So I got a piece of land, initially I plan to build my own house there, but my father encourage me to build houses for rental there.

the plot is not far from town, just about 1 kilometer away, rental is high on demand here, lots of schools but most of the teachers are from outstation, and lots of foreigners too.

the plan is to build about 20 houses made from zinc and plywood, i am staying such a house temporary and I think its not too bad. 2 bedrooms per house with kitchen, toilet, and living room. eac house is around 20 feet* 20 feet.

the cost per house is around 10k each inclusive of labour. so 20 houses *10k + 45k for the land = 245k

the rental is 300 per month. so let say all occupied gross rental would be 6k a month, should be able to get my capital back plus bank interest after 4 years plus.


my dilemma here is, although the rental yield is higher than buying a single condo worth 245k with only roughly 1.8k rental per month, the cheap houses I build has no value unlike condo. i could not sell them later, I can only rely on the rental per se.

so what do you guys think?

This post has been edited by ah_suknat: Mar 30 2009, 01:07 PM

Don't you need some kind of permit to build a 'long house' type apartment? The 10k/house is quite low. Does it include sewage planning? Quite interesting in fact.

Isn't it hot living in a zinc & plywood house?

Assuming that you are allowed to build something like this, I think it is a good biz plan. Just treat the 245k as reno cost!

not a good investment

GOOD DEAL

but wait till the economy collapses, so you can built with even cheaper price

if you built now ... later you contract is stuck with price ... you're going to RUGI teruk

keep in mind, the econ is down .. so do your profit on the rental ... if you build expensive, and rent cheap .... HABISLAH

US real estate gone down the drain, so does South Korea ... i'm waiting for Malaysia ... so i can buy cheap

money dont come easy...customers has their own minimum evalution too..if u are building plywood and asking for 300 and its for only accomodation without facilities or not located in a middle of a golf field for example. they are going to leave to live at a better place which a 300 is really worthwhile though they might need extra expenses on transportation..so what i am trying to say is earn what u should and dont expect too much earning. i think now what u need to consider about is the depreciation value and many more factors.. since i am studying architecture. i am suggesting u go and consult a professional architect ( friends ) they might not charge u ~

i think should be a good investment... im waiting to buy cheap property too.

the land is not located with-in the council area, so theres no need for permit and stuff, yeah 10k each is the rough estimation needed to build one, no fancy stuff just a cheap chalet type of accommodation.

to be honest it is kinda hot but this is Malaysia.

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Added on March 30, 2009, 1:42 pmthe longer I wait, the more I will lose on opportunity cost...

I want to build the house ASAP to I can get it rented out ASAP too.

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Added on March 30, 2009, 1:45 pmits not too far from town, in fact, It would be a perfect location to build an own stay bungalow. its not noisy, can see mount Kinabalu and transportations are available. rm300 for a 2 bedroom house, where to find??? actually I want to make it 400 but since everybody also charge 300 so I go for it.

This post has been edited by ah_suknat: Mar 30 2009, 01:45 PM

What is the rental in/around your area?
RM300/mth is for the prototype that u are proposing?...plywood & zinc?
Are your competitors also of the same type of housing?

Sorry, I don't mean to be rude.
I have lots of questions...
Foreigners?....what are their occupation?
which category of foreigners are willing to put up in a plywood/zinc house of 400 sf ?
Manual workers?...illegal foreigners?

I'm not sure of your local council, but it is likely your houses will not meet with requirements of local council.
Unless, of course, you are talking about building in some villages/forest fringes where occupants don't care 2 hoots about authorities.

Investment point of view, the above may affect your rentability ,and your rental income flow.
Also, you are unlikely to be able to find insurance cover for your houses. Even if you succeed, the premium is probably very high.

Like you are aware, the houses will not have a re-sale value. What happens if there is a fire?
If it happens before yr 4, you incur capita loss. After 4 years, any rental returns will be curtailled as you have no more houses for rent.

i see future in tourist purposes

If nobody wanna rent it, you can just get a permit and turn the house into homestay..

homestay??
interesting, near to yngwie land also got homestay la, what is it actually?
is it like YMCA?

ah_suknat, u have to bear in mind that those ppl who rent ur hses at RM300 per mth falls in the lower income bracket. not to say i'm looking down on these ppl n their capabilities to pay rent timely every mth but u hafta factor in the higher probability of them delaying payment or absconding with ur rent after staying for a few mths. hence, ur break even point would be more than 4 yrs unless u're really pro in selecting ur tenants

agreed~ i thought it was 300 per room which will be quite ok..even if its plywood and not zinc rooting..at least class a bit~ collect money also not so headache~

The main issue is local council and getting permit to build the house first (be in Bungalow or long house).

Even you own the land, it doesn't make you or allow you simply build a house without local council approval. Authority has the right to tear your house down because of it.

Whethe the sewage system, water, electricity etc cost being taken account, I don't know, but they must be in place.

It is best to clear one by clear (getting approval etc) before taking next step of looking on ROI. There may be lot of hidden cost which cannot be seen until you start to build it, or rent it out.

the rental is arounf 250 to 600 depends on the type of the house la. wooden house or bricks, also size.
yeah my competitors also doing the same type of houses, just combination of plywoods and zincs.

yeah the foreigners are like those indons, philipinos and also some from the peninsular.
the land is not located within any council area. so no cukai pintu or people collecting garbage.

and also regarding insurance, I dont think I will insure it, so fire is one major problems here. this is the risk that I have to bear.

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Added on March 30, 2009, 2:13 pmno delaying here..have to pay 1st only stay, no pay cannot stay...

This post has been edited by ah_suknat: Mar 30 2009, 02:13 PM

1st of all , a 20 by 20 to fit 2 rooms , 1 kitchen , 1 bathroom , and 1 living room.

it's pretty packed , if u decided to build houses , u need permit , u need license , u need plan permits , u need structure permits , u need many2 other permits like electricity , water , sewage ...

layout of power supply , water supply , proper drainage needs money as well unless it's next to a river and they use kerosene lamp ....

as u see 20X20 with 20 houses is kinda packed , plywood + zinc + fire = GG to everyone and everything. u can be held responsible.

How do you kick someone out the 2nd month he doesn't pay? Since they are some sort of foreign labour, and this place seems like somewhere of no where, will it be dangerous should any argument happens?

if you the way to collect rent, then u can consider. otherwise, you might earn a lot on paper, but many bad debts

Maybe you can involve them in activities that kita urang kampung bisa buat hari hari, hunting, bercucuk tanam, tangkap ikan etc etc..

I think its quite dangerous if you do not have any safety measures and precaution in hand in case fire breaks out..

Better be safe than sorry..

so where does the sewer and garbage discharge into?


Even if u r willing to take the risk, the bank may not be willing to finance you project.
Unless it just a personal loan and they take a charge on your land only..the bldgs will have 0 value to them.