Real Estate Investing 101a: A Look to Kill
For the real estate investor, the wide range of properties on the market can present both opportunities and risks in the search for assets. There is a variety of residential properties being sold with land and high-rise buildings to choose from in terms of price, design, construction and location to suit one's lifestyle and budget. Choosing the right property depends on many factors that interact and make it difficult for a novice investor. Good location with good amenities and accessibility is a good place to start.
The decision of which property to invest depends on the factors mentioned above which can also be influenced by the feelings of the individual. As much as you try to be objective and practical, sellers or real estate agents and attractive decor for exhibitors can grab our attention. We can easily miss fine prints on glossy brochures or subtle flaws on standard units. Developers tend to decorate their sales brochures with high value and benefits to attract potential buyers.
Whatever the case, one should always be aware of trade scams being hired by experienced sales agents who work with developers or sellers. Some agents can be very cheap with the truth and provide unverified information to close the sale. Therefore, it is advisable to check and verify the information using reliable sources. You can also search for data and compare it with other sources, such as the Internet and society in general. Your friends, family, and relatives can also be a source of referral.
Now that we've covered some of the risks and pitfalls of investing and choosing real estate, we need to take calculated risks and evaluate our options in an informed manner. This article will focus on the high-rise hotel apartments flooding the real estate market in my home country of Malaysia. This is because many of the property developers here are building high-rise housing units to meet the lifestyle aspirations of people who are looking for comfort, accessibility and security. Most of these high-rise projects come with a variety of amenities and amenities. So-called lifestyle development can come at a hefty price in the form of maintenance fees, smoking cessation rent, and appraisal fees. For the investor, the goal is to have a good rental yield and capital growth in the coming years. Good rental yield for high-rise apartments with 5-6% facilities is preferred. This will make it worth your time and effort in finding and choosing a good property to invest in, which can be very difficult. Otherwise, it's best to keep cash as a stable deposit or put your money in bonds or trusts that are more liquid when you need the money.
The investor must pay the maintenance costs of the property. As such, any expenses, such as maintenance fees and the cost of repairs, will reduce the rental income generated by renting the unit. For high-rise residential units, such as serviced apartments located on commercial land, rental rates, appraisal fees and utility bills are charged at higher rates than residential property prices. Rental income is also taxable. Interest on a home loan obtained to finance a property is another major expense that will reduce rental income unless the investor chooses to pay for the property in cash. However, an investor who prefers to borrow due to unsustainable debt can use the rental income to pay the monthly loan installments payable to the banks. Interest charged by banks can also be offset against rental income prior to taxation by law. For a cash purchase, the investor has stronger negotiating power and is in a stronger financial position to hold the property compared to purchasing through a bank loan, which can be risky when the interest is high.
Finding tenants to rent units in high-rise serviced apartments can be fast or slow depending on the density of the project within the area. The development of higher density creates more competition among the tenants compared to the less dense ones. This also applies to rental performance.
Real estate investing is also a good hedge against inflation because it provides capital gains over a period of time. Depending on the location and type of property (rent or freehold), the capital increase can range from 5 to 10% per year. Over a period of 5 to 10 years, property values can increase at such rates if the ownership cycle is extended. The property can also remain stable or unchanged in terms of capital growth compared to other properties in the same area. This is due to the saturation or increase of real estate in the market. If the investor is not careful, real estate investing can lead to negative capital growth due to deflation and slowing business cycles. Therefore, time is important in real estate investing. In addition to,
When deciding the type of property to invest in, high-rise housing units get better rental returns compared to the property sold, providing a 1.5-2% lower rental return. This can be attributed to the comfortable lifestyle offered by the high-rise serviced apartments that offer facilities like swimming pools, gymnasium, sports and leisure activities, round-the-clock security, etc. Look for these utilities. On the other hand, land ownership enjoys higher capital growth simply because it is located on its own land, which has become scarce with the increase in population. It can provide an annual capital growth of 5-10%, especially for the divorced owners and those in prime locations. Generally, high-rise apartments with tiered titles do not offer the same capital growth.
Ultimately, the return on investment (ROI) from rental income and/or capital gains should provide a justification for investing in the first place.
All the different points outlined above offer a comprehensive view of real estate investment 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 skyscrapers, serviced apartments or serviced offices (SOHO/SOFO), you need to keep your eyes open because the devil is in the details. For off-the-shelf units in a new development or sub-sale, you should inspect the unit for roof leaks or water seeping through a window. If the ceiling has watermarks, this indicates a water leak from the unit above. This leakage problem can be a challenge to solve because it needs the cooperation of the resident who resides in the previous unit and the property management company.
Water can seep through the window between the frame and the concrete, or between the glass and the frame during heavy rain. This presents a particular problem for units on higher floors. 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 wall next to and below the window.
Upstairs residents can be a nuisance to downstairs residents if noise is a major problem.
A developer with a good track record does not matter in real estate investing.
On the bright side, the high-rise serviced apartments can provide a panoramic view especially for residents on the higher floors. Opinion may say die for some. These units also have higher prices.
From a feng shui perspective, the view from the balcony should be a lake or river, preferably to the southwest, east, southeast, or north. Common areas within the property, such as walkways and driveways, should be well lit. Any property subject to wind conditions is also not auspicious because the life force known as Qi is worrisome in such an area.
Killing real estate investment is a double-edged sword. You can "kill" after an offer of ownership or "kill" financially with your decision, whether right or wrong.
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