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Wednesday, February 13, 2008

Select Right Properties For Investment

Every property investor hopes to generate good profit from his real estate investment. Therefore, whether it is for personal use or for investment, selecting the right type of property is important. While there are many views on this subject, here are some basic principles and guidelines that can help investors:

In considering investment in new developments, the reputation and success of the developer is important. - File Photo

1 Location

Selecting a good location is critical; it can include an area which has a high demand for rental, an area that is self sustaining in terms of shopping convenience, availability of schools/colleges, proximity to towns and cities, whether it is self-contained, etc. A location that is established and matured has a record of good yields and returns.

2 Accessibility and transportation system

Accessibility and transportation is another key factor for growth of all townships, as it contributes to the development of surrounding areas. Roads, railways and LRT accessibility not only add value to the property but also the convenience of travel.

3 Selling price

When selecting the property, it is advisable to compare the selling price of similar properties in the neighbouring areas. This is to determine whether the property you are planning to invest in is overpriced or underpriced. These records can be obtained from estate agents and this information can guide you to really understand price movements over a period of time. There are many properties that are underpriced and it takes time to search for them.

4 Brand

In considering investment in new developments, the reputation and success of the developer is important. Developers with a good track record deliver properties as promised with good quality finishes and as scheduled.

5 Timing

It is important to note that timing does help when the property market is in an overheated situation. Since the real estate industry has its own economic cycle, we must try to understand in which cycle we are in. However, in any market properties worth investing in, it is a general rule not to invest in overpriced properties at any point in the cycle.

6 The amenities

The surrounding amenities are an added advantage to the residents as they will give much convenience and result in a comfortable lifestyle. The nearby commercial area and facilities provided by the property itself are among the factors to be considered in real estate selection.

7 Restriction and condition

When investing in real estate, we must make sure it is not bound by too many restrictions and purchase conditions and this can be reflected in the title. Otherwise, one might face a lot of difficulties or trouble by the time we want to sell off the real estate. The restrictions include land usage, private caveats and transfer restrictions which will affect the selling price of the property.

8 Other considerations

We should also think about our own financial constraints to avoid excessive debt, the returns on investment, cash flow consideration, etc. In addition, when calculating the returns, we should also consider our ability to pay for the loan instalment. We should never overlook other hidden costs such as legal fees, security charges, service fees, maintenance fees, assessment, quit rent, etc.

In conclusion, property acquisition planning is important before we decide to acquire a property. We should choose properties which are cost effective and have potential for high return on investment. One should consider wisely from the various angles provided above. In all situations visit and inspect the property before you make a purchase decision. In some small degree non-financial factors such as feng shui and geographical direction also affect the value of your investment.

By The Star (by

This article is part of an on-going real estate education programme by the Malaysian Institute of Estate Agents (MIEA), 88-B, Jln SS 21/39, Damansara Utama, 47400 PJ. Tel: 03-77277477 Fax: 03-77293693 E-mail: Website: my

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