Ask this first: Who is your target market?

A few days ago, I attended the Property Outlook 2017 organised by BLT. There were a number of forums within the one-day event and I was involved in one of them as a fellow panelist. The session was titled, ‘Tenant or Owner?’ I am honoured to share the stage with fellow panelists, Ms. Prudence Wong and Mr. Alan Poon. Both have by far more experience than me when it comes to property investments. One question which was asked by the moderator Mr.Richard Oon was, ‘How should one start their property investment?’ Personally, I shared that it’s important to understand the ‘Why’ instead of always the ‘Where.’  The main reason is so that we can find some undervalued properties instead of only buying at popular areas which would already be fully-valued or even over-valued. Yes, I use the same technique for stock investments too. I will NOT buy the fully-valued stocks regardless of whether they are the bluechips loved by everyone. So, location to me is important as one of the factors but ‘Why that location,’ is a more important question to answer.

Ms. Prudence Wong then shared something very fundamental which I think everyone must think hard before they decide whether or not to buy that particular property. ‘Who is your target market?’ She shared that some of her friends told her that they got ‘burnt’ in their property investment. When she asked them the question, they could not provide a proper answer. Some would answer, ‘Oh I will rent out to students.’ Her next question would be, ‘How much can you rent out to students?’ Again, the answer is not forthcoming. Seriously, whether we are buying for capital appreciation (mostly) or for long-term rental (potentially), do we know who is our target market? Assuming we are buying a landed property, the target market can be wider to include families too. However, the question remain, how much would the future buyer be willing to pay? We should at least do some homework, understand other areas and estimate. Without any due diligence, it’s going to be a risky investment.

img_20170107_165217.jpgFor those who are buying because they want to rent out to office workers or students or even factory workers, do we already know what’s the typical rental like for these different categories? A young friend recently asked me if she should proceed with an affordable apartment in Penang. I asked who’s her target market if she would be renting it out. She said she will rent out to students. I asked how much would the students be willing to pay? She said she does not know. However, the students studying at the institution are not known to be from rich families. In other words, the pressure to rent higher than her mortgage is going to be huge and most probably, it will be continuously negative for some time. I think this is the reason why Prudence tried her best to explain why everyone must answer this fundamental question before they even say they want to start property investments. Let me ask this question again, ‘Who is your target market?’ Kindly answer before we buy. Cheers.

written on 8 Jan 2017

Next suggested article:   Fear of price increase, thus buy quickly?

4 thoughts on “Ask this first: Who is your target market?

  1. Who is your target market?

    Just like in Iskander! Those who bought into the massive residential developments for property investment should ask this question. Even as the Iskander development authority may have work out their sums in terms of overall commercial, industrial and entertainment developments for a certain size of population, did the residential development overrun the other jobs-creation developments? Mostly the answers are negative. Their residential property purchases will remain vacant for years to come before seeing fruition, if at all.

  2. I was there too when panelist touched on this topic. I’ve learned a lot from them and you too. Besides, I think if is from investment point of view. Firstly is, the person before think about either to be tenant or owner he must have very strong believe in Property. Thanks!

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