Foreign investment in Malaysia properties

All property acquisitions by foreign interest that do not require the approval of FIC but falls under the purview of relevant Ministries and / or government departments are as follows : -
a. Acquisition of commercial unit valued at RM500,000 and above

b. Acquisition of agricultural land valued at RM500,000 and above or at least five acres in area for the following purposes :
  i. To undertake agricultural activities on a commercial scale using modern or high technology
  ii. To undertake agro-tourism projects
  iii. To undertake agricultural or agro-based industrial activities for the production of goods for export

c. Acquisition of industrial land valued at RM500,000 and above

d. Acquisition of residential units valued at RM250,000 and above. The said minimum threshold will be increased to RM500,000 beginning 1 January 2010

e. The transfer of property to a foreigner based on family ties is only allowed amount immediate family

Restrictions

Foreign interest us NOT allowed to acquire : -
a. Residential units valued less than RM250,000 per unit (RM500,000 per unit as of 1 January 2010).

b. Properties other than residential units valued less than RM500,000 per unit

c. Residential units under the category of low and low-medium cost as determined by the State Authority

d. Properties built on Malay Reserve Land

e. Properties allocated to Bumiputera interest in any property development project as determined by the State Authority

Determinants of Property Value

What is the main concern of buying a property? Location? Type? Rental Returns?


Thinking of this question, we must first ask ourselves what are the investment objectives, namely, target of return, investment time horizon and etc.

Amongst the main determinants of property value include : -

1. Location – This is to determine there is a demand by the target market for this location. Research on the historical rate of property value appreciation in that particular location for similar property is essential.

2. Property type and size – residential or commercial each have different target market, dependent on location, attracts different tenant profiles.

3. Rental returns – Find out how much rent can fetch by researching the rental values of similar properties in the area and determine the cost of owning and maintaining.

4. Cash flow – evaluate the property’s potential to generate income as against cash outflows. Earliest positive cash flow is excellent.

Property value is the main consideration when investing property Malaysia

Return on Investment

How to calculate return on investment?

Investment in property may take much time and effort than you may expect. When you find a great deal, you might need to leverage on other people’s money to increase your return of investment.

How to calculate the return of investment?
Generally, there are 2 components of returns, rental yield per annum and capital gain or so-called capital appreciation.

What is rental yield?
Rental yield is the return based on rental income from the property less maintenance expenses incurred versus the total purchase price of the property. There are gross and net rental yield. Gross Rental Yield is rental versus the purchase price before the expenses incurred and so on and so forth. In rules of thumb, the Net Rental Yield is approximately 85% of the Gross Rental Yield.

There is another rental yield called Net Leverage Rental Yield. This means, the financing cost is taken into calculation when rental yield calcualted. The expenses incurred inclusive of finance cost versus the net gain is defined as Leverage Rental Yield

What is capital gain or so-called capital appreciation?
This is an one time gain when you sell off your property. It is calculated by subtracting your original purchase price from the selling price. The gain versus the amount of capital gain is called capital appreciation.

As Leverage Rental Yield, the Leverage Capital Gain is also taking into consideration of the gain after subtracting the finance cost incurred.

What is total return yield?
The total is the rental yield plus the capital gain over the investment tenor. The return is usually calculated on the internal rate of return formula.

Check the return on investment before invest property in Malaysia.

Invest Property?

Thinking of investing in a property? Worried that you are not an expert?

Never did it before and therefore afraid to invest?

We all know that experts are not born, they have done a lot of good research and they have gained through their personal experiences.

Below are guides if the considerations before deciding of property investment : -


1. What’s your budget?

•  Think what you can afford by finding out : -
• How much ready cash you have to actually complete the purchase transaction?
• Downpayment
• Fees
• Other Charges
• Option you have to get the cash namely, EPF withdrawal
• Multiply the cash you have by 9 times to get the value that the property you can affor
• How much can you afford to pay every month as loan repayment?
• Based on your monthly income excluding commission, bonus and etc.
• Use 1/3 as the amount that you can afford for monthly loan repayments
• Most of the bank will use 1/3 of your pay as affordability calculation. Though some of the bank might use 50% or etc, it is advised that don’t get yourself in trouble by stretching your expenditure

2. Which property to choose?

• What is the purpose of purchase?
• Occupy, investment , capital gain or rental income
• Should buy smaller property in a prime area or larger property in off-prime area
• Should buy completed property of property under construction
• Should buy a landed property or apartment / condominium
• Tenure of property leasehold or freehold
• Should I buy now and upgrade later or just wait until you can afford buy your dream home

3. What do you do next?

• Start looking for your dream home
• Call owner or real estate agent, arrange for viewing
• If you like what you see, offer the best price
• If the price is agreed , you will usually be asked to complete a booking form and payment of deposit
• Subsequently arrange for Sale & Purchase Agreement as well as Loan application
• Property funding from EPF drawing & etc.

Above are most of the considerations that you need to think before deciding. Invest property at the right time and right place.