Thursday, September 15, 2011

.: Acquisitions :.

So the husband & I are now on, in his words, an acquisitive-mode. We are looking at properties at around PJ area for investment purposes.

I am more of a capital gain person. Buy at a low value, value appreciates in the next few years. Dispose at gain.

My husband, on the other hand, is more of a cash-flow matching person. Buy reasonable high-yielding investments. Rent. And keep forever, and ever. Ok, perhaps not forever, but you know, for a long term.

There are pros and cons to these types of properties. Like for my type, it would mean that I need to buy properties that value have not appreciated much in the area. Also, it would mean I am looking more at landed properties and newly launched or newly constructed properties. As for my husband’s type, it would mean fishing out for properties in prime developed areas, with high volume of residence. As we both are not *coff* rich *coff* we are targeting low to medium cost properties.

I am already an owner on an investment property (IP) in Sri Ara. It’s a low cost walk-up apartment that was purchased at a cost of RM130k. The current value that is put up for sale (after only 1 year holding period) is about RM180k. The deposit that I had to fork out is RM13k (i.e. 10% of the value) and the balance is financed by loan. In a nutshell, with simple calculation, the gain (albeit an unrealized one) is about RM50k for an RM13k outlay. This reads, 4 times return on investment. Rental yield from this IP is reasonably comfortable, enough to pay for the monthly loan installment as well as monthly service charges. This reads, rental income pays for the loan installment; I am getting the IP for free. Good deal no?

As for the second property I owned, it is the place that we are currently staying in. We purchased it at its all-time-low market value of RM250k, and after injecting approximately RM80k of renovations & fittings into it, the value it is now today is at RM400k. Yes, the mini house that I am staying in is actually worth that much. But since we are staying in it, the unrealized gain of about RM70k will not be crystallized anytime soon.

As we are looking at more acquisitions, we have considered Puchong and Subang/USJ area as we believe that the price here is still reasonable. Puchong is the next gold mine, in the sense that it is located near the City Centre and has much potential to develop (which is proven by the mushrooming development of residential properties in recent years). In conjuction with the proposed MRT, this has really driven the demands for Puchong properties the past year. Subang/USJ, on the other hand, have been undervalued for a very long time, and even tho prices have picked up recently in view of the proposed MRT that would make this place more accessible, we believe that there are potentially more space for value hike (of course this is our amateur opinion, who knows, we could be wrong?)

We have met with a couple of agents and have been going for unit viewing in the past days. So hopefully there are some bargain buys waiting to be picked by us in the coming days…

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