Type of Properties
There are four(4) main types of properties:
- Residential (landed houses, apartments and condominiums)
- Commercial (shop lots, offices, retail lots in shopping centers and etc)
- Industrial (factories and warehouses)
- Lands (agricultural, orchards and raw lands)
a) Terrace/Linked Houses
- Most common properties because of high demand.
- It is usually linked side by side and has no extra land or garden along the sides other than the front and the back of the house.
- Corner house is popular because of the extra land or garden along one side of the house and the pricing is competitive as compare to the semi-detached house.
b) Semi-Detached Houses
- There is a common wall shared, either side or back between two houses.
- There is extra land or garden along one or both sides of the house.
- Semi-detached houses linked at the back of the two houses are also known as linked bungalows.
- It has plenty extra lands or garden surrounding the four sides of the house.
- The extra lands sometimes can also build a swimming pool, fountain, fish pond, playground, garage and etc.
- Lucky owner can convert his bungalow into commercial property when the opposite side or the nearby area of the fronting road has been developed for commercial purposes and become busy main road.
- You have to apply to the relevant local government authorities in order to convert a residential bungalow into commercial usage and you need to pay for a conversion premium.
- It looks like any terrace/linked house except that two units of houses are built on top of each other and sitting on a common piece of land.
- It may have two or three storey and both units have separate entrances and car parks in front.
- It is ideal for families with grown-up children especially after they get married and have kids. Old parent can stay in the lower unit and their children’s family can stay just above them. They can take care of each other and yet their independent lifestyle can be maintained.
Lands on islands and actively developing city centers are getting very expensive due to scarcity, so the only way to accommodate the growing population is to build upwards.
Many residential and commercial use high-rise buildings in Kuala Lumpur city centre and Penang Island are commonly seen.
The ownership of each unit is determined and defined by strata title. Buyers can legally own, mortgage or sell their unit with this title.
All unit owners are having vested interest in the land on which the apartments/condominium is erected. The common properties like: lifts, swimming pools, community halls, playground/gardens etc are shared among them. They are usually supervised and maintained regularly by the Developer until strata title is issued. After which residents can take over the same by forming a management corporation or appoint a professional property management company to manage the building for them.
Every resident is required to pay monthly maintenance fee and sinking fund to finance the daily maintenance activities of the building. Sinking fund is accumulative and is use to finance the future capital expenditure like repainting of the common property every few years.
a) Low Cost Apartments
- It can be low-rise, five storey walk-up or high-rise and has only very basic facilities like open car park and rubbish collection.
- The selling price is controlled and regulated by the state government and low income group with either personal or combined income within certain threshold will only be allowed to buy.
- They are mostly built by state governments and most private developers are also obliged to allocate a certain percentage in their development projects to build this kind of properties base on the guidelines of the local town planning department.
- This type of property can generate high rental yield but slow capital appreciation.
b) Medium Cost Apartments
- This property has high demand especially near city centre and industrial areas.
- Their pricing range between RM65,000 to RM150,000 and having sizes between 700 to 1,000 square feet.
- They will only have basic facilities that may include gated and guarded security system.
c) Medium/High-End Condominium
- Medium class condos normally price less than RM300,000 with 1,000 square feet or less. They usually have certain facilities like security guard, CCTV, gymnasium, swimming pool and one reserved car park.
- High-end condos price more than RM400,000 per standard unit. They will have extra facilities like restaurants,cafes, salons, convenience stores, tennis and squash courts, well decorated entrances and compounds, nurseries, kindergartens, two reserved covered car parks, swimming pools, saunas, Jacuzzis and modern security system. They offer better privacy and have lower density than medium class condos.
- High-end condos are normally built in or around premium localities like KLCC, Damansara Heights, Bangsar and etc because lands availability is limited and expensive. They are well received by the high income group due to factors of modern lifestyle, prestige, security, privacy and convenience.
Buying high-end condos for investment need to be extra careful because:
- Many new choices coming up all the time and tenant usually prefer to rent a newer condo with more modern facilities.
- Tenant pool is limited as only expatriates can afford to rent at such a high rental. They normally will not stay long here and their demand can suddenly drop or just disappear.
- Government new economy policy focus on IT and services sectors has also see a drastic drop in number of expatriates coming into Malaysia because these sectors required lesser number of expatriates as compare to manufacturing sector.
d) Serviced Apartments/Suites
- This is another current trend of development where house-keeping are available for the apartments or suites and it is normally manage by an established service apartments/hotel chain. The size can range from 400 to 1,500 square feet and price range is between RM500 to RM 850 per square feet.
- It usually fully furnished and comes with all the built-ins like air-conds, fans, light fittings, water-heaters, kitchen cabinets and etc. Buyers can practically move in with just their suitcases.
- They are considered commercial properties as the land on which they are sitting has a commercial title. Therefore they are not governed under the Housing and Local Government Ministry and are not subjected to the Housing Development Act.
What are the implications:
- The Sales and Purchase Agreement is not a standard SPA agreement of the Housing Development Act. It simply means for any dispute, you can not bring up the matter to the Housing Tribunal but to the courts. In most instances, the lawyers who prepare the SPA will favor the developers.
