Property investment is a highly profitable type of investment in Malaysia. The many varieties of property investment allow investors to choose the type of investment that would benefit them the most.
Confused about how you can profit from your properties and what type of property investment is best? Fret not! In this article, we’ll dive into the 5 main types of property investments in Malaysia, so you know which type of investment is right for you.
Types of Property Investments in Malaysia
1. Residential investments
Residential investments are a popular type of investment in Malaysia, which involves residential properties such as apartments, condominiums, terrace houses, as well as other properties that are titled residential. However, some commercial land title properties, such as SoHo (small office home office), are also regarded as residential since it is protected under the Housing Development Act (HDA).
Residential investments have a low entry price point, allowing investors to obtain high loan margins (up to 90%). Nevertheless, the monetary results of residential investments are extremely dependent on a bunch of factors, primarily location.
As such, investors must conduct research to ensure their property is located in a high-demand area. On the rental side, owners are generally obligated for all of the property’s bills, including upkeep, sinking, assessment, and sewerage fees.
2. Commercial investments
Meanwhile, commercial investments involve office buildings, shop lots, small office versatile offices (SOVO), small office flexible office (SOFO), small office lease office (SOLO), small office smart office (SOSO), and more.
Commercially titled properties are exclusively for business use, and the units are usually leased out to corporations and small business owners for long periods of time. Thus, commercial investments offer a steadier income flow compared to residential investments.
Having said that, a point to consider when investing in commercial properties is the larger upfront capital outlays, as opposed to residential properties, where the margin of financing is often 70-80%. What’s more, commercial investments necessitate stronger holding power. This is because commercial properties are largely reliant on occupancy rates within the building, neighbouring township occupancy, public transportation efficiency, and the quality of the building maintenance.
An advantage of this type of investment in Malaysia is that various expenditures such as management fees and utilities are covered by the tenant. Tenants are also responsible for repairing and handling any property defects.
3. Retail investments
To put it simply, you can view this particular form of investment in Malaysia as a mix of property and business investment.
Essentially, retail investments are quite comparable to commercial investments, but with a few key differences in terms of mechanics and preferred locations. For retail investments, the prime location would be malls and other retail storefronts.
In some circumstances, in addition to the regular rent, the owner obtains a part of the tenant’s income to keep the property in excellent condition.
4. Industrial investments
Industrial investments are widely perceived to be a riskier investment option in comparison to residential, retail and commercial investments. This is due to the fact that industrial investment in Malaysia requires a larger upfront investment and is a niche market that needs experts in order to maintain and manage it.
This type of investment comprises investments from industrial warehouses to companies that utilise these warehouses as distribution centres, storage units or for other purposes for long periods of time. Industrial investments generate income via rental or selling. Also, fee and service revenue streams are common in industrial investments, which help to boost the owner’s return on investment (ROI).
5. Real estate investment trusts (REITs)
REITs are relatively new to Malaysia’s property investment landscape. However, REITs are slowly getting attention thanks to their affordability, liquidity and ease of entrance.
REITs provide investors with the opportunity to invest in real estate for a fraction of the cost. To put it another way, REITs allow you to invest in high-quality commercial real estate without having to acquire the properties outright. REITs often provide a steady stream of income and excellent distribution yields.
While REITs offer a myriad of benefits, this type of investment in Malaysia also comes with severe disadvantages. For instance, REITs are highly risky and have weak growth. Furthermore, investors have little to no control over the returns or performance of the property.