Malaysia Property Markets: New Development, Auction or Sub Sale?

Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

new development, auction or subsale property?

We have been frequently asked this question about the Malaysia property market –  New development, Auction or Sub sale, which market is for me? In this week’s blog entry, we will summarize the pros and cons of each property market and briefly outline the typical profile of buyers in each market.

There are typically two main reasons for purchasing real estate, i.e. for investment or for own stay. The consideration factors for both are completely different and should not overlap.

If you intend to purchase for your own stay, your emotional feelings come into play when making a decision.

For example, do you like the neighborhood, are you happy with the renovation work of the house, do you like the front porch, do you like the fittings in the house etc.

On the other hand, when buying a property for investment,  one should never let emotions come into play, only good numbers!

These numbers we are referring to are the property price, rental yield and its potential for capital appreciation.

Before hunting for a property, it is important to be clear of your purpose first!

To reiterate, 3 of Malaysia’s property markets are:-

Property market #1: New Development
New Development property market

New development, also known as the primary market is usually the choice of new/young buyers because of the low entry cost of new development projects.

The entry cost is typically between RM5k to RM10k, with most of the other cost such as legal fees, sales and purchase agreement covered by the developer.

To stay competitive, many developers also offer rebates and freebies to their purchasers.

Therefore, for new buyers that have limited savings to qualify for a sub sale purchase, this is the likeliest entry into the market.

From a buy-to-stay perspective, buying from the primary market gives you the privilege of choosing your preferred unit, it also ensures that everything within the property is brand new and the buyer can be assured that everything is in its best condition.

On completion of the project, the property is in move in condition and any defects are covered by warranty from the developer.

From an investor’s perspective, buying from the primary market may be beneficial in terms of higher potential for capital appreciation after the entire project reaches completion.

Since we can expect construction cost and property prices to rise at least in proportion with inflation, buying it in its early phase may give you an advantage.

However, this is highly dependent on many other factors such as the location, demographics, infrastructure and other developments around the area, it pays to do your due diligence of the area and surroundings before buying into any new development projects as they are not without its disadvantages as well.

For one, it is the more risky option because the project completion can be delayed since today’s cost of materials, labor, land and statutory compliance is very much higher.

So if you are buying into a new project, there is risk of the project having a construction period of more than 3 years, sometimes some projects even get abandoned mid way.

All this waiting period is risk with interest, and as buyers you will have no control over its delivery.

Also, due to the rising costs, these costs are factored into the price of the property, often times making them more expensive than its actual value, therefore causing less appreciation than expected.

The finish product’s quality is not guaranteed and may differ from that of the sample house, what you see in the show room may not always be what you will get.

Other than that, after delivery of keys, there is also the possibility that the market demand of the area may have dropped or changed after the waiting period of 3 years or more.

For instance, soon after the completion of your condo, several other high rise might have followed, causing an over supply. Some investors will be stuck with not being able to sell/rent out their unit.

Pros and Cons of New development

 

Property market #2: Auction

Auction property market

Next, let’s discuss what the auction market entails, also known as the tertiary market.

Auction properties are usually priced at 20% below market value.

An investor or a person buying to stay may be able to get a below market value deal at the auction market and transactions are typically faster since there is no need for negotiation between buyer and seller.

However, auction properties are very well publicized in the market these days not only by auctioneers but also by property agents, it is no longer easy to get a good property at bargain price.

Auction properties at prime location will also attract many bidders. This will eventually drive up the price to market value and sometimes even above market value.

The entry cost is high, as bidders need to prepare a deposit of 5-10 percent of the reserve price and be ready to top up the difference in deposit after a successful bid.

Even if a buyer manages to purchase it at below market value, the condition of auctioned properties are usually in very bad state.

The money saved from purchasing a cheap property may have to be used for major renovation works, and also pay for unpaid taxes, bills, utilities and assessments.

Interested bidders are also unable to view the property before making a decision.

Moreover, the buyer may face difficulty in obtaining vacant possession of the auctioned property and may even need to go through lengthy procedures to obtain a court order to vacate the occupant of the property.

With all that has been said, it may still be a good option to consider for properties in unpopular areas that have untapped potential or non general purpose properties that attract fewer buyers from the market.

As you can already tell, purchasing an auction property has many uncertainties, hence making it risky.

Pros and Cons of Auction

 

Property market #3: Sub Sale

Sub Sale property market
Lastly, lets discuss about the sub sale market, also known as the secondary market.

When buying a property from the developer, you can only picture what it will be like when the project completes.

