6% return for 9 years or a landed property in Melaka?

A friend asked me today, if I am to choose, which would I choose. A very small fully furnished suite for RM350,000 with a 6% return for 9 years or a landed terrace house. I told her, until today I have never owned a landed property because I did not buy for own stay, thus I chose to buy condo. As for my own stay, I buy something which I love to stay, thus I buy a condo. I told her too, I do not have SOHO units. However, I still tell her that between these two, personally I would choose the 6% return for 9 years. My reasons?

Guaranteed return. 6% return per year meant that no matter what happens, at least 6% is guaranteed. Unless of course the developer goes bust. 6% is not that high but compared to majority of places where the prices has gone up tremendously, even a yield of 5% is tough these days. Besides that, even if I calculate the increment based on 1% per annum, my ROI based on my 10% capital after 9 years is still slightly over 10%. It is true, I would have to pay lawyer’s fee, stamp duties etc but I still do think 1% is a very conservative number.

Maintenance issue. If I rent out the landed property, it is unlikely to give me any good rental yields. There would also be wear and tear. Just imagine after 9 years, how many things would you need to fix. If you do not rent out, the problem would be worse. Are you sure you want to leave a house empty for 9 years? Then, hope to sell at a high price? Yes, it is true, the potential capital appreciation may exceed that of the condo but then again, this is not a guaranteed matter. As long as you are able to accept this and not feel bad that the return is low, you may choose this option.

There is no need to follow my choice because the truth is, everyone has their own way of investing. In fact I told
my friend that both the choices are definitely better than to leave all the money in FD. Oh yeah, be reminded that before you start any investment, FD is a must. She has yet to decide but in terms of Melaka, it is definitely an option that I would consider in the near future.

written on 25 feb 2014

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