What To Look for In An Investment Property

What to look for in an investment property

- location, type, rental returns
A great investment property is one that meets your investment objectives such as your target rate of return, investment time horizon and any other criteria you might have.
Main determinants of property value include:
Location - this should be assessed with the target market in mind to determine whether there will be demand by the target market for this location.
Also research the historical rate of property value appreciation in that particular location for similar properties.
Property type and size dimension- residential and commercial properties each have their peculiarities, and dependent on the location, attracts different tenant profiles.
Rental Returns - find out how much rent the property can fetch by researching the rental values of similar properties in the area, and ascertain the estimated costs to own and maintain such property.
Cash flow - evaluate the property's potential to generate income as against cash outflows. Obvious preference is to have the investment property cash flow positive as soon as possible.
* Total Return comprises net rental income and capital gain over the five year investment horizon; computed using the internal rate of return formula Personal Fund(s) Leveraged Rental (Net) Yield per annum 6.18% 6.80% Total Return per annum* 11.11% 23.52% Following the same example above, if you were to sell the property 5 years later for RM850,000, the capital gain would be: RM850,000 - RM650,000 = RM200,000 one-time gain, or (RM850,000 - RM650,000)/RM650,000 x 100 = 30.77% over the original purchase price.Taking into account the leverage (borrowing) effect, the Leveraged Capital Gain would be (RM850,000 - RM650,000)/RM150,000 x 100 = 133.33% over the initial capital The total return yield from an investment property is the rental yield plus the capital gain over the investment tenor.

Buying your investment property.
The buying process will involve the following activities and decisions :
Determine the type of property to invest - Commercial, residential, land, etc.
Assess financial and borrowing capacity,
Determine budget and price of property to invest in.
Find your investment property.
Negotiate on purchase price.
Sign Offer of Purchase & place earnest deposit / booking fee.
Complete and execute Sales and Purchase Agreement (S&P).
Pay balance of deposit.
Apply for bank financing, if required.
Appoint valuer to conduct valuation of the property.
Sign financing facility agreement.
Pay balance of the purchase price.
Get keys to the property.
Renovate.
Source for tenant.
Receive rental income!!Get