There is much to learn in property and I considered myself lucky to have gained experience despite being a newbie here, certainly property is not as straight forward as it seems, thank you all for helping and I am here to share what I gained and what I could. And especially thank for my friend who is willing to spend half day with me to scout Bangsar South, I feel worth to treat him dinner, hahahaha!
I went with my friend to Bangsar South area to do a deep scouting. I dragged my close friend who is a senior property for some public listed co boss and he focus more on commercial side at KLCC and Bangsar area albeit with less focus on residential.
He brought me around (I drive, he talks) and we had a good evening at Papa Rich (seems to be the only one left). The area has few others condos like Secoya, Hillpark, Novum, and along the way there are others developments as well.
After touring the area, we chat about it and what transpired a few days ago.
A few days ago, the rental listings at Propertyguru I tried to call. The situation can be described as bizarre. Most call ends up with agents mentioning the unit has been rented out despite the photos showing bare empty units. Some hung up on me as soon as I mention I want to rent, what a weird listing despite listed for rent.
Some agents are friendly though and they seemed genuinely serious on business, we chatted on the rentals and the situation. They mentioned that the place is new and now not much units been handovered but most are expecting a rental of RM4000 and above, how they arriving at this price juncture is a mystery but most owner insist that is the price level. They seems to be contacted by some parties that offered renovation package and the renovators said that the price could be fetched much higher than market would suggest otherwise. As agents, they could only follow owners instruction and see how the market plays out. One agent lamented that it is a hard sell as his potential tenant turned down the place immediately the potential tenant heard about the rentals at Goodwood.
At the same time, I sneak out to paid a visit again to Goodwood during working hour and managed to make some new friend there. The situation is like this: around 200+ units has been VPed, 80% units sold with Type A sold out. Out of that 200+ units, less than 20 units already moved in.
This contradict directly with the "rented out" narrative that agents mentioned. Why are they doing so? There isn't a slightest clue in my mind... until I met my friend.
"Dude, you are thinking too much!", exclaimed my friend.
My friend and I go around Bangsar South, there are many developments there. He mentioned that UOA isn't the only big player in vicinity. There are MRCB, YTL, IJM, Chin Hin all having their footprint there. There are much supply in term of residential and there will be more. It is all about supply and demand. Supply up, price drop until demand met. Just that simple. No fancy fancy words needed. Target this lah, target that lah, getting higher market rental lah, do airbnb lah, etc etc. And he asked me few question:
"Is there any other residential supply nearby? what is their price?"
"Any restriction on these residential such as airbnb?"
"Who is going to rent and how much they willing to go? Not just indicative but their real ability to pay"
"what is the owners type which is on supply side and do they truly embrace the market?"
I was shocked at the moment and my mind fumbled. Other than the first question (which my friend even jokingly said I am sloppy on that), the other questions I came out blank. Totally blank. No wonder he is the agent of big boss and I a newbie.
I tried to convince him with what I saw, like a good location & linkage to offices, the place is new with a lot of amenities, and the place is targeting higher income earner. He cut me short once he heard the word "targeting".
"Dude, you are thinking too much!", he continued "targeting high income earner but then the rental price so high, the only one that pays are either rich students who doesn't care about spending their parents money or airbnb who doesn't care the facilities maintenance, you call this targeting?" that pretty much shut down my convincing.
"and Lee, that place couldn't rely on being just one factor wow, market must be realistic for both parties the renter and the owner to effect transaction". He then mentioned the building nearby "see that building? it is The Estate and another high end building" It was 8pm and clearly that there aren't many unit lights that lit up. "They demand high rental and now they got their fair share of headache, occupancy is low".
"but a low occupancy won't affect much right?" I asked.
My friend: "wrong, Lee. That means less people will be focusing on that building, agents come and go and that building will be labelled as a hard place. It would be hard to convince for people to help you to sell and you would have hard time to both rent and sell. and if owner are rich, get ready to have more headache"
Me: "alright, what if I get those package from renovator? will it be like what those renovator said that the unit able to rent higher?"
My friend replied curtly: "let me tell you an open secret. Back in those days, many developers want to sell units. They engaged with promoters that open seminars to "teach" how to do property investment and then sell them lower-than-bank value property. Those property price is in fact jacked up. Then the cash back gimmick starts to come along. Recently you saw a lot of compressed loan articles? These are the ones. After some time, even banks don't want to do any more. Developers has no choice, then they do bulk bulk purchase. For first few projects, it did succeed, but after that a lot of projects using same trick got burned. Few years later, they had to change their tactics. You know what, they now talk about cash flow cash flow cash flow, you know why? because those are for suckers. MCO strike and people are afraid of losing rentals. So they adapt at whatever market want and continue to do their seminars. The best part? You had to pay a shitload of money to join these seminars as buy ins, once you joined it there will be package offered. You will definitely take it cause you already paid for the seminars. Now it worked like this, previously it was the property selling, now it was the renovation/airbnb package selling, see the difference? after they execute the package, they promised to find tenants and subsidies the tenant to stay for a while. How they subsidies it? They can even request rebates from the agents, think about that lah! Imagine those owner take out RM70k package, they had been promised RM5-6k, for first two years they get the tenants to cover for them, then the rental follows market rate RM3-4k, this type of scenario I seen too much."
Me:"yet there must be differences between fully furnished nicely renovated unit and a bare empty unit, right?"