For a completed property, you can have a real look and feel of the property, what you see is what you get. You can see everything about the unit, from the view, the renovation works done to the property, the surrounding area, demographics of the area and etc.

On top of that, data of transacted prices will already be available to you either through your trusted real estate negotiator or through your research on various property portals. With so much of information available, a buyer is able to make informed decisions on their purchase and reduce the risk of purchasing an overpriced property.

It pays to be good friends with real estate negotiators as they may even help you secure below market value deals in the sub sale market, why not leverage on their network and connections? You do not even need to pay the negotiator, since the seller/vendor pays the commission (for most parts of Malaysia).

The lower the property price is, the higher the rental yield and  return on investment will be. Besides, compared to new developments, the transaction is way quicker as it usually takes only about 2-3 months to get all the paperwork done and get vacant possession of the property.

From a buy-to-stay perspective, many home buyers nowadays look for renovated sub sale property as it can save them money on renovation as cost of building materials have also gone up over the years.

As for property investors, purchasing property from the sub sale market allows you to realize the rental yield immediately as you will be able to start letting out your property once you have vacant possession of the property.

For all the reasons stated above, the sub sale market is many seasoned investor’s favorite property market.

However, the same cannot hold true for new/young home buyers as it requires a high upfront payment, namely 10% down payment, legal fees, stamp duty, valuation fees, just to name a few (approximately 15% of the property price).

Other than that, buyers of sub sale properties need to spend a lot of time viewing different properties before making a decision on a purchase.

Sometimes the time taken for decision making  may cause a genuinely interested buyer to miss out on the sale due to other buyers who have made a decision quicker.  Also, with sub sale properties, there is no warranty on defects of the property, you buy a property as is.

Many times older sub sale properties may come with defects which may not be immediately apparent such as a piping defect, electrical defect or termite infestation. This may require extensive repairing work which may be costly.

Fortunately, there is good news! End of year 2016 and year 2017 is an interesting time for buyers (investors/people buying to stay) as there are many “new” sub sale properties in the market.

These may be properties that are just being handover to the owners. Many of these properties were purchase before 2014 under the developer interest bearing scheme (DIBS). So it is not uncommon to see many brand new properties for sale at competitive prices in the market now.

Pros and Cons of Sub Sale

In conclusion, buying a property depends on the purpose of your purchase (investment/buy to stay), financial readiness and risk appetite.

According to Warren Buffet, “Risk comes from not knowing what you are doing”. Therefore, it pays the best dividend to equip yourself with the skills and knowledge necessary to manage and minimize the risk of buying property.

Finally, always engage a qualified real estate agent/negotiator for all your property transactions! (Find out “Are you dealing with a certified Real Estate Negotiator?“)

New Development, Auction or Sub Sale, which is your preferred property market?  

Action Real Estate copyrights reserved. Do not reproduce or copy the content of this post without first obtaining our consent. 

About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.

What Is My Property Value And How Much Should I Sell My Property?

Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

Value vs Price

There are 2 aspects in selling that are almost akin to 2 pieces of puzzle that must complement one another-  Property Value & Property Price.

Have you ever wondered at what price should you sell your property for? Pricing it too low, you will lose money; Pricing it too high, you will not be able to get a buyer.

There are generally 2 categories of owners pricing their property for sale:

  1. Price it at above market price ( > property value)

  2. Price it at market price or slightly below market price (= or < property value)

Which will receive more response from the market and work favorably towards the owners’ objective of selling his property?

Let’s evaluate and break down the possibilities of each option based on personal past experiences and market observation.

  1. Price it at above market price (> property value)

    a) Most knowledgeable buyers may bypass the property advertisement and look elsewhere. Hence we lose potential buyers who are ready to buy but are put off by an overpriced property advertised.

    b) If we intentionally price it way above market price and say allow for price negotiation we may put across a message to the buyer that we are not sincere in selling the property.

    It will only defeat the purpose of selling because serious buyers will not be interested to waste time negotiating a deal knowing it is above market price.

    It may take 6 months, 1 year or longer for the price to drop to current market price level and genuine buyers will not have the patience to wait.

    Most of the time serious buyers will move to other property with a more realistic or acceptable price.

    c) It also takes too long to sell a property if it is overpriced in the current slow market.

    It is also not uncommon to see properties which have been in the market for over a year and may have been marketed by many real estate agents.

    The price will go down progressively from the time the property is first put up in the market for sale.

    Instead of wasting valuable time testing the market with above market price and reducing it overtime, why not set the price right from the start instead of letting genuine buyers walk pass you.

