Dec 1, 2010
Q&A: Should I go for residential properties in cities like KL and PJ?
Answering a reader’s question is Dr Peter Yee. He started out as an educator. Along the way, Yee attained a long list of degrees including a Doctorate in Business Administration (DBA) from Golden State University, USA, majoring in Investment Management, a Master in Business Administration (MBA) from the University of Dubuque, USA, a Diploma of Computer Education from Hyogo University, Japan and a Bachelor of Science (Hons) in Chemistry from the National University, Malaysia.
Over the years, he became a management training consultant, stock broker/remisier, restaurant owner, property investor and property investment coach. Today, he is financially free and has “retired” from full-time work. Yee is the author of property investment books titled, You Can Become Rich in Property and The Certain Way to Life’s Riches.
He runs How to Make Money from Residential, Commercial and Auction Property workshops in Malaysia. For more information on upcoming workshops, SMS < Your Name> to 017-2491077 or visit www.balancelifesuccess.com
Dear Dr Peter Yee,
I am 31 years of age and currently, I am a GM of a company in China. As my father already owns a double-storey link house in PJ and a medium cost condo in KL, I don’t need to buy another house to stay. As such, I have recently invested in a serviced apartment in the Golden Triangle in KL that cost about RM1 million. My monthly instalment is RM4,400, inclusive of maintenance charges and sinking fund. It is a fully furnished apartment and has yet to be rented out.
My problem: A small-time developer friend of mine from Teluk Intan, Perak, has now offered me to buy a 3½-storey corner shoplot, freehold, 29 x 32 x 70 for RM780,000. It is along the main road between Telok Intan and Simpang Empat. The top 1½-storey will be furnished with equipments for rearing bird nests which is popular in the coastal region. I am actually attracted by this, and not so much by the rental from the ground floor and first floor as the shop is quite out of the town. As for the bank loan, I don’t see any problem, as my income is around RM30,000 a month.
Is this a wise investment or should I go for residential properties in big cities like KL and PJ?
Regards,
Young Investor
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Dear young, courageous and highly paid investor,
As you are currently working in China and mentioned that you do not need a house to stay in, it implies that you may still be single. We are guessing that the serviced apartment purchased in the Golden Triangle in KL is for investment? Some points for consideration from an investor perspective. Your serviced apartment worth RM1 million, with a net monthly instalment of RM4,400, which equals to approximately 15% of your monthly income. What is the estimated monthly rental income you will be able to get? Can the rental cover the monthly installments and maintenance? When will you be able to rent it out? If the monthly rental income is more than the net monthly installment payments, you will have a positive cash asset, otherwise it may be a liability.
My subsequent opinion is based on what you shared with regards to your problem. You should consider when your small-time developer friend is able to complete the project and their track record for previous projects. This is because, if you take a bank loan, you will need to make repayments and there is no rental income until the shoplot is completed and handed over to you. You may also lose a friend if the project is abandoned.
If the ground and first floor are meant to be rented out to people to conduct businesses, will their business be affected by the smell and noise from the birds living in the upper floors? Rearing bird nest is a separate business which may require a licence and business management skills to know how to attract the birds to your shop, collect, clean and sell the birds’ nest. You will need to consider whether you have the time or people who can assist you to attend to tenant management (interviewing prospective tenants, attending to property problems and maintenance, ensuring rent is collected) and the bird’s nest business while you are working in China.
As your father already owns some property in the Klang Valley, we are guessing that he is living in the house in Petaling Jaya. You may consider buying properties in the Klang Valley because generally, the capital appreciation for properties there is faster compared to smaller towns. Since both you and your father already own residential properties, why not consider commercial properties such as shop offices, factories and retail lots in the Klang Valley? On top of that, you can leverage on your father's experience, knowledge in local properties and his support to attend to any property matters if required.
Cheers,
Peter Yee
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