Property Investment First Criteria is NOT Location, Location, Location…

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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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11 responses to “Property Investment First Criteria is NOT Location, Location, Location…”

  1. kak N Avatar

    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?
    Hmmm… tu kira murah lah jugak… Bayangkan belakang rumah akak ni (somewhere in Melawati) monthly payment dia RM14k sebulan ? Akak tengah wonder sape yang duduk kat situ.

    1. Mommy Lyna Avatar
      Mommy Lyna

      14k per month??? rent ke???
      sapekah orang itu? kalau saya dengan bayar 14k per month i rather beli je huhuhu.

  2. Mynie Avatar

    For the TTDI property, perhaps a local (Malaysian) exec who’ll be working in KL on a 2-4 year assignment?
    Are you really looking for a tenant for that property? Because a colleague of mine is looking for a place to move in next month, though 2.5k is a bit high for him. Also, is the property fully or semi-furnished?

    1. Mommy Lyna Avatar
      Mommy Lyna

      aha, no la. i have ni property in TTDI. just wondering adekah orang nak sewa kat TTDI with such monthly rental. but from my conversation dgn TTDI-ans, derang suka duk sana.. matured society.

      But are they willing to sewa kat sana? (kecuali yg rumah parents kat sana) & how about others yg tak penah duk TTDI? sanggup sewa?

      1. Mynie Avatar

        oh, sorry salah faham 🙂 i think ada yg willing to sewa, because the location is near to some offices.. though maybe kena target exec gaji tinggi2 lah, sebab kalau sewa 2.5k, mestilah gaji orang tu more than 10k.. else, baik beli property sendiri..

  3. zuhaini Avatar

    hmm.. nice way of thinking.. betul juga tu. kalau nak sewakan rumah, check sapa target tenant..

    TTDI..? mahalnya.. tapi macam kak N kata, rumah melawati mahal.. sebenarnya rumah mak saya kan, kat keramat tu, beli time saya lahir (’82). eh silap. time KITA lahir. dulu2 mak saya kata tempat tu macam HULU.. x da sapa nak duduk situ! jauh dari KL..

    Sekarang, macam-macam ada! shopping complex la.. KLCC pun dekat dll. that’s why sewa (dalam 600) dan harga rumah di situ 400k above.. huhu 🙁 tu yang saya nak bli pun x mampu… 🙁

    1. Mommy Lyna Avatar
      Mommy Lyna

      nowadays rata2 rumah area KL dah average 0.5juta for terrace double. macam2 depa buat utk mark up harga mcm tu kan.

      kalo dpt yg 200k tu kire dah ckp murah kan.

      1. mamaadib Avatar
        mamaadib

        TTDI 1.8-2.5 cam mahal ajer.. tak tau laa kalau kawasan betul2 elit.

        2ndly, dapat lagi ke umh teres 200k kat kl ni, puas aku melilau, kalau ada sure ku cekup satu muah muah muah.

        umah lelong pun 300K.

        wangsa maju area setau aku, rumah teres / kondo standard rental 1,000-1,500

  4. kakyong Avatar

    hmm, mahal sungguh sewa rumah di KL.. sbb tu lah abis degree daku terus melekat di Ipoh…
    rumah mcm kakyong ni pun, teres setingkat 3 bilik 2 bilik air.. nak sewakan RM350 pun org kata mahal.. teringat adik ckp, sewa blik kat KL pun dah RM200 sebilik, bilik pun kecik jer… tp adillah kah..

    Akauntan kat Ipoh ni nak demand RM4k pun susah, tp kalo g KL mungkin senang2 boleh dpt RM5-6K… hahahahh..

  5. Mommy Tisha Avatar
    Mommy Tisha

    Aha, I’m actually renting in TTDI and paying the above price. We decided to live in TTDI despite the fact that the houses are quite old because of the whole “feel” of the neighbourhood. The Residents’ Association is active, neighbours genuinely care for each other, the orang2 masjid is also always organising stuff and there’s a fabulous park. Schools are good and shops are nearby. It’s close to OU, The Curve and Ikea and there’s also the Penchala Link if we want to avoid the jam.

  6. pilotHans Avatar

    Hi. Nice reading. I’m thinking to buy a single story bungalow here in bdr putra permai, SK. priced at 350k. Plan to take a 310k loan. So montly would be 1418 + insurance 100+ = would be around 1550.

    plan to rent out…rental here is about 800(i just know the current owner told me, but yet to scout other houses there)

    so 1550-800 = 750 that i still need to pay…..+ RM400(my current house that i rent)….

    so montly i ‘ll need to fork out -> 750 + 400 = RM1150 for my house that im not staying…..

    is this a good investment? I know buying condo can get a better rental but I feel that my house value of 350k(today) would be around 500k in 10-15 years time…..

    plz advice

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