Property investing is a tradition with a long and respected history.
It’s widely viewed as one of the most reliable and rewarding assets to own, providing financial opportunity alongside a tangible and accessible piece of property.
While the days of Malaysia’s surging property boom in the early 2000s may be a thing of the past, there’s no doubt that Malaysia’s property market still provides some great opportunities for a smart investor.
Property investors can come in all shapes and sizes however, looking for the right investment opportunities to fit their own particular financial goals.
Let’s take a look at 5 types of property investor you might expect to meet in Malaysia, and broadly what their goals might be.
1) Property Speculators
Focus: Capital Appreciation Through Smart Purchase Decisions
Property speculators can cover a broad range of investors, but are primarily defined by a focus on capital appreciation through smart purchase decisions.
Speculators are looking to identify key areas or developments that will enjoy significant capital appreciation. That involves things like:
- Identifying hot new suburbs where emerging infrastructure and popularity suddenly drives up house prices.
- Changing trends in home ownership that see luxury condos replaced by a desire for affordable cluster homes.
- Other broad property market trends which might indicate notable capital return can be provided.
These property investors rely on strategic decision making and complex market understanding to guide their investments to a positive outcome.
2) Long-Term Investors
Focus: Stable Growth And Secure Capital
Long-term investors are looking for investment opportunities which offer a little more security.
While their focus is almost certainly on long-term capital appreciation, they also look at stable growth and secured investment, which are potentially more important considerations than for serious speculators.
Property investors of this type in Malaysia could include buy-to-let investors who enjoy capital growth alongside their rental returns.
Increasingly, this investor type might also include investors thinking more about generating return-on-investment (ROI) to secure their family wealth for the future.
Long-term investors are generally banking on the continued value growth of property as an asset, and the steady potential of capital appreciation, alongside the security of their original investment.
These investors should always weigh up the potential returns on other asset types, especially as alternatives like long-term bonds or sukuk investments may also offer steady and secure returns.
3) Short-Term Investors
Focus: Quick Return On Investment
Like the term long-term investors, the term ‘short-term investor’ is fairly self-explanatory. It can cover a fairly broad range of property investment opportunities.
The key to this investment style is a commitment to gaining short-term return on investment through quick turnover of property with decent value return.
Short-term property investment can be a challenging task. While long-term investors often benefit from the security and long-term nature of their investment, short-term investors must balance quick turnaround with the potential returns.
They’d especially need to factor in necessary expenses, such as legal costs and stamping duty.
In the simplest possible terms, short-term investors are looking to buy a property low and sell it as high as possible, but in an accelerated timeframe. That can be through the following:
- Having a smart eye for detail on rapidly emerging trends.
- Purchase of below market value properties for quick turnaround into higher valuations.
- An ability to quickly improve, enhance, and deliver property as a more attractive proposition to buyers.
4) House Flippers
Focus: Good Returns Through Hard Work And Property Improvement
House flippers are a unique and fairly well-publicised (sometimes in a negative light) example of short-term property investors.
They aim to buy a property in need of substantial renovation, develop it, then sell at a notably higher purchase price.
House flipping is generally considered to be a substantial undertaking, and is a full-time job in itself in most instances.
The key with house flippers is to ensure that the value difference between the price you purchase, and the price you sell, is substantially greater than the total cost of the improvements undertaken.
Property investments of this type face financial risk from going over-budget in renovations, or poor judgement on the overall value increase that you can generate.
Nevertheless, this is a popular method of property investment, and one which can deliver substantial return on investment when completed in an appropriate manner.
5) Institutional Investors
Focus: Best Possible Return For Investors In Optimal Markets
Institutional investors are the big boys on the property playground, with substantial funds and large goals in sight.
They invest on behalf of their members, and thus must balance the need to demonstrate above-market returns with the security of their overall capital pot.
Institutional investors are often monster investment organisations, representing investment funds, pension funds, insurance companies, and other large fund investor types.
Their substantial size and expertise also means they have a lot of experience in the property investment game, with significant access to information and market understanding to guide their investment decisions.
They’re also working on a much larger scale than small first-time or limited property investors, meaning deeper pockets, but also a broader focus.
Different funds will operate with a different risk profile, meaning there’s no uniform investment profile for the investment class as a whole.
These investors operate in large firms which are constantly assessing a range of investment opportunities.
Their goal is to pick the particular markets or asset types that are set to perform most favourably over the time of their investment.
That means their focus on property may rise or fall depending on their projections of market potential.
Institutional investment funds operate in competition, which means significant pressure to demonstrate better return on investment than their counterparts.
So, Which Type Of Investor Are You?
Property investment does not guarantee a return. Even the safest, long-term investment may be susceptible to market depreciation or unanticipated costs that eat into your investment.
And yet, property investment remains a popular investment opportunity due to the potential for significant return on investment that can be realised with the right circumstances.
Like any financial decision, property investment requires detailed understanding, comprehensive market research, and a lot of hard work.
So whatever investor type you are, remember that the greatest rewards are often received from the greatest effort.
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