This should be the question you ask yourself even before you make the decision to invest in real estate.   You have to ensure that you know exactly what type of real estate you are going to invest in. There are a number of questions that you have to ask yourself before making the commitment. This is because different types of real estate will work for different people.

Where there is a property investment opportunity, you will want to find out if the property is worth making the investment. There are always valuable investment properties for sale everywhere, therefore the key is to find the right type of property for you.

There are some investment properties for sale that will take a lot of work, time and effort but they can be very profitable if you do proper research. If you just go out and buy investment properties for sale without proper research like its potential return on investment, then you will not turn the profit you want or need. Gut feeling alone is dangerous. You also need to check the comparable market value to establish if this investment property is priced correctly.

There are different types of real estate that can offer a great profit margin, but knowing which type will be the most profitable one for you should be clearly understood prior to investing any time and money into a deal. First and foremost, it should also be properly noted that there are several differences in investing in commercial or residential property. The concerns and the laws of the game are different. A smart investor knows that it takes a bit of investigative effort to find really good investment properties.

It is quite common for investors to begin with residential properties as people tend to be more familiar with residential properties as a result of experience from having purchased their own home. If you are more interested in residential real estate, are you looking to invest in landed properties or high rise apartments and condominium? If you plan to take the commercial real estate route, so your interests lie in shop offices, office suites, industrial properties or in retail? All of these investments have the potential to produce a potential profit. The first step is to be clear with what it is that you are looking for with regards to your real estate endeavours. If you invest some money in your property that will appreciate in value, then you have a choice of selling it right away, making it a rental property, or selling the investment property for a profit. It is important to see what the properties are sold for in the local neighbourhood and not what are their asking prices on the market.  

Landed vs high-rise

Investing in landed properties is still a popular option today due to a variety of reasons. One of the strongest reasons is in the attractiveness of capital appreciation of these properties. Landed properties include link houses, townhouses, semi-detached homes, bungalows, cluster homes and the like.  Investors of landed properties that are under construction have made handsome returns upon the property’s completion. Having said that, the fundamentals of property selection i.e. location is still a very important and essential consideration. Some investors look at investing in landed residential properties as solid investments as many make these their homes, making them less speculative.

As for investing in residential high rise, most would agree that the rental returns of these properties far exceed than those of residential landed. Typically the returns can be two to three times more in comparison. Residential high rise would include apartments, condominium and service apartments.  They also tend to be the preferred option for expatriates largely due to the facilities within the development, safety issues and convenience. This is more evident in locations like KLCC and Mont’Kiara.

As with any investment decision, there are advantages and disadvantages to consider. While rental returns may be attractive, you need to consider their maintenance cost as this can increase over time. It is also very important to ensure that the residential high rise that you invest in is properly managed as the better the management, the better the value will be in your investment. The reverse holds true as well.

Commercial properties

Other income producing real estate includes commercial and industrial properties. These units can be single use, stand alone, with a single tenant or multi-use with multi-tenants such as within office buildings. Many seasoned investors would choose commercial property investment as their preferred type of property when compared to residential. There are a number of factors that lead to this preference and some of the most highly ranked reasons would be the ease of management of the investment. 

When it comes to commercial property, a tenant would rent the place pretty much on an ‘as is, where is’ basis even if it is completely bare as the tenant would renovate the place with the necessary interior design to suit their business. It is not common for residential properties to be rented out without it being partially or fully furnished. To some investors furnishing the property can be quite a task while others take pride and enjoy doing up their property. Another plus point for commercial properties is that the tenant would look after the premise as it is their place of business and they need to impress customers to ensure their business succeeds.

As for industrial properties, not many investors venture into this option of property investment for a couple of reasons, one of them being the price (they are usually more expensive) and the other is the understanding of the movement of industries. Having said that, those who invest in industrial properties have seen years of steady rental income as they usually have longer leases than that of residential and commercial properties. Leases of above 10 years are quite common. This makes it comfortable for the investor for a long time period with the generated return on investment.

Remember, it is your job as an investor to educate yourself on the opportunities that are available and then decide on the best direction to take. Cross checking with fellow investors and listening to their experiences will help you make better judgments. Whether you decide to invest in residential homes or commercial properties depends entirely on what your financial goals are. Your financial goals and that of your friend may be entirely different and by sharing experiences, it will help both parties in making decisions. Assessing the positive and negative aspects of each type of real estate will lead to better overall decisions.