16/11/2016
Property investment – landed or high rise?
When going into a real estate investment deal, the first thing that should be kept in mind is the location. The location of the real estate determines how close it is to business district, schools, restaurants and also to public transports which is a huge deal to the tenants. The second thing to keep in mind is the convenience for your tenants, whether there is a parking space, good security system, access to major highways and if you are renting out a condominium, its facilities and view could all help add value to your property also. However if all of the above are more or less the same for both landed and high rise property, which one will you choose?
The most common way to earn a profit from your property investment is by renting it out. When renting your property out it is important to keep in mind how much return on investment you expect and stick to it. In terms of return on investment, a condominium will definitely yield the highest revenue. Even though landed property may cost more, it does not necessarily guarantee a higher revenue than a condominium.
Besides renting your property out, you might also want to sell your property one day to earn a lucrative amount of money. The way to make sure you do not lose money when selling your property is to make sure that your property appreciates in value.
For a freehold landed property, the prices are more resilient to depreciation because there is land attached to it. On another hand, for leasehold landed property, the property value will stagnate or depreciate towards the end of the lease. Other than that, there are also a lot of regulations and uncertainties when going through the renewal of your lease. Therefore, if you are going for a short term investment it is advisable to hold on for 5 years before selling. While for long term investment it is not advisable to hold more than 10 year if less than 70 year lease.
Every property requires maintenance. For landed property, the responsibilities for maintenance falls to the investor to keep it in good condition. Condominium properties rely on good maintenance to keep the building in good shape and the facilities in good condition. If the condominium management is subpar and leave the building to its own device, the building value will depreciate very quickly and at that point it is advisable to sell your property as soon as possible.
Some studio apartments could be above a shop lot. Therefore, if it is a good retail shop below offering peaceful, convenient and quiet environment, then the studio will have a good chance to appreciate. However, if it is a shady shop or very crowded and poses a security threat causing discomfort to the tenant, then that studio might drop down in value quickly as people quickly move on to nicer locations.
Another aspect that you should keep in mind when purchasing a property is the developer planned Phases for their area. If you purchase property at a later phase, it will always be more expensive than purchasing it at an earlier phase. The prices for these phases are usually planned out very early and only reflects the projected value of the property in the developer’s perspective and does not necessarily reflect the true market value at that point of time. Therefore if you are planning to purchase a condominium at a later phase, look around for early owners and buy it from them rather than developer’s to avoid buying a overpriced unit.
Conclusion
In summary, always keep in mind your goal for your investment, whether you are angled towards short term/long term investment and then always invest into your choice of real estate property appropriately.
