Dive into Malaysia's property investment types and strategies. Learn about residential, commercial, retail, industrial properties, and REITs. Discover how to optimize returns and navigate the property market effectively.
According to a recent report in 2023 by the Malaysian Real Estate Association (Pertama), property prices in Malaysia are expected to increase by 25 per cent, especially for homes valued at RM500,000 and above, as the economy continues to recover. Pertama's president, Ismail Omar, stated that developers and owners are currently forced to sell at lower prices, making it an opportune time for Malaysians to buy homes.
He was quoted saying, “Especially houses priced above RM500,000 which are largely unsold when buyers are more likely to buy homes below RM300,000. So developers or owners are forced to sell at a lower rate to avoid selling at all. However, the situation is only temporary, as the Malaysian economy recovers, the housing market is expected to stabilise again with a price increase of around 25 per cent. So some people are aware of this, they are scrambling to buy a house now that the price has fallen before the value has risen."
Ismail also highlighted that banks and financial institutions are willing to offer loans and simplify the process for buyers, resulting in an increase in the demand for homes. However, he warned that the government needs to monitor the current situation of house prices to avoid a sharp increase that would make it difficult for the public to attain homes.
Introduction to Types Of Property Investment In Malaysia
Investing in property is a popular venture in Malaysia, with the potential for lucrative returns over time. Much like investing in gold or silver, property investment is a way to capitalize on a resource that is becoming increasingly scarce. There are several types of property investments available in Malaysia, each with its own set of advantages and challenges. This blog post will delve into the five major types of property investments in Malaysia, namely Residential, Commercial, Retail, Industrial, and Real Estate Investment Trusts (REITs), and discuss how to earn from them. The information is gathered from two reputable sources, PropertyGuru and Plenitude, to provide a comprehensive understanding of the investment opportunities in the Malaysian property market.
Whether you're a seasoned investor or a novice in the property market, understanding the types of property investments and how to earn from them is the first step towards a successful property investment journey in Malaysia. So, let's debunk some common misconceptions about property investment and delve into the different types of property investments in Malaysia.
The 5 Main Types of Property Investments in Malaysia
Residential investments refer to properties that hold residential titles, such as terrace houses, apartments, condominiums, and others. Some commercial land-titled properties that are protected under the Housing Development Act (HDA) are also considered residential titled, for example, SOHO (small office home office) developments. These are popular and common residential investments due to their lower entry price points and higher financing margins up to 90%, making them less risky compared to other types of investments. However, the return on investment (ROI) can vary significantly depending on factors like the property's location.
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Commercial investments include properties with commercial land titles, such as shop houses, retail lots, and various types of small offices. These properties are typically leased out for business usage only, often involving multi-year leasing, leading to a more stable cash flow. However, they require a higher upfront capital as the financing margin is usually less than 70%.
Retail investments refer to properties located in malls and other retail storefronts. They are a combination of property and business investment, with the landlord receiving a percentage of profits in addition to the basic rental returns.
Industrial properties such as industrial storage or warehouses and distribution centres have long term agreements. These investments generate a unique level of income from both rental and re-sale, with significant fee and service revenue that may increase the ROI for the property owner. However, they are considered riskier due to the niche market and the need for specific professional maintenance and management.
Real Estate Investment Trusts (REITs)
REITs are a new property investment concept that leverages on the ease of entry and affordability. It involves buying shares of a corporation that owns real estate properties and distributes its income as dividend. However, with REITs, you do not actually own the said property and do not have decision-making power on how the property is managed or run. Some examples of REITs in Malaysia in 2023 are Axis REIT, Sunway REIT, Pavilion REIT, Atrium REIT, and IGB REIT. These are among the top 5 Malaysia REITs that would have made you money if you invested from their IPOs.
How To Make Money From Your Properties?
One of the most common ways to earn from property investment is through the buy-to-rent strategy. This involves purchasing a property and then renting it out to earn rental income. The rental fee should be carefully calculated to cover all ongoing expenses such as loan instalments, maintenance fees, and other property costs. It's also important to conduct thorough research to understand the type of property you are buying, its location, and the potential tenants you may attract. Properties in high-demand areas or near significant amenities like universities or business areas can yield higher rental income.
Rent out as Airbnb
Another way to profit from your property is through short-term rentals such as Airbnb. Compared to long-term rentals, short-term rentals can potentially yield higher returns on a daily basis. However, this strategy requires more hands-on work, including maintenance, customer service, and marketing efforts. It's also less stable as the income depends on the fluctuating demand for short-term accommodation.
Flipping / Buy-to-Sell
Flipping, or the buy-to-sell strategy, involves buying properties with the intention of selling them for capital gain. This strategy requires a commitment to hold onto the property until it is sold, which may involve higher costs or a longer time to find the right buyer. Factors that can make a property attractive in the sub-sale market include its location, immediate ownership and move-in condition, potential rental return, and good property management.
Using Cryptocurrency for Property Investments
Cryptocurrencies like bitcoin can also be used to buy a property. While it’s still a grey area with no concrete regulations, there have been records of successful transactions. This does mean that you can potentially earn more returns if you have the trading know-how to buy low and sell high at the right times.
In conclusion, making money from your properties requires a well-thought-out strategy, from property selection to financing, to tenant management. Whether you choose to rent, sell, or use cryptocurrency for your property investments, it's important to understand your financial limitations and seek professional help when necessary to avoid any financial distress along the way.