Real estate means physical property and it is one of the most popular types of investment. People buy property to earn positive cash flow, and there are many different types of real estate investments in Malaysia.
Each type of property investment has its benefits and pitfalls, including how much you are going to earn, so it’s best to study them well before deciding on the one to add to your portfolio.
Keep reading to learn the different kinds of property investment available in Malaysia to have a general view of what to expect.
Categories of Property Investment in Malaysia
If you wish to own/invest in a property, it’s better to first understand all the aspects involved.
If you buy properties that come with Residential land titles, you are doing Residential Investment. This type of property includes:
- Terrace house
Moreover, if you have a commercial land title property that is protected by the Housing Development Act
(HDA), it is considered ‘residential titled’ (this is the only exception to this rule). A very popular form of investment in Malaysia is this property type.
Why are they so popular? Because the initial payment is lower so you can finance up to 90% of the property.
There is a golden rule In real estate: to have a good return on your investment (ROI), you need to focus on the property location. This is key to ensure you will be able to gain enough money to pay your loan and interest and still make a profit.
Bear in mind that when you own a residential property, in most cases, you are responsible for paying all the bills, including:
- Maintenance fee
- Sinking fee
- Assessment fee
- Sewerage fee
If your residential property is not in a good location, you might not be investing in the best one.
For example, in Penang, you have several residential properties that are well located, such as Taman Seri Jerjak
(two types of properties available), which are now completely sold out, and it is now developing a new site.
In this category, properties that come with a commercial land title are:
- Office buildings
- SOVO: Small office versatile office
- SOFO: Small office flexible office
- SOLO: Small office lease office
- SOSO: Small office smart office
- Shop lots
As the name suggests, commercial titled properties are for business only. This type of property is usually for rent to companies and small business owners.
The benefits of investing in a commercial property are that in most cases, you will lease for many years. This can ensure a more stable cash flow.
The downside is that your initial payment is higher because financing for this type of property is between 70% and 80%.
Remember to look for a commercial property investment such as Santuari Commercial Centre
as your rent will depend on occupancy rates, surrounding township occupancy, public transportation, and of course building maintenance and appearance.
Retail properties are located in malls and other retail centres. Bear in mind that although they are similar to commercial investment properties, they have different characteristics.
Retail investments combine property and business investments.
The industrial property investment refers to investment made on an industrial warehouse and it involves long-term agreements. This type of investment is riskier than commercial because it requires a bigger capital to invest.
Other Ways to Invest in Real Estate
There are other ways you can invest in real estate in Malaysia if you don’t want to deal with the property yourself. You can do it through Real Estate Investment Trusts or REITs.
This is when you buy shares of a corporation that owns real estate properties, and the corporation declares profits as dividends.
This is a good investment, and you just have to be vigilant with some tax complexity.
Many are looking to invest in Penang properties new projects
because the property is rising in value. It is indeed a good idea as long as you know what you are doing. Always ask your bank loan officer what future interest rates might be and consider how taxes can affect you.
If you are buying a housing development in Penang for investment, pay more attention on how you can improve your house to rent it or sell it better
. After all, the main idea is to have a good return on your investment.