Saturday, June 14, 2008

Subang Jaya SS15 area

This will be part of what I am going to write about the SS15 area in Subang Jaya. To those who don't know, Subang Jaya is a suburban township 20km west of Kuala Lumpur. One of the "districts" in Subang Jaya is SS15. Being a mix of commercial and residential area, with a large student population this has to be the busiest and most vibrant part of Subang Jaya.

In my opinion, besides hosting branches of all the major banks, SS15 owes it's status mainly to the student population. SS15 is home to most of the colleges in the Subang Jaya area - they've got Taylors, Inti, Metropolitan and also a not so posh private school called Sri KL. Apparently, the student population here is about 20,000 with 80% from outstation. Don't quote me on this figure as I myself heard it from someone else. However, it is quite possible. Inti College has also built a multi storey block on its' campus to house more students. Taylors is moving its' degree students to a new campus in Sunway which is still under construction. When that happens, the existing campus in SS15 will concentrate on pre-university courses.

So, what's in Subang Jaya SS15?

In terms of realty investment opportunities... I'd say there are 3 options:
1. Providing housing for students
2. Commercial shop lots
3. Small offices

Of these 3, I'd say the 3rd one is the least desirable and has the lowest success track record of all in order not to waste time on it so that I can talk more about the 1st 2 options. Small offices in SS15 mainly consists of walk up units of shop lots and the tallest building in the area, Subang Square. The average rental in Subang Square for a 500sf office unit is RM1600. Somehow, I don't see a very good take up rate and often notice the high turn-over of businesses here. Anyway, I'll leave this matter to the Feng Shui forum. However, it is interesting to note that Titijaya is going to build another Subang Square style commercial building barely 100m up the road to be called First Subang. We'll talk about it in the next post as I got some pics of this development...
picture above: Scale model of First Subang at the developer's showroom

picture above: Subang Square

With such a huge student population, obviously it is lucrative business to provide them housing. In fact, I have noticed that many of the students have spilled over to neighbouring areas such as SS12, SS14 and SS17. Most houses in Subang Jaya are double storey link type, size around 1600sf, with built up of roughly 1200sf. I have seen valuations for these homes at just over RM300k. Banks and professional valuers tend to put the same price on houses in SS15. However, due to demand from investors, they would normally fetch a 10% - 15% premium over other areas in Subang Jaya.

So how does the economics work?

If you are renting a house in Subang Jaya to a family, the average rental is about RM1000/month. But if you are planning to rent to students, you will get a lot higher. Most of these houses have 4 bedrooms. The landlords would further renovate and turn the living spaces into bedrooms as well. They can typically squeeze in 8 to 12 rooms into a 1200sf house, each room occupying about 100sf. The market rate for such a room, fully furnished is between RM350 to RM500. If the master bedroom is not compartmentalized, it would fetch a whopping RM1000/month rent. Normally 2 to 4 students would share this room. Say we take an average situation, at RM400 per room in a 10 room house - the total rent would be RM4000/month. At a cost of RM350,000 and further RM50,000 for renovations and furnishings (I know most landlords would stinge and spend much less on furnishings), we are looking at 12% yield... a rarety these days....

picture above: Example of a double storey link house converted into students accomodation. This intermediate house has 12 rooms!

Of course one would expect the students to trash the place and leave the landlord with a whopping maintenance bill. This is not always the truth as I have seen personally many of these student houses are well maintained by the landlords though a bit spartan. Not all students trash their houses and the myth that girls are cleaner and neater is not always true. What I have personally seen is most often the opposite case!

picture above: Posters advertising rooms to let for students. Agents are seldom involved in these transactions

The most important thing in managing a student house is to be involved hands-on. If the house is well maintained, generally the students would tend to look after the place. You also have to be on hand to collect rent or evict tenants who don't pay - while confiscating their deposit! Also with such high demand, it is normally possible to be selective with your tenants. Some landlords actually interview the prospective tenants before hand!! I have also bumped into some students who live further away in SS17 and they told me they do not mind walking 1km to college because the place they've got is very clean and well maintained compared to the dumps neighbouring their colleges. Of course the most sought after area is SS15/6 which is within 100m of the colleges. Other areas in SS15 such as SS15/4, SS15/3 and SS15/2 are further away and approximately the same distance as SS14 and SS12. The only advantage of staying within SS15 is one does not need to cross any of the busy roads separating the districts. In fact, these roads have somewhat turned into expressways!

Besides the landed houses, there are several apartments within a stone's throw from the colleges which have become popular with students. The 2 most in demand are My Place Apartment which is literally opposite the colleges and Pangsapuri SS15, 80m from the entrance of the Taylors main campus. In my opinion, Pangsapuri is much better maintained than My Place with many facilities falling apart. Strange it may seem considering the near full occupancy and the hefty RM200 monthly maintenance fees charged per unit. Typically, these are low rise apartments up to the 6th floor. They are walk up units, no lifts. Each of these apartments are about 900sf and have 3 bedrooms and 2 bathrooms just like a typical family unit. Some owners make the living room into a bedroom to reap extra profits. Each room would be able to fetch RM500 for the smallest room to RM1200 per month for the master bedroom. So, typically landlords can get about RM2000 to RM2400 per month. Lower floors can get better rates than the higher floors. Apparently the higher floors suffer from low water pressure and of course, those poor little things don't like to lug their heavy college books and weekly sugar supply up those steps. Taylors college have also signed long term 10 year contracts with some owners at RM1600/month. The last transacted unit which was in November 2007 at My Place apartment was RM270,000 (1st floor). and RM250,000 at Pangsapuri SS15. So, typically we are looking at 9% returns or 7% for long term guaranteed returns for 10 years.

