Newbie trying out property investment

Let me introduce myself, I am 24 years old working in Singapore, earning roughly 7k SGD a month excluding bonus and stock options. Right now I am looking into sub-sales as.

Let me share with you guys my opinion on why I am looking into sub-sales, not a new project.

There is more negotiation room and I can collect rent to cover my installment. I can calculate my rental yield fairly easily.

When you go to the sales gallery, even though the surrounding area only yields RM2K rental with a fully furnished unit, they will advertise RM5k rental if you cut into smaller rooms and so on, or do Airbnb which I am quite opposed to as there is too much competition right now and it is hard to make your unit really stand out among all the Airbnb units.

I have been to a lot of sale galleries in KL recently and I don't think right now there are any good projects that can generate breakeven cash flow, let alone positive cash flow. I feel like all the properties are quite overpriced at this point as I need to fork out around RM 1k for the unit and this is excluding renovation from the makeover guys and the agent commission fee for helping us find a tenant.

Moving on to the project I am looking at

It's Country Garden Danga Bay located in Johor, I am right now taking advantage of the situation of China/Singapore investors trying to cut their losses because the initial launching price is RM 1. xx million, and right now the market value is around roughly RM470k and above hence I am sort of trying to lowball the seller to sell me their unit and let them live in peace.  

The unit I am looking at is an 881 square ft 2 bed and 2 bathroom layout. There is a tenant inside the unit and the rental is around RM 1700, the selling price is RM480k which I manage to haggle down to RM 380K which is almost 100k off. I think I will jack up the price to RM 1800/RM 1900 after I purchase the unit. The rental yield is roughly around 5.6% which I considered decent. If you compare this to any other units in KL/RnF pricess Cove, I find this unit quite impressive as most of the properties in KL only yield roughly 3% rental yield, at most 4%

Furthermore, to give you more context the developer units are going for sale at a price of RM 450 per square foot for those 1200 square ft layouts and RM 550 to RM 650 for those units ranging from 400 square ft to 900 square ft. Even for subscales, other than the unit I am eyeing which is RM 430 per square ft, the next cheapest available sits at around RM 540 per square ft.

Concerns/Questions:

I am contemplating whether I should take a full loan and cash out the difference as I know the bank value will be higher than the sales price. If this is the case, I might need to fork out the maintenance fees every month. But If I do not cash out and went for a lower loan amount, the rental actually covers all installment and maintenance costs and I do not need to worry about anything.

The reputation of the developer and the financial status might be a problem if I wanna exit this property as the future buyer will also research online before buying. But since this is already built and finished hence I am not that concerned if the developer actually goes bankrupt. Have you had any trouble exiting a property where the developer's name kinda ruin the ongoing deal?

Due to the higher initial launching price and now the price drop so much, there are still unsold units from the developer which I confirm with several agents and there is a lot of negative comments about this project, but when I go to their township and see, quite popular leh, got beach, got visitors, two sides of the road all fully park for the beach and all, maybe is developer buy cars and park there to look more popular hahaha but there is also a mall with Aeon, Mr. DIY, HealthLane Pharmacy, Original Classic, Cinema, Although the mall is not that big but it has everything we need. How come the online comments are so teruk and I am scared this might affect future buyers when I am exiting this property?

They said since this whole township is built on reclaimed land, the building might sink and terus collapse hahaha I am not sure whether this is true or not so might need your expertise on this.

I want to play it conservatively, assuming my property does not really appreciate in price, and since I am entering below market price and I can sell it back at below market price too in the future and assuming there is no capital appreciation there and I continue to let my tenant build equity for me and I refinance it and cash out and keep repeating this, am I playing the property game right or should I aim for a property that has much more space for capital appreciation like in KLor Penang, cuz high rise in JB, I don't really see too much of a capital appreciation happening as they have ample of land.

Last but not least, does buying this property make sense ?

I am not so experience in refinancing also I saw some1 said can use refinancing to cash out loan.

Just my 2 cents,
- Got to find out who is your potential tenant if the current tenant moved out. Why ppl in JB willingly rent your unit for rm1800-1900 if there are other cheaper option at the same place?

- New project vs subsale. Have u calculated the SPA legal fee, MOT and etc into your cost? 1 of the reason ppl go for new property is bcuz of all kind of incentives given by developers.

- Exit plan. As u mentioned, the reputation of the project itself is quite bad, u are lucky enough if the property price remain stagnant. How many potential buyers in the market 5/10 years later? Assuming the property is well maintained.

- Consider auction market if u hv so much cash in hand.

- 7k sgd is a lot if convert back to MYR. Try consider commercial properties like shophouses?

Close your eyes and buy since your salary is so high. there is nothing to worry about since you can get 380k and always can sell 480k in future since it is the market price now + gain some equity over the years.

My take is only 1, when you buy a house, u dont just buy your unit. You buy 'into' the project.

