubtedly the potential for generating the highest possible income. This potential income is primarily assessed through two critical metrics: rental yield and the prospect for long-term capital growth. However, it’s important to note that these metrics are not absolute and can vary significantly based on a range of factors, including market conditions and the impact of new developments in the area.
Rental yield, for instance, is a key indicator of how much income a property can generate compared to its purchase price. Generally, properties that are more affordable to enter the market tend to offer higher rental yields. This is because the cost of acquisition of residential property is lower, yet they can still command competitive rental prices, especially in high-demand areas.
Characteristics of capital appreciation
On the other hand, capital appreciation refers to capital gains due to the increase in the property’s value over time. Properties that are likely to experience significant capital appreciation often share certain characteristics. These include:
– Proximity to public transportation hubs, such as MRT and LRT stations, which can significantly enhance the property’s appeal to potential renters and buyers alike.
– The availability of amenities in the vicinity, such as grocery stores, eateries, and other essential services, adds to the convenience and attractiveness of the entire property itself.
– A location near employment centers, universities, and hospitals, which ensures a steady demand from renters and can drive up property values due to the desirability of the area.
Residential properties, in particular, have shown a remarkable resilience during economic downturns. This resilience is partly because the demand for housing remains relatively stable, even in challenging times. Moreover, residential properties often have the potential to recover more quickly than commercial properties once the market conditions improve. . Commercial real estate properties, while they can offer high returns, are more directly affected by economic cycles and changes in business conditions.
This resilience and potential for recovery make residential properties a preferred choice for many investors. The stability of housing as an asset class, combined with the potential for both immediate income through rental yields and long-term wealth accumulation through capital appreciation, presents a compelling case for investment in real estate properties. Consequently, understanding these dynamics and selecting properties that align with these criteria can significantly impact an investor’s success in the real estate market.
2. Types of properties to invest in
If you are looking to invest in Kuala Lumpur, for instance, housing estates that have received the most investment interest are those that have a lot of modern lifestyle amenities like shopping malls, cinemas, retails, and F&B outlets nearby.
Investors are also looking to capitalize on a promising rental market because of the influx of workers and students in KL.
Specific areas with cosmopolitan landscapes of upscale eateries and entertainment outlets catering to the expatriate community have also grasped the interest of the investor. Bukit Jalil and Mont Kiara fit the bill in this regard.
Bukit Jalil provides some high-rise properties with decent rental yields and a strong potential for future capital growth.
Mont Kiara’s condominiums continue to command high prices, generate net rental yield, good capital appreciation, and provide attractive rental yields.
Damansara in Selangor is a popular choice among property investors as well.
It has excellent infrastructure and amenities nearby, so it offers attractive rental yields and capital appreciation, which bodes well for a long-term investment strategy
3. Expected returns on investment
Rental yields vary uncontrollably by property type, location, and area.
However, in general terms, a rental yield of 4% per annum or more would be considered good income producing properties in Malaysia.
It is important to remember that the fundamental support for price growth for housing property in the long run would be:
- land scarcity
- growing population with inflation
High housing prices are often attributed to the cost of land.
This phenomenon leads to an increase in land prices because market value and the price developers are willing to pay for new land increases with the increase in housing market prices due to inflation.
Real estate investing is considered as a viable way to generate income by many people. One way, of course, is through housing property appreciation – the strategy of ‘buying low and selling high’.
But this strategy involves a lot of tasks and a keen understanding of the housing property market.
On the other hand, collecting rental income is also an appropriate strategy; this usually is used as a means for the asset to pay for itself – offsetting the loan taken for the purchase (if any).
Both strategies have their advantages and disadvantages, followed by inherent risks.
Point to be noted, the first strategy of buying low and selling high would only work well during a bull market. It would be a bad decision in a weak property market like now.
You would probably find yourself stuck with it longer than expected, having no buyers in sights
Conclusion
This is how one should define and measure best property value and investment.
Step by step, if every new investor gets to understand the other criteria of the property investments, it will be easier for them when investing and finding out the best investment property for them in the Malaysian housing market.
>> Continue reading part 2 here! <<
Frequently Asked Questions
1. What is the most profitable property investment?
The most profitable property investment depends on factors like location, property type, and market conditions. Generally, high-growth areas and well-managed rental properties yield better returns.
2. What are the available investment opportunities?
Aside from real estate, diverse investment opportunities exist across categories such as stocks, bonds, alternative investments, mutual funds, savings, education, small businesses, collectibles, digital assets, and socially responsible investments. Consider your financial goals and risk tolerance when choosing.
3. Key factors to consider when purchasing a rental property
Key factors when buying a rental property include location, financing options, property management choices, legal compliance, insurance, operating expenses, market research, investment goals, partnerships, property type, and a long-term perspective. These factors are essential for a successful and profitable rental property investment.
4. What are Real Estate Investment Trusts (REITs) in Malaysia?
REITs are like stocks but focus on their real estate investments. They’re often traded on stock markets. In Malaysia and globally, they get tax benefits and often pay better dividends than regular companies.
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