Azizi Ali, Renesial Leong, Juanita Chin and other famous property gurus will tell you that property investment first criteria will always be location, location, location. Though I’m definitely not one of those gurus (Yet? HaHa!), I’ll be the first to say location is NOT the ultimate answer to Malaysian property investment.
Instead, your target market should be the one.
Ever since TokPa passed away last year, Abiy had assumed the role of managing his family rental properties all over Malaysia (bunyi macam la ader sedozen, huhu). Despite the fact that the locations are very strategic (strategic for that particular area la), almost every 2-3 years each of them will be suffering from 3-6 months of no tenant for the past 5-10 years due to change in tenant.
Though for some, 3-6 months of no tenant for 2-3 years period consider good, we thought things can be improved.
After several researches (online & offline) we discover that our real problems is not about location, but about who our target tenants really are. Understanding them will make us realized what are their preferred properties and reasons why they should continue renting; as long (& profitable) as possible.
For example, local graduates that are coming to KL alone from kampungs (like from Kelantan or Kedah) for jobs will most likely consider a fully furnished room with public transport nearby. Reason being, they want cheapest rental, easy access to office (don’t have to rush buying new cars) and save money from buying all those ‘start-up’ furniture so that they can send more cash to their parents at kampung.
If this is your target market, simple apartment with 2-3 rooms will do better than terrace house. The fact that most affordable terrace houses are far away from public transport like Putra or LRT as well as limited front house car park can discount its attractiveness.
The last thing they want is probably berebut parking depan rumah and bergaduh with someone they are not familiar with. Maklumlah, kereta masing-masing habis modified so takut hilang kalau park luar pagar. Kang habis keluar loghat kelate + kedah + sarawak etc berebut parking. Ni belom lagi pasal bahagi bil api air…
Secondly, if your target market is professional expatriate, high-end condominium with completed ‘built-in’ facility like shops, saunas, or bookstores fares better than average apartment nearby public transport.
Reason, they are wealthy enough (or maybe company sponsors) to buy extra gas and pay parking to drive to their workplace. The last thing they want is to rent cheap apartment and/or not well properly maintained despite the fact that their company are willing to pay more for their hospitality.
However, targetting the ‘right’ market can be tricky but we found it much easier if the market is someone we are familiar with, (like orang kampung baru kerja bandar like me etc). We know what their problem is and really understand what they want because both of us are/were in the same shoes!
Don’t you think so?
Since then we list down who our prospects really are and match them with our target properties. For example:
Group 1:
Newly married couples with only one is working in either government or GLCs. They have stable income to pay rental with 70% probability they care our properties because their family and friends will often visit them. For sure la malu kalau rumah tak kemas or bersepah kan? They probably prefer landed terrace house for their kids to play in front of their house too.
Since government or GLCs seldom pay significant annual increment, they can continue renting our properties for as long as 5-10 years. Reasons, it may take some time for them to accumulate savings to get their dream home on top of ever increasing household spending & property prices. Therefore, we don’t have to worry of new tenants for years to come!
Group 2:
A group of singles that come from the same sources (graduated from same university) or going to the same workplaces. And they must be executives with more than RM1500 income per month. Since this kind of people have high turnover rate (possibilities of one of the singles move out to new houses or outstation very often), they may consider renting fully furnished high-rise properties for easy short-term rental.
If my calculation is right, I can recycle old furniture making the apartment deemed as “fully furnished” or maybe buy cheap second-hand perabots. In the name of “fully-furnished” I can easily increase rental by 15-30%. I don’t have so much cost incurred because the furniture almost ‘free’ and for them to easily absorbed the additional cost because it will be divided by 4-5 person!
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Having said that, we are having difficulties to define potential target markets for the 2-storey terrace house in Taman Tun Dr Ismail, KL. The monthly cash flow will definitely be negative considering the average price is currently at RM600-700k but only RM1800-2500 rental cost.
Does anyone have any idea what kind of people that are willing to fork out RM1.8-2.5k per month for 2-storey terrace house in TTDI?
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