Almost everyone think of huge capital appreciation when they enter the property market. Nearly everyone thinks buying a condo means good rental and a landed property means good capital appreciation. Let’s look at just the condo part today. Assuming that we just want a stable rental income and wants the condo to be easy to rent out. What are some of the key considerations?
Location, location, location. Famous slogan repeated by property gurus in their seminars, workshops, books and more. However, have you ever thought about, what is a great location? Is location equal to any area? Personally, choose an area you are most familiar with. If you stay in Cheras, you would know Cheras more than anyone. You should know where the jams are, where some of the hotspots for rental, where the colleges are etc. Reason why I say so is because when you are familiar, it is easy for you to rent out as well as you know exactly how to tell people why they should rent your place.
Distance from city. In this case, distance from KL city centre. Why is this important? Well, there are MANY people working in the city. There are MANY MNC headquarters in the city. There are MANY different office towers in the city. There are MANY other happenings happening in the city. You may ask, why then not buy in the city? Well, if you can get a good place with positive yield why not? Otherwise, personally I would set a maximum distance of 15km from the city. In other words, when there are no jams, I can be anywhere I want to go in the city within just 15 minutes.
Convenience. Are there shops, clinic, restaurants, shopping malls, hypermarkets, Chinese primary schools etc? These should be within 2-5km away so that you can reach them easily. A plus point would be a hospital nearby. Tell the tenant, ‘touch wood’ but if some emergency happens, you have access to doctor almost immediately. The last thing you want is for the ambulance to face a traffic jam on its way to reach you.
Size of the condo. There is no need to buy anything more than 1,200 sf because you are unlikely to be renting out to a family of 3 or 4. Keep it simple, rent it out to working couples. Even if you are renting to students which I do not really recommend there is no need for such a large unit. The students needs just their room. However, do not buy too small units because capital appreciation may be limited as well. RM500,000 for a 1,000sf condo is quite likely in future but RM500,000 for a 650sf condo? Logically, tough.
Last but not least, check first, is it really easy to rent out. Go online, check the rental rates. Make sure the condo does have a lot of other issues such as too many foreigners or even lots of unit leaking. The toughest part of buying a condo for rental is the time needed to search, view, decide and the documentation process. Once rental starts, it will be continuous for a while. Who knows, your tenant may rent from you until the day you sell!
Jointly written by asali and charles on 11th March 2014.
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