    Then there are also owners who hope for ignorant buyers who will buy their property at above market price, which rarely happens.

    Even if there are such buyers, we may not be able to get passed the bank to value it at the escalated selling price.

    If the buyer is not able to get the loan to purchase the property then how is the transaction going to proceed? The transaction will probably be aborted if the buyer needs bank financing.

    d) Marketing a property too long a period of time is not only wasting a lot of time, it also creates an image to the prospective buyer that there must be something bad/wrong with that property, that is why for so long it’s still in the market and remains UNSOLD.

  2. Price it at market price/slightly below market price ( = / < property value)

    a) We will be able to attract genuine buyers to the properties.

    b) There might be more than 1 interested buyer  for the property.

    c) Potentially selling slightly above market price if there are more than 1 offer.

    d) If owners can differentiate creatively their property from other similar properties that are currently in the market with words like “best price, best value, best view and quiet surrounding etc.”, the property will have the best exposure and best credibility to the market.

    e) Another reason why we should price property for sale competitively is so that it can even compete with an auction property in the same location.

    Auction properties are usually listed 20% or more below market even for properties in good location and in great demand. Because the price is so attractive, it attracts a lot of bidders as many as 20 to 30 bidders. At the end of the day, the successful bidder usually ends up buying above market value, higher than secondary sale value in the same location.

    f) Nowadays, prices of most properties are transparent to the public and most buyers are aware of approximately how much each type of property is worth by checking with property websites such as iProperty, Propertyguru etc. They can also check actual transacted prices in the Brickz website. Therefore, it is only wise to price the property correctly and competitively from the start before putting it up in the market for sale or to let.

P/S: The above advice is applicable in most cases. In certain circumstances, if the property has unique features and advantages from its extensive renovation compared to other similar properties around the area, it can be marketed with a higher premium.

Email us at action.e2520@gmail.com to get an indication of your property value!

Action Real Estate copyrights reserved. Do not reproduce or copy the content of this post without first obtaining our consent. 

About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.

Comparison of Home Loans to Finance Your Properties

Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

comparison of home loans to finance your property

There are generally 3 types of home loans available to finance your properties:

1. Basic term loan

2. Semi flexi loan

3. Full flexi loan

On the same topic of home loans, we have also shared a guide on how to get a housing loan in Malaysia. Have you ever wondered what the banks think of you when you apply for a loan? Read this piece on Getting A Housing Loan In Malaysia.

1. BASIC TERM LOAN

This type of loan has been the norm in the past, however it is now not a very favorable option for most modern home buyers due to its lack of flexibility.
For this type of loan, you pay a fixed installment monthly over the entire loan tenure period. If you have extra cash in hand and would like to make an advance payment to pay down the principal sum, you will need to write to the bank and ask for permission to pay down the principal sum (subjected to the bank’s approval).
However,  the additional amount you allocated to pay your loan cannot be withdrawn in the future.
Hence, if you have an emergency use of the money you will be stuck with a liquidity problem.

2. SEMI FLEXI LOAN

In comparison to the previous loan, this type of loan allows you to deposit any extra cash into your loan account to reduce the principal sum, without the need to formally write to the bank for permission.
Subsequently, this will help you reduce the interest charges and your loan tenure.
For example, your loan balance sum is RM400k and you have RM200k cash at hand for say 2 months. You can deposit this money in the loan account for 2 months and withdraw it out 2 months later.
If the loan interest is 4.5% per annum you would have saved RM1,500 as interest from depositing RM200k for 2 months only.
At the end of 2 months, you decide to withdraw the RM200k for other more important use. You will then have to make a request to the bank, which will impose a RM50 service charge for withdrawing the money.
At the end of the day, your net saving is still RM1,500-RM50=RM1,450.  Hence, parking your extra cash in your loan account can help you save money.

3. FULL FLEXI LOAN

This type of loan allows you to deposit and withdraw any advance payment into the loan account anytime you need, without the need for formal applications and at no extra charges, although it does come with a monthly fee of RM 10 to maintain your current account, it also provides you with a cheque book.
Every month your loan is automatically deducted from your savings account (if you create a standing instruction). Whenever you have extra money in your savings account, you may choose to transfer it into your loan account to offset your principle sum and subsequently reduce your interest charges.
For instance, your current loan balance is RM 400k, you have extra RM 200k cash which you have decided to park into your current account. Your loan interest will only be based on RM400k- RM 200k = RM 200k, instead of the initial RM 400k.
As and when you require the extra cash, you can withdraw it by writing out a cheque, or by internet banking and there is no need to go through the bank as in the semi flexi loan.

