Yes, diversification needed for property investment. Not just where we are based.

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Three conversations stood out during my recent two talks, one in Penang island and another in Ipoh. I love speaking in Penang because it’s my ‘home’ of 15 years. It was where my career started and where it fluorished too. Ipoh is meanwhile my hometown, so of course I am glad to be home.

First conversation was with a senior manager of a real estate agency in Penang. He has teams in Penang, Perak, Johor and Sarawak. He said something which was true long time ago when I was still based in Penang. I was questioned by many Penangite friends when I told them about my property investments in KL and KK. They said it’s hard to manage. Actually, based on my experience, it was not. Penangites love property investment BUT they prefer to buy within Penang. Usually, within the island to be more exact.

Even today, Penangites who came to listen to the talk, they know property investment. Many had more than 1 investment property too. However, anything out of Penang even if it looks attractive to them their complaints include; something not so easy to manage, something they do not know enough and something they think is not necessary as their Penang investments are just fine.

Second conversation was with an old friend from Ipoh who has been based in Penang for as long as I did and is still based in Penang today. She bought a landed unit somewhere in mainland (pretty close to Perak…) just 5 years ago. Developer or rather the sales person convinced her that the development will mature within a few years’ time. It did not happened as planned and today the sale price is lower than her purchase price.

She asked if she should sell the property at a loss versus renovating it and rent out at a loss. I told her that the best is for her to move there and sell her island home. She said she is not willing as it will involve changing her current lifestyle. Well, she decided that she will sell at a loss and not try to rent it out for the next few years.

Third conversation was when I was speaking in Ipoh. A doctor spoke to me and said he has a number of property investments, all are within Ipoh and he was not sure if he should buy out of Ipoh because it may be tough to manage. He said he does not have much free time to manage any property outside of Ipoh. I told him that it’s possible to buy and let some management company manage for him nowadays. He said he will consider.

What these conversations reveal is that many does not think of property from an investment point of view and they have really not read much about it. Most of the time, due to lack of understanding, it’s easy for them to come to conclusions. For example, if we are looking at demand versus supply, it is worth nothing that due to continuous urbanisation, the demand for properties in the Klang valley is likely to be many times higher than mainland Penang or Ipoh.

Thus, if it’s mainland Penang or Ipoh, then the demand will have to come from within. For mainland Penang’s case, we could just ask Penangites staying within the island this question. “Would you move to mainland?” Their answers would already reveal to us why it’s best to buy for own stay instead and not for investment if we are hoping the demand will come from within. As for investment, always look at demand as a start and not some emotional factors such as ‘born here, schooled here, work here and well, invest here…” Happy understanding and happy investing.

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<Featured Image is courtesy of Stock Photos from Andrii Yalanskyi>

Next suggested article: Investing out of the city you live in

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