How to invest property in Kuala Lumpur - Part 4

Real estate just the same as any other business, supply and demand determine profit at the end. When the supply is getting lesser, it is not doubtful price will go up. Can we control the price keeps going up? In certain extend, we control it some how directly and indirectly. For those who can visualize how the price being manipulate, likely they will invest into landed related property.


Part 4 - Why people still invest into shop?
Give you some figure here to visualize easier here, lets do a comparison at some area high rise condo is selling in the range of 500k~800k, rental in the range of 1800~4000, whereas shop in the same area probably 3m~5m with the rental of 10-15k

High rise
- Almost 1% rental yield higher
- Still manageable to offset interests
- Very much lower entry level
- Bank loan easily 80~90%

Shop
- Almost 1% lower in rental yield
- Usually not enough to offset interests
- Buy 1 shop about equal to buy 5~6unit condo at 1 time
- Bank loan likely 70~80%

There are 2 main reasons people go for shop,
1) when you secure a right tenant, your tenant likely will work for you in the next 5~10years, indirectly to say, you save up to 4 times agent fee if tenant shifts every 2 years which is quite common in high rise condo. If you knows how to find tenant for your shop, you will like save 5times agent fee. Unfortunately, it is hardly you can have this kind of saving in high rise condo. We will discuss finding tenant in future.

2) When you purchase a shop, you always got chance to dispose in next 1year+ with non linear capital gain, but condo likely you can only get something 5~8% gain yearly. When government place a RPGT of 30% in first 3 years, your chances to dispose a high rise condo in short period becomes very slim as such. Under certain circumstances, some shop owner probably speculator is more relative name here, they could easily dispose with a capital gain of 20%+.

Perhaps some people not very sure how much is the capital gain of this 20% here. Lets do some calculation here. If the purchaser use 30% cash down payment for a 1m shop, he spend 300k upfront. When he exit the shop at 20% gain in the next 1.5yr, although he might incur interests lost of 1%, he still have 18% on hand, he is making gross profit (before minus legal, stamping, agent...) 180k with the cash of 300k or per anum he is making 90k with 300k investment. If we come from fix deposit point of view, you are getting 30% interests. This example here also reflects  there are people still go for shop even though making losses in rental yield. You may ask, how to dispose with such good return, it is already a known  on the day you purchase. We will discuss identify shop opportunity in future.