So, which is the best package?

If you occasionally have spare cash in your hands, you may want to opt for either one of the flexi loans.

If you are usually tight on cash and do not intend to make payment advances, you may want to opt for the basic term loan, they may sometimes offer lower interest rates.

At the end of the day, choose the type of loan based on your own financial needs; i.e. How much of financing flexibility do you need?

P/S: Here is a good tool for you to use to compare different bank’s interest rates, there is also a home loan calculator in it! It makes calculating the monthly repayments easy for you. To use the mortgage calculator, you just have to type in the property price that you would like to borrow and for how long. It will do all the calculations and will present you with the best mortgage deals available.

Best Home Loans in Malaysia. Discover Them Now! | iMoney

Find the best home loan in Malaysia with interest rate as low as 4.39% p.a. and apply online.

Action Real Estate copyrights reserved. Do not reproduce or copy the content of this post without first obtaining our consent. 

About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.

7 Benefits of Being a Real Estate Negotiator (REN)

Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

perks of being a real estate negotiator

1. You have flexibility of time

You are not bound to the 9-to-5 office hours. That means saying goodbye to the frustration of being stuck in bad traffic every morning.  You are your own boss, you determine and set your day-to-day-schedule that best suits you and your clients. If you dislike to do viewings on weekends, then the best option would be to consider commercial real estate. There is no specific work hours, if you wish to work only 5 hours per day, as you wish! Perhaps by doing so, you would finally be able to make it to the gym and fulfill your resolution of living a healthy lifestyle! Solely due to this benefit, many retirees or even house wives are turning to real estate business.

2. Have ownership over your own business growth

Being a real estate negotiator is equivalent to running your own business. You are your own boss! You get to decide where and which areas you like to specialize in, type of properties you like to sell (industrial, commercial or residential), execute your own marketing strategies and see the results they bring. You also have more control over your own business management and business plans, because you practically own the business! Your customer base will still be the same even if you move to a different company. Comparing this to other businesses, real estate business demands minimal operating and overhead costs. Majority of the costs involved are marketing related costs.

3. No limit to how much you can earn

Most real estate negotiators do not get paid a basic salary. Their income does not depend on their seniority or years of service. Some fresh newbies can even earn more than senior real estate negotiators simply because they are hard working, committed, innovative and creative in the way they run their business. Real estate negotiators’ income comes in the form of commissions from selling a property/renting out a property, which is typically about 2-3% of the transacted property value  and 1 to 1.75 month’s rental/lease (based on duration of tenure) respectively. Of course a small portion goes to the estate agency at which they are attached to. For example, selling a bungalow worth RM 2 million, will entitle a real estate negotiator RM 60,000 in commission (assuming 3% commission). There is  no limit to how many properties he/she can sell within that month, the only limit is themselves! This certainly does not come as a breeze. It takes consistent effort, hard work, commitment, creativity, intuition to build goodwill and trust among sellers and buyers.

4. You get to find good property deals for yourself

Apart from the day to day selling or renting of their client’s properties, real estate negotiators  should also have sound property investment knowledge to be able to speak the same lingo as their investor clients. What better way to develop property investment knowledge than being an investor yourself! Being a real estate negotiator, you are already on the field looking out for good property listings, when you come across deals worth investing, you are in the front of the line to grab it! Many a times while looking for listings, I would end up being the purchaser.

5. You get to leverage on others

Being a real estate negotiator allows you to leverage on other real estate negotiators when you collaborate and do a co-agency. For example, if you have a listing but have not found a buyer, you can collaborate with another real estate negotiator who has a buyer. This way you get to leverage on their customer base, and they in turn leverage on your listing. It is a win-win situation.

6. You get to help others

Start by focusing on a small area, and work hard to build your reputation in that area and you will soon be an expert and go-to real estate negotiator within the area. It is  fulfilling, satisfying and rewarding to help others with potentially their biggest and most complicated transaction of selling or purchasing a property.

