Monday, September 21, 2009

Forced to Sell! Urgent Sale!

KLCC K Residence force(d) to sell at RM806psf. Above shopping center and Light Rail Transit (LRT). Profit from it! Contact....

KLCC Marc Service Residence 967sf & 1007sf high flr basic RM1k psf up urgent sale Call...

Pardon the poor English grammar above. I tried my best to copy exactly what these guys put up in the classifieds. These ads have been featured in the classifieds for the past 2 months almost on a daily basis. Which makes me wonder, if they were really forced to sell or urgent sales at all. I am sure those of us who monitor the classifieds long enough would know these are scams. If they were really forced to sell, surely the price must reflect the urgency. Just above the K Residence ad, was another one advertising a 2739sf unit selling at RM2.1million which is RM760psf. While this is more reflective of their urgency to sell, it is usually typical that bigger units are cheaper per square feet compared to smaller units.

Couple of years ago, during the good times, there were a couple of estate agents who advertised Marc Residence at around RM800psf. I can see one of them in today's classifieds up to the same trick. When you call up, she will say the unit is sold and she has another one at RM1000psf which is a better unit. Funny enough, 2 weeks down the road, she was still advertising the price of RM800psf. There are many estate agents today trying out their luck in a thinning market. The gimmick is to get you to call them instead of other agents who are advertising a more honest price.

I am sorry for those new investors who would have to waste a phone call to these real estate agents.

One should also avoid buying properties at a "per square feet" price. For example, the benchmark for Marc Residence today seems to be around RM1000psf. So, if you manage to find a unit at say RM800psf, it does not necessarily mean that you have got a good deal. These could be those small 860sf units facing the busy and noisy Jalan P Ramlee which goes boom boom boom till 4 am in the morning. So, you would have paid too much even at RM800psf. Always look at the whole unit and work on a total price before making a decision.

Thursday, September 10, 2009

Investing in Students Accomodation

Finally taken possession of the Pangsapuri Subang Jaya in SS15 and had little under 2 weeks to complete renovations before students move in. Yes, we managed to get tenants even before collecting the keys. I wonder why I have been wasting so much time and money in expats market for the past 10 years.
The most fortunate thing to happen to us was to find a very good contractor. Philip, wife, son and his team managed to turn the whole dump into a nicely liveable student dorm which includes the following:
1. Retile 2 bathrooms and some broken floor tiles
2. Convert a kitchen into a bedroom
3. Moved the kitchen to the dining area
4. Plumbing works to move the kitchen and bathroom sinks
5. Moved the master bedroom door to enable access to the bedroom's bath and toilet - we did this to enable a ratio of 2 rooms to 1 bathroom
6. Laminate the floors of the bedrooms
7. Painting; and
8. All fittings, including curtains, accessories etc.
Here's the result:
The living room - we initially thought about converting this to yet another bedroom but decided against it as we wanted to provide the students with a common area to hang out. Also access to the balcony to dry their clothes.

This is the new kitchen. In hindsight, we should not have relied too much in Ikea. The stainless steel kitchen you see is not suitable for an electric stove as we were later worried that there might be electrical leakage. It's also too small. So, we had to make do with a single hob gas stove. Having the students' welfare in mind, we installed a water filter which is fit for drinking. The kitchen, I must admit is a little spartan and probably only suitable for some light cooking and heating up snacks.

2 of the bedrooms have a swimming pool view. We maintained the cheapy long fluorescent lamp as it does a good job brightening up the room. we replaced the curtains with black-out blinds and laminated the floor. This picture taken before the place is furnished.

The swimming pool view.

This used to be the kitchen and has since been converted into a bedroom. The wet kitchen is now a balcony to enjoy the pool view. I thought earlier of converting it into a sexy shower area but decided against it due to time constraint and avoid getting myself into trouble. Every bedroom is air-conditioned and later furnished with 2 wall mounted book shelves, a wardrobe, bed+mattress, writing desk + chair and fan. This picture taken before the blinds was installed.

We retiled all the bathrooms with white tiles and black grouting to lend that modern touch. The WCs have been changed to these modern single units from Johnson Suisse - expensive stuffs but since we are going to let this last a long time, why not? Since we moved the sink outside the bathroom, there is more space for the shower and we built a tempered glass partition so that the WC does not get wet after the shower is used.