So the success of your unit, is dependent on the success of the project. If the project die, yours die as well.

With the high density development, while most of the owners idgaf of their houses here, what would you think will happen down the road?

- The average rental there would be around RM 1700 to RM 1800 for the same unit layout as mine as most of the rental are slowly increasing since the customs open up.

- I calculated and most likely everything excluding the property will come up to roughly around RM 20k which I will mark up the SnP and use bank money to cover it.

- True, the exit plane might be a concern to me. But I heard like refinancing is also a good way to cashout or milk money from the property assuming there are tenants paying for ur installment. Like there are few ways of making money other than buy low sell high

- I am also looking into auction market but still awaiting the properties I want in auction, might consider getting 2nd or 3rd property in auction

- Shoplots, hmm an interesting choice, not much experience in this, i guess shoplots wont be considered because higher entry barrier (more risk), if really nobody rent then hailat compare to house at least i still got a house at the end of the day

thanks for commenting thou but what do u think ?

Hahaha, I wish I have so much money until can simply throw almost 400k into the sea hahah. But yea, your comments are what I tot as well, like since I am buying way below market price, my risk are lower, the lowest price that I saw was a unit from developer which cost roughly 450k without any renovation.

I read your long post and only got 2 sentence for your consideration.

If it gotta be JB, same objective as you claimed (your para 1). Go for business park dev instead and not highrise residential.

Depending on your initial outlay and leverage

This post has been edited by jojolicia: Jan 16 2023, 05:04 PM

ya, developer unit now about 450-500k depends on view n floors.

if u can get 380k, very value for money. My friend bought 780k there.

If me, close eye buy. U dont need cash to buy and rental cover your installment. Where got throw 400k into the sea. You actually "Kosong tangan tangkap a white wolf"

:lol

The capital gain for high rise in johor bahru is really not optimistic.
1. There is still a lot of undeveloped reclaim lands, not only the current supply, there will be a lot of future supply.
2. Those that setup a home in JB, most of them preferred landed and against high rise.

It will be purely the rental play. For high income earner like you, it will be wasting time for a few hundres RM a month.

if free few hundred a month, what if u got 10-30 units of them?

it is cash flow every month, and at the end of the day after few years, u even dispose at your buying price, u still earn equity.

For JB market investment, focus on gated and guarded landed terrace. Personally, I am studying sunway iskandar. There seems to be an increasing expat community living there with comprehensive amenities in the township. There is also a lot of activities at the industrial area in gelang patah, where sunway iskandar is the best township for the expat/ local working there.

Managing tenant is a business and demand time. And to get tenant, we need to fully furnished and ID the unit. A few hundreds a month will take you 4-5 years to just recover the setup cost/ transaction cost. Lousy/ negative ROI if w/o capital gain.

buying 380k, to sell at 450k is not hard.

I nearly bought a unit at 480k but i switch to others.

I’d just correct that and say that your figures about KL are mistaken. It is still a capital city and rents in “in-demand” areas have been very resilient. Way above the 5 or 6% mark. With SGD backing you, you don’t have to look at mass market property for Malaysians, consider the upper middle or upper crust stuff.

Johor has become a third rate Shenzhen wannabe with limited industry and won’t shake that off in a hurry. Perhaps it makes sense if you get something at 50% or less of its original price.

Buyers are now wary of locations that are highly cyclical and only appeal to one set of clientele.

This post has been edited by Cavatzu: Jan 16 2023, 05:19 PM

Invest in high rise at JB is not an ideal choice.

The capital gain really not that good, try look for other.

Dont buy high rise it is over over over over over supply in JB. Choose landed instead

Agreed. If I were Singaporean and I wanted to buy something just across the border, it would be landed at a fraction of the price.

If you’re going after a more cosmopolitan populace then it’ll be KL.

Just to reiterate, Johor is not Shenzhen. It’s like Philadelphia to Manhattan.

Personally, I dun like the project itself. It wasn't built for local Malaysian at that time. Besides, JB and KL is different, demand for high rise is low. But for investment purpose, look at the numbers and pray hard u get a good tenant, if all good u can just go ahead. Nobody guarantee can predict the future.

One aspect that being speculated now is the size of Singaporean retirees that will live in JB in the next 10 yrs, looking at the increasing gap for of cost of living btw Malaysia and Singapore. Singapore government is actually encouraging this by allowing CPF (KWSP equivalent) to be used in a few JB hospital.

If that happens, the retirees will likely prefer high rise with good amenities and facilities, as it demands less time and energy to upkeep a highrise and they do not need huge space. For that, my opinion is only nusajaya area fit a Singaporean retiree's life style requirement.

Within nusajaya, iskandar sunway is most promising with best amenities ard the area.

What nonsense conjecture. Hard borders are up for a reason. What if PAS takes over government, that’s more likely than SG sponsoring their citizens to live in our country and not contribute to their GDP. It’s mainly Malaysians who work in SG who will buy back in Johor.