7. It is a regulated profession

There are many illegal real estate negotiators in the market in recent times, which pose a risk to the public and also jeopardize the real estate profession. In response to this,  the Board of Valuers, Appraisers and Estate Agents (BOVAEA) Malaysia has implemented measures to ensure high level of  standards and professional code of conduct are adhered to by all real estate negotiators to protect the interests of both the real estate industry and the public. It is compulsory for ALL real estate negotiators (new projects/sub-sale) to be certified by the Board before they are allowed to practice. By ensuring that you are a certified negotiator, and wearing your REN tag (How to obtain a REN tag is described below) during viewings, you set yourself apart from the other illegal brokers in the market. Besides that, you are protected by law to collect a fee of commission for the service rendered for selling or renting out the property. (Read more about the Law here)

 General requirements for becoming a real estate negotiator

1. Any person above the age of 18 years with Sijil Pelajaran Malaysia (SPM) qualification or above.
2. Must be attached with a Registered Real Estate firm (company that have E license issued by the Board) on a full time basis.
3. He/she must attend a 2 day Negotiator Certification Course (NCC) approved by the BOVAEA to obtain a REN tag (issued by the Board)
4. To obtain a REN tag, the applicant must have
– an employment letter from a registered firm he/she intends to work with.
– copy of his/her NRIC (work permit is required for a non-resident)
– complete a form prescribe by the Board.
–  copy of passport size photograph.
Within 2 to 3 weeks REN tag will be issued by the Board.

P/S: Why being a certified real estate negotiator is important? As per the Act, any person not certified by the Board is not entitled to have his fee pay for real estate services. In addition, as per the Act, it is an offense punishable of RM300K or 3 years jail or both.

Interested applicants may send their resume to action.e2520@gmail.com

Action Real Estate copyrights reserved. Do not reproduce or copy the content of this post without first obtaining our consent. 

About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.

Are You Dealing With a Certified Real Estate Negotiator?

Q: How can I tell if I am dealing with a certified real estate negotiator?

Here are some FAQ adapted from the Board of Valuers, Appraisers and Estate Agents’ (BOVAEA) brochure, which I find quite beneficial for you to be aware of. Do take time to read on!

There’s only ONE tip in buying, selling or renting any property! Engage a certified Real Estate Negotiator or Registered Estate Agent

Who is a Real Estate Agent (REA)?

An Estate Agent can operate his/her own Real Estate firm. He/she can provide real estate service in selling, leasing properties or finding a property for the clients. He/she can employ up to 30 Real Estate Negotiators (REN) to assist the Real Estate Agent in providing these Real Estate Services.

Who is a Real Estate Negotiator (REN)?

A Real Estate Negotiator (REN) is an individual who is employed by a registered Estate Agent. They are not registered with the Board but certified to practice. They must attain the following requirements to be employed by the Real Estate firm;

They must attend a two-day course on Real Estate and will be issued a certificate of attendance. With the certificate they can seek employment either on a “Contract of Service” or “Contract for Service” with a Real Estate firm. The Real Estate firm then will apply for the REN tag with the BOVAEA.

BOVAEA will certify and designate a REN number & issue a tag to the REN. Only then can the REN be employed by the firm and represent sellers, landlords, buyers & tenants in the sale and marketing of properties.

What is a REN tag?

REN tag is an identification tag issued to a Real Estate Negotiator (REN). It contains all the information including their name, photo, IC number, REN number, firm name, firm registration number, quick response code (QR) and security features. It’s mandatory that the tag be worn by the REN at all times during their conduct of business so that the public will be aware that they are dealing with bona fide negotiators. See below picture for an eexample of the REN tag. Insist to see his/her REN tag! It is your right!

Can a REN use the firm’s company tag instead of a REN tag?

It is mandatory for all negotiators to wear the REN tag during the course of doing business and it cannot be replaced with any company name tag. It is an offense for someone to imitate and produce something similar to a BOVAEA REN tag.

How to check or verify whether the REN is certified by BOVAEA?

The quick response code (QR code) can be verified using a smartphone. The code reader will show all the negotiator’s information including their photograph. If in doubt, conduct a search at www.lppeh.gov.my or www.propertyagent.gov.my website under Negotiator Search. Alternatively, call the BOVAEA during office hours at 603-2287 6666.

What happens if the REN does not have a REN tag?

Then he is an ILLEGAL broker. He is not authorized to carry out the real estate service and does not have the right to demand commission as such STOP dealing with him/her. Report him to the police immediately with full information. Read the Law below (FAQ continues after this law excerpt):

Punishment Under The Law For Illegals

Section 22C of the Valuers, Appraisers and Estate Agents Act states that:

No person shall unless he is a registered Estate Agent and has been issued with an authority to practice-

(a) Practice or take up employment under any name, style or title containing the words “Estate Agent”, “House Agent”, “Property Agent”, “Land Agent”, “House Broker” in any language which may reasonably be construed to imply that he is a registered Estate Agent or that he is engaged in estate agency practice.

