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The correct approach to service apartments?
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adc



Joined: 15 Jun 2005
Posts: 122
Location: SIN

PostPosted: Thu Jun 30, 2005 1:46 am    Post subject: The correct approach to service apartments? Reply with quote

As per the request from fellow members from this forum I have decided to start a new topic on how to stay ahead from the loopholes from service apartments.

Although I am doing pretty well with my service apts/condos - there are some loopholes that I'll definitely avoid :-
1. guaranteed rental return schemes
2. new project / under-construction project
3. poor location

I get +ve returns from my service condo after deducting the maintenance & monthly installment(loan).

If you have read my postings, I used the same approach to purchase a normal condo or service apt albeit for service apts ==> I pay much more attention.

I just want to make it happens in the service apt & I am happy that I have made it.(make money from service apt) Laughing

*just added*Why? Simply, because there are some books/authors which state that he has never heard of anyone who has earned money from service apt.


Logically speaking, your rental property must be in a good location & easy to find tenants - YOURSELF! You must be able to find tenants easily.

In addition to the above, I will go into service apts/condos ONCE it's fully completed & after 1-4 years...to check if the management is OK...

Management fees must be reasonable lah! ie: RM0.15 per sqf.

Do note that the utility bills for service apts are more expensive than for normal condo. However, it's not 100% the case.

For electric bills, the developer can apply from TNB to charge the service apts the residential rates. For water, the mgmt has other ways so as to reduce the water bills to the normal rate.

For me, the electrical or water bills must be more or less the normal rate(a few % extra - ok lor) before I go in. Simply, I will go in after all the hoo-ha.

The quit rent for service apts is more expensive but still it costs me only about RM100 plus per year. Yes, it's more expensive but it's still very affordable...lol Wink

In short, I will ONLY buy service apts after if they meet my strict requirements (coz I buy to rent & I rent to make money) :-
1. good location
2. in high demand
3. management is OK
4. reasonable management/maintenance fees
5. reduced utility bills
6. workmanship is OK

There are many service apts popping up in Klang Valley - I am a willing buyer - must meet my criteria lor...

Some examples of the prospective service apartments are :-
- The Plaza Condominium in TTDI by TTDI Harta SB
- The Heritage in Seri Kembangan
- East Lake Residence in Seri Kembangan by HKland
- Millenium Place
- (I forgot the name) it's in Bandar Sunway by Sunway City Group
- Berjaya Times Square Service Suite
- Ceylon Serviced Residence by UM Land
- Casa Mutiara
etc. etc. etc.


Why I don't buy the service apts when it's a new project or still under construction?

1. Flexibility on handover date (normally 3 years, service apts can be up to 48 months)

2. do note service apt/condo/service residence does not 100% comes with a covered car park (mine got lah...hahaha)

3. Progress payment collection (normally, homebuyers pay progressive payment on completion of work, for service apts it is on commencement of work)

4. Claim on defects (normally, it's 18 mths, for service residence it is 12 mths)

5. Late delivery (in service project, it is at the developer's discretion. normally, the developer have to pay late delivery charges to the homebuyers)

6. *when the project is halted or developer run away (chao lou)* The only recourse is "court". Normal condo, homebuyers can go to the Tribunal. Court case? Malaysia leh...I bet the case can be resolved in less than 5 years....hehehe

Please share with me your views/opinions...


Last edited by adc on Mon Jul 04, 2005 9:42 pm; edited 2 times in total
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pjutara5



Joined: 17 Mar 2005
Posts: 52
Location: Kota Damansara

PostPosted: Thu Jun 30, 2005 1:18 pm    Post subject: Reply with quote

Thanks for sharing your valuable views/opinion. If I ever consider investing in service apartment, I will strictly adhere your experience.
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Banzai



Joined: 25 Oct 2004
Posts: 3367

PostPosted: Thu Jun 30, 2005 1:31 pm    Post subject: Reply with quote

How about the dollars and cents ?

Care to share the details P&L items for this serviced apartment. This means the amount you put in for downpayment, legal costs, other misc costs, net income i.e. rent income - agents fees - maintenance - interest costs - quit rent - annual assessment.

