Finding Low-Entry, High Yield Properties In Malaysia For A Positive Cashflow
Article contributed by Dr Alan Poon.
We are now midway into 2021, yet the pandemic landscape that has had a global impact is still very much uncertain, despite the rollout of vaccines by countries all over.
Everyone is still being cautious with the mutated variants of the COVID-19 virus that has stricken worldwide economies since the end of 2019.
We all wish we could go back to our normal life and business as usual, yet we seem to be back at the start, as Malaysia is again in its third Movement Controlled Order (MCO 3.0) with stricter SOPs to contain the rising new daily cases.
While it does seem gloomy, this could prove to be one of the best times for property investors looking for a great deal.
With more people struggling for liquidity and cashflow including business owners, many of these asset owners will look to sell off their properties in the secondary market for immediate cash.
For primary markets where developers are concerned, this is also a time to recover as much as possible from the unsold units that have been on the overhang list.
They know very well they need to ride through the storm before the sentiment of the consumer market returns, which may take years.
In this regard, the doors for negotiation on discounts and rebates are definitely open for sure, all you’ve got to do is ask and see!
Never Let A Good Crisis Go To Waste
For those who are not yet in the know, this period of uncertainty will be the hardest hit to them but for those who are readily prepared with their ‘ammunition’ for property shopping, your time has arrived!
Almost all the lucky stars will work in your favour, because the entry price of buying a property will be discounted heavily when you know how and where to look for them.
Many times, we want the best deals in town when it comes to property investment. Anyone who’s already bought a property (especially their first investment-grade one) would know the feeling of finally jumping into owning a big ticket item.
This is a purchase which you would be proud to call an ‘investment’, and that it will be the first step in life for financial freedom… or is it?
Only Way Below Market Value Deals
Hang on a moment; not all property purchases will lead to giving you peace of mind and passive income every month!
Even if you buy a brand-new property from a reputable developer, or getting into a secondary market where everything is furnished to your liking and tip top condition.
So, how do we enter ‘cheap’ that can give us the ‘elusive’ positive cashflow monthly, without sacrificing the location or aesthetic value of the property?
The question lies in "IF" one is able to spot a ‘below-market-value’ opportunity for a low-entry purchase.
Many tend to follow the herd mentality and jump right into buying at a ‘famous’ location. It’s not just about buying into a so-called hotspot.
On normal days, low-entry properties are possible, although requiring more work. The difference for now, is that bargain hunting has become lucrative.
This is because competitors for the same location or type (in both the primary or secondary market) are working hard to beat each other in selling off their properties to the limited number of buyers.
This targeted group of buyers are those who are ready to place their bookings, especially those who buy because they need a place to call "home".
Once your objectives for purchasing an ‘investable’ property are clearly defined, it’s all a matter of knowing your market deals, by scanning prices of properties in a targeted area and ensuring you get the average price per square feet (sq ft).
Generally speaking, by focusing on getting deals that have below-than-average price per sq ft AND match your property type criteria, you have gotten yourself a good deal – congrats!
Your property is then almost guaranteed of a higher yield than those within the same area, provided you can get the same rental (or higher) amount from quality tenants.
Now, do make sure that you’ve screened potential tenants properly (or added value to the interior part of the property, which can attract better rentals)!
Lowest Interest Rate Level Is Finally Here!
The term ‘low-entry’, when purchasing a property, does not necessarily mean buying the ‘cheapest’ one from all the available offers on the table, but having a lower cost of acquisition.
Aside from the nett amount of the purchase, you’ll have to factor in the cost of financing the property – the housing loan that you can take from any financing institution (provided you’re eligible).
When the economy hits rock bottom, the central bank would usually try to increase local spending by releasing liquidity into the market through the reduction of interest rates.
Therefore, Bank Negara Malaysia (BNM) has maintained the Overnight Policy Rate (OPR) at 1.75%, which is the lowest interest rate level we have seen in this country’s financial history.
Notwithstanding further uncertainty with the continuing MCO in the country, we may even see a reduction for the balance of 2021, which may help to spur the economic growth that the country desperately needs.
This is extremely good news to those who are ready to focus on real estate. Not forgetting the sea of red downtrends in the local stock market, there is a real and timely sentiment of pulling out funds from the capital market to hedge on ‘cheaper’ hard assets like property.
With these opportunities available, it is a no brainer to accumulate more yield-producing assets, and ride with the market bull run in the coming years!
Time Waits For No Person
Are you excited yet? Wait, don’t just jump into the market blindly! Any form of investment requires you to do your proper research.
That being said, make sure you do not fall into the category of having too much analysis as there will be no practical result.
To obtain a low-entry, high yield property is never impossible, but it’s not easy as well. Otherwise, no one will ever be ‘burnt’ in investment, especially when it comes to properties which are somewhat illiquid.
The difference between one who can make those handsome profits in property investment and tell their success stories, compared to those who only can dream of such gems, are usually those who have one thing in common: They took ACTION!
So, as long as you have the financial capability and market know-how, it’s time for you to start now and have fun hunting for the right deals!
Dr Alan Poon is an award-winning international speaker, serial entrepreneur and author of the three “Good Tenant, Great Tenant” book series on tenant management. As founder and CEO of SuperiorWealth Resources, a business advisory firm specialising in real estate solutions, he is also a media influencer for his contrarian insights and market observations of the real estate industry. Feel free to connect with him at his Facebook page, or email him at firstname.lastname@example.org