(b) Display any signboard/poster or distribute, circulate any card letter, pamphlet, leaflet, notice or any form of advertisement offer for sale, rent or lease or invite offers to purchase, rent or lease any land, building and any interest therein whether such land building and interest is located within Malaysia or outside Malaysia.

(c) Be entitled to recover in any court any fees, commission, charges or remuneration for any professional advice or services rendered as an Estate Agent.

Section 30 of the Act states that

30(1) Any person who;

(i) Acts in contravention of Section 21 or 22C;

(ii) Aids and abets in the commission of an offense under this Act commits an offense and is liable on conviction to a fine not exceeding THREE HUNDRED THOUSAND RINGGIT or IMPRISONMENT FOR A TERM NOT EXCEEDING THREE YEARS or TO BOTH.

Can a foreigner work in Malaysia as a REN?

Any foreigner who wish to work as a Negotiator is required to obtain a work permit from the Immigration Department and only then will the BOVAEA consider. approve and issue a REN tag.

What about advertisements in newspapers, property portals and signboards?

All advertisements posted by a REN must contain the company E registration number with the BOVAEA and REN number besides their phone number. Do not respond to any advertisement if it does not contain all these information. It is considered illegal for any advertisement to not follow the requirements above except advertisements by property owners.

Can REN sell properties in shopping complexes or exhibition halls?

Yes. they are required by law to wear the REN tag at all times. In their name cards, other than the company details, the name card shall also contain the firms E registration number and the REN number.

Can I respond to flyers distributed by Estate Agents to my home or offices?

Do not respond to any flyers which does not contain the below:

  • Specification of type of property for sale/rental/lease/wanted
  • Flyer must produce firm’s letterhead (containing the name, registration number, office telephone number, address)
  • Contain the signature of the REA
  • Negotiator’s name with REN number
  • and this statement “Persons responding to this flyer are not required to pay any estate agency fee whatsoever for properties referred to this flyer as this firm is already retained by a particular principal”

Can foreign real Estate Agents or developer sell their property in Malaysia?

Foreign Real Estate Agents or developers cannot sell property on their own in Malaysia. They are required to engage a local registered Real Estate firm to market any foreign properties. The local firm is required to make an application with BOVAEA for approval and will be assigned with an approval number which needs to be displayed at all exhibitions and in all marketing collaterals. The local firm’s representatives are required to be present at all times during the exhibition.

How do i know whether the property being marketed by the agency is approved by the Board?

Any foreign property being approved to be marketed in Malaysia is required to display the BOVAEA approval number, example LPPEH/88/8888/KL. Separate application is required for different venue which is only valid for one month from date of approval.

This was reproduced from the BOVAEA brochure entitled “Enhancing Professionalism, Integrity and Accountability”

Ways to Improve Rental Yield

Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

Using the example from our previous post, a man had purchased a second property by refinancing his first loan. Now, he has two properties which he can rent out for cash flow gains. However, he realized that if he rented out the two properties as it is, his rental yield is still not up to his expectation of at least 5% or higher rental yield.  Is there a way to increase the rental yield of his properties? Assuming that his 1st property tenant will be moving out soon, the current market rental remains unchanged and he has some excess cash in hand from his loan refinancing.

If you were in his shoes, what would you do to increase your rental yield?

There are few options an investor can do to his/her properties. He/she may choose to do nothing about it. This may be the worst choice because the property may be dirty due to ageing paintwork. By choosing this option, it may result in longer vacancy periods and worse still, it might even reduce the rental yield. The last thing any investor wants to see are numbers that don’t look good!

So don’t be overly anxious if you cannot immediately find a tenant for your vacant property, instead, you may consider doing some minor enhancements to improve the value and rental yield while looking for a new tenant. Yes, it will involve a certain amount of cost, but a proactive approach and a bit of initiative go a long way!

ways to improve your property yield

Here are 4 minor property improvements you may consider to significantly improve your rent rate; for properties such as flats, apartments and condominiums in the low to middle class.

 1. Walls The very least the owner can do, is to touch up the dirty walls by repainting the whole house. Besides that, you should also check to ensure that all the electrical points are working fine.

2.ToiletsThe owner may consider tiling up the walls, changing damaged and rusty taps. Installing a water heater if there was none before.

3. Floor- If your apartment/condominium has a yard floor with cement render only,  you may consider tiling up the floor of the yard and filling up any steps from the home area to the yard’s floor in order to have a flat ground between the yard floor and the flooring inside the condominium ; this will create a perception that the built-up area of the unit is larger than other similar units. 

4. Kitchen Replacing the zinc counter in the kitchen with a custom made concrete countertop lay with polish tiles and stainless steel sink.