Hence, in my opinion, the landed houses are better investments. Also, you need to pay maintenance fees amounting to 10% of your monthly rental if you invest in the apartments. If forking out RM400k plus is too much for you, there are lower entry level single storey houses in SS12 and SS15/2 at around RM250k per pop. Their layouts are somewhat similar to the apartments... minus the maintenance fees.

picture above: Pangsapuri SS15
picture above: My Place Apartment

picture above: Location of My Place Apartment is strategic - directly opposite Inti College and Taylors College

picture above: Some units in My Place Apartment are noisy as they are facing these kitchen exhaust fans from Asia Cafe which runs 24 hours

(The new apartments beside Carrefour Subang Jaya will not feature in this post because they are not in SS15 although many of them advertised as SS15 area in order to fool prospective tenants into believing that they are very near - incidentally, these apartments do not get very high rental yields although popular with students, not because of their vicinity to SS15, but rather due to the lack of students accomodation to cater to demand).
Now you may ask, we are going to stuff up to 12 people in a house. What's the legality of it? More on this...


Anonymous said...

any idea about Casa Tiara, Saujana Residency, E-Tiara or Subang Avenue or Subang Soho at SS19 down the road in front of Subang Parade? good for investment and own stay? now the price is going very high, 350-400k for a 2-3 rooms unit, & yet hard to get one due to the demand and maybe agent are playing with it. do u have any idea?

sinleong said...

the stretch in front of subang parade is ss16. there happens to be a glut there now...i dont know why u feel it's hard to find. it's kinda overbuilt.

Anonymous said...

May i know normally did you rent your whole unit to the students all just the room or different room to different students? I perceived that not all students will graduated in the same time some may have fail the course and have to retake the exam again, thus spend extra semester.

If you were rent room to student instead of whole unit,is it possible to create tenancy agreement base on just one room rent?I wonder how much will the stamp duty for contract cost for just one room rental...

Normally all legal fees cost are charge to the tenant rite?

Anonymous said...

How much do you paid for expanding or create extra room for your unit in pangsapuri? If we rent out the room to students instead of whole unit to students, tenancy agreement can still be make based on one room rite instead of whole unit?

i'm quite confuse some lawyer told me that charge rm600 for a tenancy agreement because it based on (monthly rental *1/4) calculation. that's really too expensive man~

sinleong said...

How much do you paid for expanding or create extra room for your unit in pangsapuri?

SL: Secret ;-)

If we rent out the room to students instead of whole unit to students, tenancy agreement can still be make based on one room rite instead of whole unit?

SL: Yes

i'm quite confuse some lawyer told me that charge rm600 for a tenancy agreement because it based on (monthly rental *1/4) calculation. that's really too expensive man~

SL: Why use lawyers? You can do your own tenancy agreement. there is a template somewhere in my blog

Anonymous said...

I really uncomforted with some myplace owner who rent a room for 3 or 4 person sharing. Can't imagine 3 or 4 person sharing a tiny room. Is taylor students or inti students really that poor and need to share a room with 3 or 4 persons?

I think 2 persons are just fine rite? Else when they check out, your room will be in a "heavy wounded" mode....

Is it advisable to rent out the parking lot separately too? I think parking lot quite a scarce in SS15 area.

sinleong said...

well.. if 4 person are sharing then the rent they each pay is less and the owner earns more too. there is a market for anything in subang ss15. if there is no market, people wont do it. i wont do it because i dont think im that desperate. even if you rent your room for RM1000 there will be tenants and there are some people who do this. just throw in a lot of luxuries.

Anonymous said...

so far do you come across with any tenant(student) who fight or having conflict in your rent properties? Would you evict them after that?

Normally female student is better behave and cleaner than male student rite?

CNyee said...

hey SL, just got to know your blog thru Cindy Lau.

really amazed by the knowledge you have on renting properties.

and I've learnt a lot from your blog too.

keep good work, I love your wisdom!

Anonymous said...

One question , how much did you buy the pangsapuri ss15 for ? any for sales now ?

Steven said...

Nowadays, the 2-sty terrace houses in SS15 are listed between RM550-700k. That is quite a nice appreciation in price over only 2 years.

I passed by the area recently, I noticed there's yet another construction going on beside Inti, can someone tells me what is being built? Do you think two years later price will shoot to RM800-900k?

sinleong said...

it's highly speculative... and the renovations they made to partition into 10 or 11 rooms are illegal. MPSJ can come n shut it down

sinleong said...

the construction beside inti ss15 is a serviced apt, which is leasehold n overpriced... nevertheless, good location