There are 5 main types of real estate investments in Malaysia, namely residential, commercial, retail, industrial and real estate investment trust (REIT), each with its own profit strategy, advantages and disadvantages. The 5 main types of real estate investment in Malaysia
Residential investment is an investment in residential properties such as row houses, condominiums, condominiums, etc.
Some commercial landed properties protected under the Housing Development Act (HDA) are also considered as residential properties, such as SOHO (Small Office Home Office) developments, which are also popular and common residential investments
One of the main attractions of residential investments is the lower entry price of residential properties and the high 90% financing margins, i.e. less risky compared to industrial investments.
Please note that not all residential investments will provide you with the same ROI due to various factors, the main factor being the location of the property. Therefore, it is important to do the proper research so that you can purchase a property in the “preferred” location to maximize your return on investment, both in terms of rent collected and resale value.
Commercial investments are properties that are used for commercial activities, such as stores and office units. A location in a busy neighborhood virtually guarantees stable rental demand and annual appreciation. The downside is that physical space is obsolete for many industries. Reselling or leasing commercial property can be a challenge as people now prefer to work from home.
Commercial properties are usually leased for multiple years so you can get a larger and more stable cash flow from them. One of the key positives of a commercial investment is that utility costs and management fees are usually borne by the tenant. Unlike residential properties, commercial properties can be leased or resold unfurnished.
One thing to consider when investing in commercial real estate is that it requires higher upfront capital, as the financing margin is usually less than 70%. In addition, the return on a commercial investment is highly dependent on the commercial occupancy rate as well as the occupancy rate of the surrounding townships, public transportation network and other factors.
Retail investments are similar to commercial investments with different mechanics and prime locations as retail properties are those located in shopping centers and other retail storefronts.
In essence, retail investment is a combination of real estate and commercial investment – the landlord receives a percentage of the profit in addition to the base rental return.
Industrial properties are properties such as industrial warehouses or warehouses and distribution centers that have long-term agreements. Industrial property investments generate unique levels of income from rents and resales, and significant fee and service income may increase the landlord’s return on investment.
Before investing in industrial real estate, be aware that this is a very niche market that typically requires specific professional maintenance and management, as well as higher upfront capital costs. As a result, this type of investment is usually considered riskier.
Real Estate Investment Trusts (REITs)
A REIT is a new concept of real estate investment that takes advantage of ease of entry and affordability. It basically invests in real estate by purchasing shares in companies that own real estate and distributing their income as dividends.