I thought it wouldn't be viable and I was hoping someone could convince me otherwise.
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mercuri



Joined: 03 May 2005
Posts: 4599
Location: KL

PostPosted: Thu Jun 30, 2005 1:44 pm    Post subject: Reply with quote

adc, ur list of criteria is very exhaustive and I doubt many service apartments can meet ur standards. Naturally if all of those are fulfilled the service apartments won't be within reach of many investors. Laughing. I therefore would ONLY consider buying a service apartment if all my criterias are fulfilled as well, so far, not even one can fulfil it. Sad

Last edited by mercuri on Thu Jun 30, 2005 8:25 pm; edited 1 time in total
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adc



Joined: 15 Jun 2005
Posts: 122
Location: SIN

PostPosted: Thu Jun 30, 2005 7:39 pm    Post subject: Reply with quote

The service apt that I bought meet all my criteria EXCEPT if does not actually meet my "reduced utility bills" 100%. The water charges is reduced to more or less normal rate. But, the electrical charges remain. It's like 50% compliance with my criteria - but I still buy hahahaha Wink

I am not going to buy any if it doesn't meet my other criteria.

Yes, I do agree that if the service apts meet all the criteria it will not be within reach of many investors.

Similar to normal condo, although there is a market price, there are a minority who will sell their units far below market price because they are in a hurry ==> for reasons like ie: migrate to other country, owner was retrenched etc. etc.

The figure is small but if you spend time to look for them, you will find albeit not so easy lah...
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lps



Joined: 15 May 2005
Posts: 10

PostPosted: Thu Jun 30, 2005 8:04 pm    Post subject: Reply with quote

I thought the rental yield around Sri Kembangan area was nothing to shout about, let alone a serviced apartment????
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winter



Joined: 20 Jun 2005
Posts: 134

PostPosted: Fri Jul 01, 2005 1:17 pm    Post subject: Reply with quote

i would like to ask why we shd steer clear of guaranteed return schemes?
isn't it safe because they can guarantee your rental return? what are the normal guarantee rates?
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jeff_macosx



Joined: 22 May 2005
Posts: 14

PostPosted: Fri Jul 01, 2005 1:36 pm    Post subject: Reply with quote

Hi,

Just want to know who are the common type of tenants who would rent service apartment in KL city? Question
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Banzai



Joined: 25 Oct 2004
Posts: 3367

PostPosted: Fri Jul 01, 2005 1:56 pm    Post subject: Reply with quote

winter wrote:
i would like to ask why we shd steer clear of guaranteed return schemes?
isn't it safe because they can guarantee your rental return? what are the normal guarantee rates?


But the developer don't guarantee they won't bankrupt or they won't cancel the guarantee return scheme.
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adc



Joined: 15 Jun 2005
Posts: 122
Location: SIN

PostPosted: Fri Jul 01, 2005 8:17 pm    Post subject: Reply with quote

I agree with Banzai.

winter wrote:
i would like to ask why we shd steer clear of guaranteed return schemes?
isn't it safe because they can guarantee your rental return? what are the normal guarantee rates?


The company which lease your units may not perform well. If it is losing money, it will better be wrapped up (bankrupt). There is NO guarntee that the company won't bankcrupt.

When the company is already bankcrupt, what's the use of your lease agreement?

To another point which I can't confirm(I did not waste my time to confirm it - since I'm not interested in such schemes) but I have been told that there is a loophole in such a scheme whereby the company can terminate the agreement/lease by proving it in court that the company is in red(bleeding money).

lps wrote:
I thought the rental yield around Sri Kembangan area was nothing to shout about, let alone a serviced apartment????


Do note that the purchase price affects your rental yield. Just in case, if you want to know my way of calculating rental yield (read my posts) or ask Banzai...hahaha Wink

With due respect & in terms of sub-sales condo/apt(not new condo lah), in most cases the rental yield is nothing to shout about if you purchase at the market price. However, if you purchase the condo/apt at the market price during economy recession - it's different story.

Put Mt. Kiara aside, may I know the condo/area where you SHOUT about "good rental yield" from sub-sales condo/apt at the current market price?