- The developer will impose their own set of payment schedule rather than the standard payment schedule of the HDA. It usually allows the developer to claim in advance of the actual work done and this poses a very high financial risk on the buyer side if the project is abandoned.
- Assessment Rate is higher even though it is used for residential purposes.
- Completion or handing over date can be more than 36 months.
- Defect liability period can be shorter than the standard 18 months.
- The developer is not compulsory to provide a parking lot for each unit.
- The provision to retain the last 5% of the purchase price by the vendor’s lawyer during the defect liability period is not compulsory.
Commercial lands give higher value when compare with residential, industrial and agricultural lands. This is because commercial properties provide premises meant for business activities and usually can generate higher rental income than the latter. The investment approach should focus more on the perception and mentality of the business minded tenant group. Priority shall be given to factors like accessibility, ease of parking, human traffic flow, location, quality of neighborhood, security and maintenance quality, visibility etc. There are three (3) major types of commercial properties:
a) Office Lot
- It is not a good investment property because:
- Currently it is over supply.
- Tenants tend to move from one place to another as they can operate their business from anywhere therefore it is difficult to bargain for higher rent when existing tenancy expire.
- Entry costs is relatively high for Grade A office space in preferred location like KLCC, Golden Triangle, Bangsar, Mid Valley and KL Sentral. Moreover, the risk on return of investment is also high.
b) Retail Lots
- These properties can be located in office buildings or shopping complexes.
- The right investment mindset is that you are like a sleeping partner to your tenant’s business. You provide premises for rental income and tenant run the business for profit. Therefore to secure a correct tenant with right business to rent your retail lot is very important; otherwise you will end up with rental collection problem or keep on changing your tenant.
- You need to be extra careful when invest in retail outlets in office buildings, consideration must be given to the factors like the number of the targeted crowd and office population of the nearby, buildings, operating hours or days, tendency of existing offices relocation to nearby new buildings in the near future etc.
- Businesses in premises with limited potential customer pool or operating only during office working hours and close on weekends may not be able to generate sufficient profit to support the high monthly rental. Therefore you may have stagnant or low rental growth.
- Retail outlets in shopping complexes would be a better type of commercial properties to invest in. The reasons are as follow;
- Well planned with modern design of one stop centre to cater for the latest shoppers trend and lifestyle
- Right location with innovative promotional activities and publicity which can attract large potential pool of customers even multi-national tourists
- Provide sufficient parking bays etc. Successful shopping complexes are likely to give you a good rental yield (say 8% p.a) and very high capital appreciation.
- An obvious advantage investing in retail outlets is that you don’t have the property maintenance and up-keep problems because they are normally taking care of by the tenants.
- Maintenance and service charges for shopping complexes are usually high, may be at around RM1.30 per square foot. This is to cater for the cleaning and maintenance of common properties and centralized air conditioning charges. Sometimes owners are required to pay for additional Advertising and Promotion charges base on square foot per month. This factor and the quality of property management need to look into before investing.
c) Landed Shop Lots
- This property type can be 1 or more storeys and usually have a combination of shop/office, shop/apartments or shop/office/apartment.
- Ground floor shop can generate higher rental income than the offices or apartments on top. It is advisable to buy just the ground floor or the most buy 2 storey shops only.
- It has no or low monthly maintenance fee and the operating hours is quite open, some mamak restaurants even operate for 24 hours.
- This property type can provide good rental yield with capital appreciation. The success of the investment is very much depends on location and population growth in the vicinity and neighborhood.
Commercial properties have other benefits to earn extra rental incomes from Billboards advertisements and Telco Transmission/Transceiver Station.
- This property type refers to factories, warehouses and plants.
- It can be 1 storey or multi storeys and can be in terrace/linked, semi-detached or detached.
- The development of this property type is very much dependent on factors like distance to airport/seaport, source of raw materials, supporting facilities, end markets and labor supply etc.
a) Agricultural / Plantation Land
- Usually are planted with crops like rubber trees, oil palm trees or any other agricultural products. The returns are highly unpredictable as it depends on the price and the yield of the produce.
- To be successful in this investment you must have good knowledge and experience in managing the agricultural products; as factors like unnecessary high operating and maintenance costs, unconductive weather, pilferage and other issues that may affect the yield and returns are required to take note of.
- The land is usually sold with orchards or fruit trees planted surrounding the house, public utilities and infrastructures are constructed right to the house.
- Buyers are advised to check whether the land they are planning to buy is agricultural or residential title as there is a different cost implications to the value of the property.
c) Raw Land
- It is a bare/jungle land, has no monthly returns and the only investment gain is capital appreciation.
- Beginners are not advisable to invest in raw lands because if you happen to buy in the passive/rural areas the potential appreciation may take a very long time to enjoy the benefits of your investment. Sometimes it will not happen in your generation or your children’s generation and you may not be around. It is considered high risk as it is difficult to predict the future development of the raw land. It is better not to buy unless you really have the knowledge and means to study and able to forecast the likely future growth/development in and around the land.
- Farmers and developers are suitable to invest in raw lands.