According to Juanita Chin (Her property investment journey with her husband began in year 2003 and today, they own 13 properties in Penang worth approximately MYR5.6 million. 12 of those properties were purchased from developers), you can split your days into two days before buying a property from property developers.
The first day - Information
Even before looking at new residential developments by developers, there are many things that each investor must do and ask oneself.
• Research: Spend 80% of your time on research before placing any deposit. Make sure that the price per square foot and location is right. Chin shared, “There was an expo overseas and most of the buyers bought a property that was in the jungle, with beautiful scenery and all that. But these investors were not aware that the development would be 100km from the nearest town! By asking the right question(s), these investors would not have been stuck with their purchase.”
If one does not conduct the necessary research, one could be stuck with a property that has depreciated from RM100,000 to RM50,000 and be stuck with the property after seven years (and counting!). That is another example that Chin shared. The unfortunate investor told her, “I should’ve invested in seminars. What is a few thousand (to spend on seminars), to save a RM50,000 mistake!”
• Set your goals: You need to know whether you are going purchasing to keep (for rental returns) or flip (buy-to-sell upon capital appreciation). It is also important to figure out who the target tenants or buyers are once the project is completed as that affects your goals. Ask yourself, “Would a restaurant or grocery store want to do business here?”, because future tenants or buyers will ask such questions.
• Set your budget: Decide on your property portfolio, whether it would be less than RM500,000 or RM100,000 and so on. For a newbie, it is advisable to begin with a smaller budget.
• Set your target location: Don’t run all over the place. Instead, be an expert in a particular area and keep farming (investing) in that area.
• Pick type of developer: Would it be residential, commercial or industrial?
Once you have figured all that out, then you should analyse the developer. To evaluate, you need to find out these key information - track record, financial strength, reputation, past projects (completed / abandoned), end-financiers, workmanship, license approval and the individuals behind the project.
Chin also cautioned that it is important to find out if a developer has been blacklisted by the Ministry of Housing and Local Development. As reported by The Star a total of 1,345 housing developers were blacklisted from carrying out projects the previous year. As at March 5 this year, a total of 1,120 developers were blacklisted and the highest number of blacklisted developers were from Selangor, followed by Kuala Lumpur and Johor.
The second day – field trip
On the next day, plan your journey to several projects that had been chosen. You have to evaluate these projects based on the first day’s learning and decide which project (of the two) that you would purchase.
Modified from StarProperty
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