BTW, I didn't talk on my rental yield - not even to shout about it.
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lps



Joined: 15 May 2005
Posts: 10

PostPosted: Sat Jul 02, 2005 8:10 pm    Post subject: Reply with quote

adc, don't get me wrong. What I meant was Sri Kembangan wasn't known as a high rental yield area, so to speak generally, therefore my remarks " nothing to shout about ". In fact I am interested to probe further whether this perception was wrong coz I've just bought a unit in The Heritage,yes a serviced apartment in Sri Kembangan area for my own stay.
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adc



Joined: 15 Jun 2005
Posts: 122
Location: SIN

PostPosted: Sun Jul 03, 2005 4:39 am    Post subject: Reply with quote

Just got back from clubbing - drink quite a lot leh...lol. In any case, my mind is still OK though it is 4am now... Wink coz drink lots of chinese tea liao...okok irrelevant..

Thank you lps for the clarification.

It's actually better if you ask in a more postive note. Laughing No pun intended.

The Heritage? You bought it for RM175k - Tower3? Due completion in 2007?

Well, it provides a 6% p.a nett returns on your condo wor. IMHO, I suppose it will have a nice view (south lake) provided your view is not blocked by any other units. Care to advice on the maintenance charges?

All my comments/checklist on service apt are posted in this topic (1st post). Personally, I don't think The Heritage development will be halted since Mahathir is staying there, stalled project is an eyesore for him... okok....this is irrelevant also...hehehe Mr. Green

I am not in a position to change/tweak your perception etc hehehe - who am I wor? Wink but just to inform you on the supposedly new trend in Seri Kembangan.

With the opening of South City Plaza (Giant, parkson, halo, mongkok etc), somehow, Seri Kembangan has become more trendy & happening(night life also improve a bit) as compared with the past years.

Perhaps due to this or any other reason, there is a substantial influx of Middle-east residents in Seri Kembangan. Maybe they like the view of the picturesque South Lake (venue for motorboat F1 ==> something like dat lah...since I'm not an avid fan of the sports)

Perhaps also, Seri Kembangan is set to become another "in" place. I can't foresee the future & I believe the developers sense this new market potential - all of a sudden, so many new developments in that area ie: many new condo(even luxurious condo), widening of the flyover from seri kembangan to Mines, new toll-free road just in front of South City Plaza connecting directly to Sg. Besi etc.

There is even an Egyptian bistro (Syed Bistro) in South City Plaza - so now, you should know why lah hor :d

Yes, english speaking ppl from Middle-East - Saudi Arabia, South Africa, Kuwait, Iran etc. etc. Simply, kinda rich ppl from oil-rich nations(saudi arabia, kuwait, iran) or diamond-rich nation (south africa). Wink I'll put their population in seri kembangan as substantial

Luckily not ppl from Bangladesh (no pun intended) - THANKS GOD! Smile

Anyway, Bangladesh is not in Middle East lah (I hope my geography is still OK)...lol


I think you need to belanja me "yamcha" liao lah...
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winter



Joined: 20 Jun 2005
Posts: 134

PostPosted: Mon Jul 04, 2005 4:50 pm    Post subject: Reply with quote

Thanks for the insights Banzai and adc..
i wonder how come last time i din think along this direction before Very Happy
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Banzai



Joined: 25 Oct 2004
Posts: 3367

PostPosted: Mon Jul 04, 2005 5:09 pm    Post subject: Reply with quote

No worries, it happens to a lot of people who are not familiar with Malaysia's properties.

Another forumer has posted before, good properties don't sell outside Malaysia.. he is right. Good properties don't even make it to launch date. They are usually sold out during the 'soft launch' and usually, without a single advertisement in the newspapers.
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winter



Joined: 20 Jun 2005
Posts: 134

PostPosted: Mon Jul 04, 2005 5:19 pm    Post subject: Reply with quote

yah...I am from Singapore.

Any ideas how to get invited to this kind of soft launch?
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adc



Joined: 15 Jun 2005
Posts: 122
Location: SIN

PostPosted: Mon Jul 04, 2005 8:44 pm    Post subject: Reply with quote

winter wrote:
yah...I am from Singapore.

Any ideas how to get invited to this kind of soft launch?


Simple but interesting, just register with the developer & they will call to invite you to the soft-launch.
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Banzai



Joined: 25 Oct 2004
Posts: 3367

PostPosted: Mon Jul 04, 2005 11:21 pm    Post subject: Reply with quote

Or just call them up regularly.. only a handful of developers are worth keeping track of and you will find our views of them scattered in the threads.

