Real Estate Investing 101A: Views of the Slaughter
For a real estate investor, the wide range of properties on the market can present both opportunities and risks when seeking to acquire assets. There is a smorgasbord of high-rise residential properties and lots to choose from in terms of price, design, construction, and location to suit one’s lifestyle and budget. Selecting the right property depends on many factors that interact to make it a challenge for a novice investor. A good location with good amenities and accessibility is a good place to start.
The decision of which property to invest depends on the aforementioned factors that can also be influenced by one’s emotion. As much as one tries to be objective and practical, sweet-talking salespeople or real estate agents and the enticing décor of display units can fool us. We can easily miss fine prints on glossy brochures or subtle flaws on ready-made units. Developers tend to embellish their sales post with exaggerated value and benefits to attract potential buyers.
Be that as it may, you should always be aware of the tricks of the trade employed by being seasoned sales agents acting in the interests of developers or sellers. Some agents can be quite inexpensive with the truth and 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 in general. Your friends, family, and relatives can also be a referral source.
Now that we’ve covered some of the pitfalls and pitfalls in property investing and selection, we need to take calculated risks and weigh the options we have wisely. This article will focus on the high-rise serviced apartments that are flooding the real estate market in my home country of Malaysia. This is because many real estate developers here are building high-rise residential units to meet the lifestyle aspirations of people seeking convenience, accessibility, and security. Most of these high-rise developments have a wide variety of facilities and amenities. These so-called themed lifestyle developments can come at a hefty price tag in the form of a maintenance fee, waiver rent, and appraisal fee. For the investor, the goal is to achieve good rental profitability and capital growth in the coming years. A good rental yield for high-rise serviced 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. Otherwise, it is better to have cash in the form of a fixed deposit or to put your money in bonds or unit trusts that are more liquid when you need the money.
An investor must pay to maintain the property. As such, any expenses, such as the maintenance fee and the cost of repairs, will reduce the rental income derived from the rental of the unit. For high-rise residential units, such as serviced apartments located on commercial land, the rent, appraisal fee, and utility bills are charged at higher rates than residential properties. Rental income is also taxable. Interest on the home loan to finance the property is the other major expense that will reduce rental income unless an investor chooses to pay for the property in cash. However, the investor who prefers to borrow due to lack of leverage can use the rental income to defray the monthly loan installments payable to banks. Interest charged by banks can also be offset against rental income before tax is collected under the law. For a cash purchase, the investor has greater bargaining power and is in a stronger financial position to retain the property compared to a purchase through a bank loan, which can be risky when interest increases.
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 one. This is also valid for the rental performance.
Real estate investing is also a good hedge against inflation as it offers a capital gain over a period of time. Depending on the location and 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 ownership cycle is expansive. A property can 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 contraction and downturns in economic cycles. Therefore, time is important in real estate investment. Also, if you buy a 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 real estate, which offers a lower rental yield of 1.5-2%. This can be attributed to the lifestyle convenience provided by the high-rise serviced apartments providing facilities such as swimming pools, gym, sports and recreational activities, 24 hour security, etc. High-rise serviced apartments tend to attract younger families seeking such lifestyle conveniences. On the other hand, land ownership has higher capital growth simply because it sits on its own titled land which is becoming scarce with the growing population. It can deliver 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. Please note that any capital gain from the disposal of the property may result in capital gain taxes.
In the end, the return on investment (ROI) of 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 look at real estate investing in terms of quality and workmanship.
If you are looking to invest in serviced high-rise apartments or serviced offices (SOHO / SOFO), you need to keep your eyes open, as the devil is in the details. For units listed in a new development or sub-sale, you should inspect the unit for roof leaks or water leaks through the window. If the ceiling has watermarks, it indicates that there is a water leak from the unit above. This leakage problem can present a challenge to solve as it needs the cooperation of the resident staying in the previous unit and the property management corporation.
Water can seep through the window between the frame and the concrete or between the glass and the frame during heavy rain. This is especially problematic for units on the upper floors. The rubber and silicone seals used in window and frame construction can crack and melt in the hot sun. Through the ravages of time, you can see watermarks appearing on the adjacent wall and under the window.
Upstairs residents can be a nuisance to downstairs residents if noise is a major problem.
A developer with a good track record is important in real estate investing.
On the plus side, serviced high-rise apartments can offer panoramic views, especially for residents on the upper floors. A sight to die for some may say. These units are also priced higher.
From a Feng Shui perspective, the view from the balcony should have a landscape of lakes or rivers, preferably in the southwest, east, southeast or north. Common areas within the property, such as hallways and hallways, 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.
The idea of killing real estate investment is a double-edged sword. You can do a “murder” after viewing a property or be financially “killed” for your decision, right or wrong.
To read your natal chart based on consulting the Four Pillars of Destiny and Feng Shui, visit my website at http://www.bazidestiny.yolasite.com