Mar 3, 2010
Investing in condominiums: large vs small
Based on the updates by Global Property Guide in October 2009, the monthly rental yield for smaller units in Kuala Lumpur are higher, compared to larger units. It also shows that condominiums acquire higher rental yields compared to bungalows.
However, if you are looking to invest in property, don’t base your decision on a general trend alone. There are many aspects to look into - location, surroundings, developer, design concept, and others.
Going small
Smaller units usually appeal to more investors as the entry level is more affordable and it can be rented out at a more affordable rate. For example, a 1,075 sq. ft. unit at Idaman Residence is renting at RM5,000 whereas a 2,100 sq. ft. unit is asking for close to RM10,000. With the possibility of escalating monthly rentals, the number of both local and expatriate tenants who can afford high rental rates are quickly reduced.
When it comes to investing in smaller units, it is wise to check the number of available like-sized units as these would compete with you for tenants. You are at a lesser advantage if you have to compete with other 100 same-sized units for tenants.
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Source: Global Property Guide
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It is also important to consider the “which” and “where” to invest in. Take an example; in the KLCC area, it is commonly known that some condominiums/service apartments are much better occupied than others.
Size is indeed crucial. But does it mean that smaller is always better? Not necessarily.
Going big
The purchase price per square foot is usually lower for larger units. For example, on a recent visit to Ara Hills in Ara Damansara, I discovered that a larger unit, 1,900+ sq. ft., is priced at RM430psf whereas a smaller unit, 1,600+ sq. ft., is approximately RM450psf. Bear in mind that both units are on the same floor.
When it comes to larger units, you must keep in mind the tenant market of such units. You should analyse your potential tenant – their needs and motivation to rent your unit. There are also options available for tenants. For example, at a rental of RM18,000 per month, a potential tenant can either choose between a condo unit and a landed bungalow.
Price is indeed crucial in deciding the unit size of your investment. However, as pointed out earlier, there are other factors to consider. Another example, I know of a friend who invested in large units in the KLCC (Kuala Lumpur City Centre) area and only one of those units had trouble being tenanted. Why? I reckon that it is due to the project and its surroundings, and not just the size alone.
Other tips by Ai Cheng:
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