My friend:"My boss bought quite a few units at KLCC along with his staffs and friends. All rich guys with listed co background. My boss renovated RM100k and rented it out at RM3k. His staff just rented it out bare at RM2k. The difference of one thousand ringgit. That is in KLCC. Imagine here at Bangsar South. Think about it. For the difference of one thousand, you spending RM100k for it. For your case, even taking whatever package will cost you a whopping RM70k, it is a risky propositions. Big boss has listed company with lots of cash. You do not. And along with it a lots of owners are thinking the same and everyone else doing the same, you think it is easy to fight for the same group of renters who are willing to pay such hefty rent? RM5000 is not a small amount. Look at that building, they want RM7k rental, what they end up with? low occupancy"
Me:"what about the agents? they mentioned they rented out? and with strong demand? (i even showed him some photos)"
My friend: "it matters not. what matters is the restriction. some buildings starts to ban airbnb, some buildings ban students, some ban Africans or blacks. given the proximity of UM around Bangsar South, surely some restriction will be in place for these buildings. Go find out the restrictions then talk. Even someone offered sky high rental, if the building ban it, it is useless. And it's all comes down to demand and supply. Rather than figuring out how much price it can fetch, figure out the factors why other similar building with similar location is fetching that level of pricing. And to answers your confusions, some agents are listing a high high price listing to get owner contacts, if they list low low price meaning they want to get tenant contact and offer them somewhere else."
We chatted for hours, but these are the key things I remembered. I also remembered he did mentioned another project called Cubit around that area. He pointed the construction and showroom and asked me to check out that project if I am interested in that area. There is too much to be digested for me at Goodwood, not to mention another new project research.
Oh yah, I also chatted with him about KL Gateway Premium. He agree with my direction is correct. Much happy to hear it. I hope I can recalled more of the conversation. He did mention something very catchy but I can't remember it.
regarding your question, I am in no position to answer it. I shared whatever home work I did and advise from my friend. I think I missed some of his opinions, let me recalled it. I don't remember too much.
Got my replacement leave after 2 weekend working. Pity me only got replacement leave on these 2 days. At very least I can work on this side side project.
My friend was prescient. He was right to point out these questions:
Apparently, there are a lot of supply nearby. This issue came up when I went searching for rent with agents. A lots of name float up: The Estate, The Park, Goodwood, KL Gateway Premium, Secoya, Camelia, South Link, etc etc. I can't remember that much. Most agents feedback there are supply of units due to most tenancy being signed just after the borders reopen and the lease is now up to renewal. The assessment of mine is a bit too optimistic on nearby properties where I once thought KL Gateway Premium might fetch RM4000. Most agents told me for a 1200 sq feet unit fully furnished it would only fetch RM3300-RM3500 range. That is the type of layout I am aiming to invest.
I now consider it unlikely that on long term basis this price level is sustainable. I suspect some nearby property rental might start to drop. One agent that recommend Camelia (the one next to Goodwood) mentioned that the price there is dropping due to competition from Goodwood and they are starting to advise owner to lower their price. They said it used to fetch RM4000 range for a 1400 sq feet unit but now only RM3500-RM3700.
As uncomfortable as it sounds, it is unlikely price would suddenly recovered as there are no new "border reopening" or "UM reopening" as I would found out in the below.
My friend was very very sharp on this issue. It came to me that after this question was asked, I found out there are restriction on
. I chat with some agents and make inquiry on this issue, their feedback is that most owners don't care as long as the foreign student pay as much as they request, ie, a premium.
for other owners that are renting out, their concern is that their neighbour might complain so they mentioned this when it comes to tenant selection. Some own stays owner, they are very particular on this issue as it was promised on the SNP. Sorry for breaking the bad news but I remembered someone once showed me profile about renting to UM.
There seems to be some issues with surrounding buildings as well on tenant profile mix. A few years ago there are large influx of different quality tenants and most buildings nearby experience a boom in rental. But then when MCO/COVID came a lot of issue crop up and affected these buildings and some buildings have legal cases/ dispute with tenants as a group From the feedback of agents, the owners around these area are especially concerned on tenant profile nowadays. Agents pointed out to me some building started to ban airbnb due to these tenants profile issue.
"Who is going to rent and how much they willing to go? Not just indicative but their real ability to pay"
ability to pay. Yes, some tenant can pay high and above market rental. Just pay, no question asked, no haggling. Then the police came knocking with a myriad of questions after busting the unit. With the door broken, the unit sealed up for investigation and lots of trash.
Or tenants could otherwise pay high rental only to default sooner-than-expected and get "free stay" as long as the owner inability to evict. Caveat Emptor.
"what is the owners type which is on supply side and do they truly embrace the market?"
I didn't know that owner can just leave the building empty just like that until someone here pointed out with example. I thought owner are realistic and will operate on a demand/supply basis. OK, lesson learned. We now knew there are answer to this question now.
and the answer though it might be unpleasant we mustn't ignore it. I just had dinner with my friend and I didn't recalled much details. But I hope these information is helpful. Quite unlikely I would invest in the project but the other subsale around this area might worth looking.
Sep 19 2022, 12:26 PM
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for other owners that are renting out, their concern is that their neighbour might complain so they mentioned this when it comes to tenant selection. Some own stays owner, they are very particular on this issue as it was promised on the SNP. Sorry for breaking the bad news but I remembered someone once showed me profile about renting to UM. 
Or tenants could otherwise pay high rental only to default sooner-than-expected and get "free stay" as long as the owner inability to evict. Caveat Emptor. 
and the answer though it might be unpleasant we mustn't ignore it. I just had dinner with my friend and I didn't recalled much details. But I hope these information is helpful. Quite unlikely I would invest in the project but the other subsale around this area might worth looking.
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