City & Country: Investing in real estate

One crucial aspect of investing in real estate is the objective of the investment. Property investors often make the mistake of buying into property without deciding what their objectives are, says Bukit Kiara Properties group managing director N K Tong.

The niche developer says buyers first have to consider whether the property is for personal use, for investment returns or both, as well as whether it is for capital appreciation, rental yield or both.

Other considerations are whether one is planning to buy off the plan or on the secondary market, whether it is landed or strata titled, and the preferred location.
Tong: Real estate should form part of any investor's portfolio
For example, depending on one’s personal financial position and preferred investment approach, one can decide whether to choose landed or high-rise properties. Landed typically give strong capital appreciation, but with lower yields in the interim. Therefore one needs a good source of cash flow to be able to service a loan on such a property and not depend on the rental yield.

On the other hand, high-rise properties can give a decent rental yield, and can be self-supporting with the right percentage of financing, especially in today’s low interest rate environment.

Tong, who will be speaking on “To buy or not to buy — Where to put your money?” at The Edge Investment Forum on Real Estate 2010 on April 10 at the Sime Darby Convention Centre in Kuala Lumpur, believes real estate should form part of any investor’s portfolio.

There are many asset classes that can yield a decent return, and in Malaysia, the two most accessible classes are stocks and real estate as fundamental investments, Tong says, adding that once those two are part of the portfolio, investors can consider venturing into other alternatives.

Investing in real estate also forces investors to consider the medium to long-term outlook, as a short-term focus rarely yields decent results, Tong says. This medium to long-term outlook sets itself up for more success, as patience rewards the investor.

One should not be pressured into a hasty decision, even when “someone else” is apparently eyeing the same unit. “However, the paradox of that is also not to hesitate when the property in question meets all your preset criteria at an attractive price.

Also, don’t be emotional about a purchase and pay too much, unless it is for personal use,” he says.

Unless the decision involves personal use, one should always put aside personal preference and empathise with the needs of tenants in order to maximise the potential of confirmed rents and a good return on one’s investment.

As for property hot spots, Tong says any property in any location at the right price with an attractive yield can be considered a hot spot. Why? Catch what Tong has to say at the upcoming forum.

This article appeared in [email protected], the monthly management pullout of The Edge Malaysia, Issue 799, Mar 29- Apr 4-11, 2010.

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