We also installed a Grundfos pump so that our students can enjoy their power shower.

As mentioned we moved the sink outside and this is a designer Johnson Suisse sink with tap. Why move it outside? So that we have more space inside the bathroom for an orgy and so that students rushing for their class in the morning do not need to wait for someone to finish on the pooper before brushing his/her teeth. There are 2 bathrooms.

We moved the sink out from the 2nd bathroom too and installed a washing machine. There is a tall glass mirror on the wall for one to admire herself before stepping out to go to class.
One might think we are crazy to spend so much on quality items for a students' house. I think it is not wasting money because as much as expats would pay us good rental for our CBD apartments with interior design, the students are paying just as much. There are 4 rooms in this house and total 5 occupants. We are fully booked for at least the next 1-2 years without even having to engage estate agents to market for us. Returns > 10%.

Thursday, September 3, 2009

Not All Properties Appreciate in Value

The myth that one should invest in property to take gain of capital appreciation in the long term is not always true. Condominiums and other strata-titled or communal type properties are especially risky because the overall maintainence and occupancy of the property plays a major factor.
What you are about to see in the latter part of this article is probably very familiar to many Malaysians especially those who live in strata-titled properties. This property in question is located beside the KESAS highway, across the highway from the Sports complex which hosted Malaysia's 1998 Commonwealth Games. The neighbourhood is matured and middle class. There is a shopping mall and a Carrefour beside the complex. Nearby is the International Medical University. With all these attractions nearby, what has gone wrong?
Built in the mid-90s in time for the Commonwealth Games euphoria, this is one of a series of condos with the same pre-fix name lining the stretch along Kesas highway facing the Games Village. The property's management has since been handed over to a very lively residents committee. Majority of residents are owners but lately many have moved out and there seems to be an influx, though a small minority of migrant workers moving in. Their presence is very apparent as they hang out frequently in the common areas.
Please be warned that the pictures below can be up-setting to some. Kindly exercise viewer discretion...
Since the beginning of the residents' committee take-over, security has been a major issue. Many units were broken into and since then, the commitee has taken a very strong focus on security. This may have eaten into the resources of the maintainence as you are about to see...

Residents could not remember if the buildings have ever been repainted since they moved in. Walls are peeling off and mold set into the surface.

Hygiene is also a major concern. There appears to be old clothing, used pharmaceutical contraptions and garbage strewn down the back part of the building which houses the units' kitchens and 2nd bathrooms.

Some lights appear to have blown off, apparently due to water seepages from the ceiling in this top corridor making the corridors dark, dinghy and dangerous for children.

The corridors' railings also do not offer much protection and it is easy for children to climb over and fall. The mouldy walls would probably assist the fall by being slippery.

In the evenings, the multi-purpose hall looks pretty well utilized with many residents taking part in badminton games and the squash courts are also well-patronized. Other facilities such as the Sauna and Gym which prominently advertised their opening times...

... appears to be locked...

The library in the same clubhouse, though unlocked...

.... appears to be sacked...

It is highly unlikely that residents will be able to do much reading in this library under such conditions...
The once popular jacuzzi is not very appealing any more...

... same fate befalls the putting green.

The clubhouse also houses a cafe which serves affordable food and appears to be doing brisk business. The cafe faces the pool which fortunately still enjoys good use and in good condition.

Unfortunately, nobody plays tennis anymore...

I understand that value of this property has plunged by as much as 20% since. The beginning was obviously very promising as you can see from the very strategic location and the vast list of facilities offered such as swimming pool, tennis courts, squash etc. The moral of the story in buying strata-titled properties is not to fall into the offer of so many facilities which will become a maintanence issue in the future. Probably half the facilities and being well-maintained would be more appealing.
As I mentioned, this is a very typical scenario in Malaysia. We do not have a strong maintenance culture which results in high end condominiums turning into dumps. In the earlier part of this blog, I have highlighted how a lower middle class condo in Bangkok is managed - and with much lower maintenance charges. This shows that there really is no excuse. A well maintained property can be executed. It just takes the right skills and attitude to do it.
Be careful what you invest in!