This is an interesting but quite unlikely scenario. You will very rarely find rental rates in a certain development diverging by as much as that. Comparing RM3.6K vs RM2.8K that is divergence of almost 30%, assuming all are similar type units (intermediate vs inter or corner vs corner). Even on location wise for commercial, unless the popularity is extremely uneven (ie shops facing main road all busy but shops behind extremely quiet).

But to your question:

a) Market has not dropped but you are paying over the odds of market price - ie bigger risk. If rents fall to the level of Lot C gradually, you lose yield (ROI). If you need to dispose of your property urgently (short sale), the odds of you finding a buyer are lower, as buyer would need to top up RM80K on top of 15% downpayment.
b) Same as A except even worse - in case of sale buyer would need to top up RM210K extra on top of 15% just for you to breakeven.
c) I would buy C (unless some external subjective factors like condition sucks or location really bad) - as the risk is all covered. You match the banks valuation. If rents drop to match the lower level, you are still unaffected, and if rents increase to match the level of Lots A or B you profit.

You need more studies on commercial sector.

truly you have not surveyed in detail.
me myself am charging my tenants 40% below the market rates.
any typical development would have a range of asking rental rates and selling prices.
not uncommon to see an absolute 40% gap from lowest to highest. could be even more.

Seriously bro, is there a needed to consider which to pick if it has to choose one?
C) is definitely the choice!
Reason: Having the Rental Yield means current earning or earning of tenure in contract which may fluctuate in future, whereas Purchase Price is Permanent!
The one question to ask yourself is, if contract end or tenant leave, can u get back the same rental (I presume the rental rate is on the higher end)?
The same logic like residential unit;
A) Rental 3.5k, selling 600k, gross 7%
B) Rental 2.5k, selling 500k, gross 6%
If i hav to choose one, I'll still choose B)
In anytime or upon tenancy ends, I can push up rental or worst I spent some money to Reno and still I can ask higher rental. What about the 600k unit, if the rental is already at the higher end? What other strategy can u take to reach tat 3.5k once current tenant left?
Good luck!

i'll choose the one with the most likelihood of staying on and with good and profitable business.

Jus my view point....
Nobody can guarantee a long term tenant right, even if it's a 3++3+3 contract, company go burst what can we do? Unless u got Bank as tenant ya....
However lower purchase price will be something tat is definite advantage. Isn't it?
Is there something I missed?

This post has been edited by AppreciativeMan: Mar 20 2013, 12:17 PM

l will choose C. If I up the rental to 3K I have 6% ROI and 3K still cheap compare to A and B.

Opss i had to change. typo just now. hehe. I would choose A actually.hoaaaa. many replied to my reply. thanks guys. Anyway in my opinion, there is a reason why C is lagging behind. It is on the road that not many cars flowing as compared to A and B. If you ask me, I will definitely choose A because in commercial, I believe, die die must buy good facing (doesnt necessary mean facing main road coz based on my analysis it all depends on flow of traffic. there are some shoplots not facing main road getting more traffic than those facing main road). Anyway, these are the businesses of individual lots:

A: Kedai langsir

B: Kedai perabot

C: Kedai perabot

From my observation, A's business is thriving while lot B and C are competing with each other. However, take note buying A needs RM170K and one will have a risk of having trouble to sell back due to low valuation. One day, valuation might keep up with the price one will pay but it will take a while.


Anyway, what do you guys think with these investments? Good or bad or risky or what?

If you ask me, for a bumi, one better put his money like this:

Put in whatever one has in AS1M, ASN and take loan for RM400K in ASB. ROI combined would be around 7%. no pening2 with tenant, no pening2 to sell back.

Unless Lot A, B and C future capital appreciation and rental incremental are substantial. This is why sometimes I always ask myself to weigh between rental and other investments.

For flipping, provided one has bought at good development, this is a sure win if one can sell with a profit by taking into consideration of rpgt as well.

This post has been edited by AMINT: Mar 20 2013, 03:46 PM

Well, if the location is different then of course it is a factor to consider.

Very obvious a non experience people talking something never experience and practice before

I think my prediction on yr choice is right, you choose A

Good to know that we think alike.

I definitely choose A also.
B is a bit risky type of tenant.
C location must be worse off then A and B.
For A, only concern is load a bit up on fire insurance.

Bro, with that kind of return, I will sapu all 3

Where got such return in KV anymore ? Looks like I got to visit outside of KV ASAP

yeah true2

hehe. got bro. you have to look closely. You have to look deeper than just rely on internet.

(Someone i know here who keeps calling people A stupid, people B stupid but only did research on the internet via propwall. However talked like as if physically did the research. )

Anyway, yeah not many KV props can get like that. I am venturing outside of KV to down south actually. Some say better dont waste time coz not easy to manage since a bit far. I kinda agree with them but I still think it is wise for me to do this because I wanna learn.

This post has been edited by AMINT: Mar 20 2013, 07:17 PM

I haven't increased one of my tenant's rental since 5 years ago. Although someone offered to rent the shop for 20% more. All because he is very prompt, and never never kacau/complain even 1 time unlike my other tenants. I will rather keep good tenant than having headache over 20% more rental. To me, it is not worth it.

todays Star paper
- polis bring crime down 100 %
wtf

???

You are a smart owner.