 You may also consider providing extra add ons such as the below:

·         Curtains for all windows and sliding doors.

·         Installing stainless steel clothes hanger at the balcony area.

·         Providing an extra stove in the yard area for heavy cooking.

Furnishing may not always be necessary. Whether or not to furnish the property should depend on the location of your property, if your property is within the city centre or near to education institutions, then furnishing the property would be beneficial. However, it is also wise to leave furnishing the property as the last consideration so that you can tailor to the tenants’ needs/requests. Some family tenants may actually prefer to furnish their own space.

All these property improvements, as minor as they may seem, can set your property apart from the other units within the same block, which will attract more prospective tenants to your property, and more importantly, will help to increase the rental demand of your unit.

Let’s now look at the potential return on investment (ROI). For example, if the above property improvement cost you RM10k and your new tenant now pays a rental of RM300 more, compared to the previous tenant. And if your new tenant commits to staying for 3 years, you would have received a return on investment of RM10, 800. On the other hand, If this RM10k was stored in the bank as a fixed deposit, the compound interest at the end of 3 years is ONLY RM1,248.

This all sounds great. However, there is also one point of caution to note; do not over-renovate every single property you have with the intention of increasing the rental yield. It greatly depends on the type of property you have. For example, a flat will still remain a flat no matter how much money you invest to make it great. The rental value will eventually hit a ceiling. It will not fetch the rental of a condo because it is a flat.

The reason why some enhancement of rental properties is necessary is that there may be several other similar vacant units available in the market at that point in time when your unit becomes vacant. Instead of positioning your property as a me-too property in the market, you can position your property as one of the best. Not only can you get your unit rented out faster, but your unit may also be able to fetch a higher premium compared to other units.

In addition to the above, since you have tastefully done up your unit compared to the rest, you would also likely have a higher chance of getting more than 1 offer for your property. This gives you the benefit of being able to select a better tenant, perhaps one that is able to sign a longer tenancy term.

What are some other techniques you have used to successfully increase your rental yield?

Action Real Estate copyrights reserved. Do not reproduce or copy the content of this post without first obtaining our consent. 

About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.

Key to Expand Your Property Investment

Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

This is a continuation of our previous post, you can read it here!

In our previous post, we have shared about the power of property investment and how it can help you hedge against inflation. Here are two main points from our previous article:-

  • Rental yield contributes to your cash flow and helps you repay your loan installments.

  • Holding the property long enough can help you gain capital appreciation.

Congratulations! If you have made a decision to invest part of your money in an investment property! 

 Next, after seeing substantial growth it brings to your finances, would you stop at purchasing only one property? Today, we shall explore a useful key to expand your property investment! Read on.

key to expand your property investment

Using the example from our previous post, a property was purchased at RM 250k and appreciated to RM 300k after 2 years. Since the property has appreciated by 20% and is now worth RM300k, the purchaser has gained an equity of RM 50k.

What can he do to unlock this equity?

Here are some possible options he might consider:

1. He can choose to SELL it to buy a new car with the profit (Sounds good);

2. Go back to his bank and ask to TOP UP his loan to take out some money to go for a holiday (Sounds good);

3. To REFINANCE it with another bank that offers a lower interest rate than his current bank to unlock the profit and invest in another property. (An investor’s option!)

What does it mean to refinance?

Refinance simply means to finance again, and most often with a lower interest rate than what you are currently paying.

Let us discuss why he should consider option 3, i.e. to refinance an existing loan that he had taken just a few years ago.

Most people would probably think, isn’t this too troublesome and costly?

If another bank is willing to offer you a lower interest rate and provide free moving cost to you, that would be most favorable. However, provision of free moving cost has been closed by many banks. Despite that, it is still very much beneficial for an investor to refinance his property with a little cost as it will benefit him in the long run.

Therefore, lower interest rate is one reason behind refinancing  a property with another bank.

Another reason could be because he has found another GREAT BUY property that fits into his criteria of having a reasonable yield and capital appreciation potential.

For example, he has found a 2nd property selling at RM 300k which he intends to purchase; he would still be eligible for a 90% loan from the bank since this is his second loan. He refinances his 1st property by cashing out 80% value from his 1st property, which is 0.8 x RM300k (current market value) = RM240k. Assuming that his outstanding loan from his first bank is RM 180k, he can use the RM 240k he obtained from refinancing his 1st property to redeem his 1st loan. After redeeming the RM180k of his 1st loan, he has now unlocked RM 60k in cash from his 1st property. This RM60k cash can then be used as his capital to purchase the 2nd property, by paying for the 10% deposit (RM30k) and other administrative cost of purchasing the 2nd property! 

