Property Investment 101: Investing into land is definitely the best lah. Only one SMALL issue…
What’s the best type of real estate investment?
To me, it’s land. Land, Land and Land. This is something which cannot multiply. Once all the land has been developed, built on or even planted on, that piece of land is done. We can redevelop but do understand, there’s just ONE piece of that land. That’s why some people could have paid RM1,000 per acre a long time ago and they could sell RM1,000,000 per acre today.
Depending on where that piece of land is yeah. If you think RM1 million per acre it’s expensive, actually it’s just RM22 per sq ft. This is definitely not considered expensive unless it’s in some secluded places where development has yet to reach.
Read here to understand how high can the price per sq ft be yeah: Article in edgeprop.my (RM3,200 per sq ft)
Let’s look at some numbers
One acre is 44,000 sq ft. If just one quarter of the whole piece can be used for building residential condo and that building is 10 storey high and price per sq ft is sold at just RM500, then the calculation of the value which we can extract from this piece of 1 acre land is as follows:
44,000 sq ft divided by 4 = 11,000 sq ft.
10 Storey Building is 11,000 sq ft x 10 = 110,000 sq ft
RM500 per sq ft = RM500 x 110,000 = RM55,000,000 (RM55 million)
Considering cost of land to be 10 percent of the gross development value, then this piece of land should be worth RM5,500,000 (RM5.5 million)
Where to find, I wonder. If you can get one, would you share with me?
Now, we have a problem, do you have access to buy a piece of 1 acre land for RM1,000 today? Or even RM44,000 for RM1 per sq ft? Answer is most likely, no. However you can buy a piece of land for say RM50 per sq ft and WAIT….. RM50 x 44,000 =2,200,000.00 MYR RM2.2 million. If we already have RM2.2 million in the first place, we have lots of options lah. 🙂 Maybe just leave it in the bank for RM5,000 per month as pocket money?
What’s the next choice then if it’s not land?
Well, it could be investing into commercial properties… maybe industrial properties… maybe into a unit to start AirbnB… or perhaps just some normal monthly rental. These are not the best days for home owners, especially condo owners. So, they may not have the best rental. In other words, this could be a good time to look through listings, find one where the rental looks decent enough and just buy the unit.
After that, continue to rent it out until one day in the future when the price have gone up due to plain old inflation. If you do not believe inflation can do anything to home price or you refuse to believe that property prices have always been going up except for some “amazing” properties which everyone does not want, then do skip property investment yeah. I am very sure some people who want to rent could find a unit somewhere out there. Meanwhile you just need to make sure you also have a place to stay and not renting lah.
Else, that rental money paid will all go to waste. RM1,500 x 12 months x 10 years = RM180,000 to the owner… and for the tenant? Nil, Nothing, Zilch.
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