I'm registered with Sunrise, BRDB and Sunway (I don't know why Sunway is there!).
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Banzai



Joined: 25 Oct 2004
Posts: 3367

PostPosted: Mon Jul 04, 2005 11:23 pm    Post subject: Reply with quote

oh yeah.. for some of the soft launches, like some of those Shah Alam developments, people queue up overnight.. kinda of like the way singaporeans queue up for the $1 Xbox.
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raistlin



Joined: 01 Jun 2005
Posts: 1104
Location: Krynn

PostPosted: Mon Jul 04, 2005 11:32 pm    Post subject: Reply with quote

Or the free can of abalone! Very Happy
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adc



Joined: 15 Jun 2005
Posts: 122
Location: SIN

PostPosted: Tue Jul 05, 2005 12:47 am    Post subject: Reply with quote

wow...free can of abalone...tell me which developer is offering that...heheheh Laughing

I can sleep outside the developer office...lol just kidding...
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winter



Joined: 20 Jun 2005
Posts: 134

PostPosted: Tue Jul 05, 2005 8:53 am    Post subject: Reply with quote

yah...in 1997 and b4..people in SG do queue up over a few days for launches..some of them actually there to make money by selling their place in the queue.
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adc



Joined: 15 Jun 2005
Posts: 122
Location: SIN

PostPosted: Mon Sep 26, 2005 11:50 pm    Post subject: Reply with quote

All of a sudden it seems that there are many new service suites/condo/apt creeping up in Klang valley - really not sure why is it so.

Do share your views with us.


In fact, I have just posted on the Axis thread - another service apt near Ampang. The yield is somehow too low due to the extraordinarily high maintenance cost. RM 0.20/sqf maintenance fee + RM 0.06/sqf sinking fund ==> a total of RM0.26/sqf ==> terribly high maintenance cost for a RM145k Axis apt.


Banzai wrote:
How about the dollars and cents ?

Care to share the details P&L items for this serviced apartment. This means the amount you put in for downpayment, legal costs, other misc costs, net income i.e. rent income - agents fees - maintenance - interest costs - quit rent - annual assessment.

I thought it wouldn't be viable and I was hoping someone could convince me otherwise.


I'd prefer it to be kept private, therefore, I decided to PM you the details instead.

It will be viable should the purchase price is far below market price.
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raviera



Joined: 11 Jul 2005
Posts: 100

PostPosted: Wed Sep 28, 2005 2:48 pm    Post subject: Reply with quote

dear adc.. have u heard bout Juta Mines Condo? well roughly.. its ... slightly cheaper than Heritage n Eastlake.. in Seri Kembangan.. its a condo unit.. Rm 0.15 / sq feat.. Rm 148000 + for 947 sq feat.. roughly i have to pay RM 930 monthly instalment starting from Dec 2006.. wat do u think of it? kindly give ir opinion... thanks
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aimtrue



Joined: 18 May 2005
Posts: 139

PostPosted: Wed Sep 28, 2005 9:46 pm    Post subject: Reply with quote

adc,

The reason is simple, and is economics.

There recently was an oversupply of office and commercial space in the Klang Valley. Some might remember reading about this in the papers last year.

The residential sector was selling much better and more robust.

Thus developers who were developing commercial buildings, or were sitting on commercial land, changed their plans to residential units instead. Some did it midway. Others hedged by building residential units on top of commercial space.

So, as you know, residential units on top of commercial land became known as "service apartments".

The term "service apartments" was originally meant as residential units which offered hotel-like services like maid and laundry, for eg The Sucasa in Ampang. But now, most "service apartments" simply mean an apartment on commerical-status land.

BTW, the entire explanation above was gleaned from a Henry Butcher property analyst. The benefits of attending free talks..

Anyway, can you PM me the P/L details for your service apartment too? I am not also not convinced that service apartments can make money, unless it is in the city center. and it was purchased way below market value.
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zap



Joined: 15 Jul 2005
Posts: 60

PostPosted: Thu Sep 29, 2005 11:07 am    Post subject: Reply with quote

just want some opinions on Milennium Place....serviced apartment in Sec 14 PJ...it meets almost all the criteria listed above.....the maint charges are 20c/ft....covered walkpath to Asia Jaya LRT...near Jaya supermarket..
other apartments in that vicinity are doing well in rentals...is money to be
made here???
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