Doing so, he now has 2 properties! The 1st one with a loan of RM240k and the 2nd one at RM270k. Also, do not forget that he will still be able to get 5% rental yield from both investment properties with capital appreciation potential!

In conclusion, by simply refinancing his 1st property, he had successfully cashed out RM60k cash from his earlier investment to reinvest in a 2nd property! You can do the same!

Don’t put all your money in the bank, as the saying goes “Don’t put all your eggs in the same basket”. 

Action Real Estate copyrights reserved. Do not reproduce or copy the content of this post without first obtaining our consent. 

About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.

Are Banks Really Helping Us Grow Money?

Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

Q: Can your money really grow in the bank?

The market fixed deposit offered by banks in Malaysia are currently around 4% per annum.

On the other hand, what is the annual inflation rate in Malaysia?

A rate of 3% – 4% as published by the authority?

The recent hike in RON95 petrol price from RM 2.10 to RM 2.30 on the 1st February 2017, the % increase is already above 9.5%.

The recent parking charges in Bangsar increased from 60 cents to RM1, the % increase is above 66%.

These are some examples of price hikes around us. The list is too exhaustive to be mentioned here.

 Is the bank really helping you grow your money? and are you able to ride the tides of inflation? 

Is there a better way to hedge your money against inflation? Do you want to WIN over inflation? 

Surely everyone wants to be a winner and certainly do not want to be a loser. But the fact is, saving all your money in the bank is behaving like a loser.

Instead of saving all your hard earned money in the bank, why not consider investing some of your hard earn money in a reasonable yield property with capital appreciation potential.

What is a reasonable yield property?

Look for an investment property that give you about 5% yield. (The details of rental yield calculation is in earlier article here. More information on improving rental yield here). That is already above the 4% fixed deposit interest rate offered by banks.  

What about capital appreciation?

Capital appreciation means the value of the property increases over a period of time from the date of purchase. If you purchase the property for say RM250K 2 years ago and now you can sell it for RM300K. That means the capital has appreciated 20% over 2 years

If we keep the same RM250K in the bank as fixed deposit. Would any bank to our knowledge gives us a 2% extra on top of the principal sum of RM250K apart from the contractual 4% interest per annum.

The answer is always a definite NO.

Then why is it that so many people still keep ALL their money in bank to see it reduce in value over time?

The answer can be FEAR: Forget about Everything And Run. Unfortunately they are running to a place called bank that will only make the VALUE of their money smaller by the day!

The real reason could be a lack of knowledge in property investing.

“An investment in knowledge pays the best interest.”

– BENJAMIN FRANKLIN

What are some fears that are holding you back today? 

Action Real Estate Copyright. Do not reproduce any of our content without first obtaining our consent. 

About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.

Calculating Property Rental Yield

Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

Property rental yield

 

 

 

 

 

 

 

One of the core determinant factor in choosing the right property to invest in for cash flow gains is by calculating the property rental yield. It is used to determine how much return on investment can be made from forking out the price of the property. Why is this important? Because calculating rental yield can tell an investor if the investment on a particular property is worth it, or how expensive that property is with respect to its potential returns. The gross rental yield is simply calculated by the total gross annual rental divided by the price of the property multiplied by 100%. Do bear in mind that the price of the property should also include all other expenses associated with the purchase of the property, i.e. stamp duty, sales and purchase agreement fees, valuation fees, and also renovation costs. 

Gross Rental Yield = Annual rent  /  Price of property  x  100 %

In addition to that, if you are making a calculation for a high rise condominium, there would also likely be maintenance fee which is borne by the landlord. Hence to accurately calculate the net rental yield, one should subtract any cost involved with the unit. (for eg. tax, insurance, sinking fund)

Net Rental Yield = Annual rent – costs (eg maintenance fees)  / Price of property x 100 %

In view of property prices that have increased over the last 2 years, it is getting harder and harder to find a property with a rental yield that can cover your monthly installment. (sucks, I know!). Most investors would generally set the cut of point of about 5% rental yield. These days, a rental yield of about > or = 3% is already pretty good! If you’d like to find out how to improve your rental yield, read here.

If you have not already noticed, the bottom line is, rental yield is greatly dependent on the price of the property! If you happen to chance upon a property that is below market value and in a fantastic location. What are you still waiting for?

Grab it by its tail before it is gone!!

Action Real Estate copyrights reserved. Do not reproduce or copy the content of this post without first obtaining our consent. 

About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.