The Property Business: Maximizing your income in today's everchanging market

From the financial markets of Wall Street, to the rise and fall of property markets in Dubai, the old rule of "Change is the only constant" was consistently proving itself. Fundamentals though that proved themselves always showed that they work, and work well, regardless of the direction or the volatility of the market. After spending more than 10 years working in the investment and property arenas, the fundamental tactics and strategies that generated healthy profits over and over, were shown to be timeless, consistent, and divinely simple. For all who wish to truly understand them, and learn how to apply them in their property investments, this blog is for you.

Jan 17

2010

Price and Leverage

Posted by Samer Helmy in Tips, Rent, Property Investment, Price, Leverage

Many investors are not exactly aware of the fact that there is a ballistic trajectory to the potential return of property in relation to its price.

Rental return in general tends to improve in the beginning phases as the really cheap ones either have no facilities or comfort and mostly fetch peanuts for rent, or old and tired and cost a lot in service charges and maintenance in relation to its rent to produce a healthy final rental yield (this is a really rough curve, so don't think the angle represents a relative portion of the property market).

Now afterwards, the plateau is basically the "sweet spot" where rental yield to property price is maximized, in KL we're talking above 6%. This represents your medium to premium condominium apartments and homes.

The sinking portion of the curve is when you get to high value properties, such as major KLCC condominiums and bungalows. The rental yield in relation to price falls as that number grows, because simply the reasonable rent to charge on such high end properties is not high enough to keep such a percentage. For example, think about a RM700K 3 bedroom condo in Mont Kiara, and a RM 4 million 5 bedroom condominium in KLCC. The first is easy to rent for 4,000 per month, 48,000 annual rental, or more than 6% yield after service charges. But for the second to net 6%, it needs to rent at more than 20,000 per month, 250,000 annual rental or more. Do you believe it's possible in today's market? I didn't think so either. Now think how much rent you need to collect on a RM 10 million Damansara Heights bungalow to get to 6%? You're right, more than 50,000 per month, which is practically impossible unless it's a palace that would cost twice as much in the first place and furnished for at least another small fortune.

So do your homework to learn what is popular, in demand and gives you the biggest bang for your buck, before plunging and buying a property unit that might rent hard and still underdeliver.

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Jan 12

2010

Petronas, Petronas, Find Me a Match.

Posted by Samer Helmy in Property Investment, Petronas Towers, KLCC

Can you see the Petronas twin towers from here?" The look of disappointment comes on the faces when the agent shakes their head in negation. That question is not really asked by an eager prospect expat tenant, it's asked by eager Malaysian investors who have it in the back of their heads that this is the view that people wants.

KLCC

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Jan 12

2010

Big Mistake Property Investors Make

Posted by Samer Helmy in Tips, Rent, Property Investment, Mistakes, Manager

Some people can jump in the property game, buy an apartment, rent it out to the first viewer, and then says: “HEY! This stuff is easy, how come not everyone is doing it.

It is true. Property investment is quite an easy process to get into, and many starters even with the least amount of homework can land a decent piece of property and generate both rental return as well as a healthy book value increase over the following few years.

However, the differentiation between racking multi-million dollar fortunes in any market, and those who fall by the side in frustration at market conditions/falling yields/rising maintenance/panicking over bank payments not being met, happens on the middle laps of this stamina race.

Property investment is like Le Mans 24 hour circuit, not a quarter mile drag. You won’t get rich by pulling a good gear change. Alternatively, if you are on a circuit and gaining half a second per lap on your competition, and the car is setup to withstand the long journey, with your team prepared with necessary spare parts and enough fuel, then the game is set from the beginning and you will cruise to take your checkered flag in confidence.

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