How to Build Wealth Through Property Investments in Malaysia

Short on time? Here’s what to expect from the article:

• Homes near MRT (Malaysia rapid transit) lines or tourist hotspots in Malaysia often see prices climb fast.
• Industrial spaces and hotels bring higher returns, while investing in REITs (real estate investment trusts) allows you start small with just RM1,000.
• Property investment has drawbacks, such as long loans, empty rentals, and upkeep costs, making timing and location crucial.

Why property matters in Malaysia

Malaysia is a fast-growing country with new buildings, highways, and schools. This makes real estate investments important because:

• Land is limited, but demand grows as the population rises.
• People need homes, and businesses need offices or shops.
• Governments invest in transport routes, which make nearby properties more expensive.

For example, if a new MRT line is built, houses near the station often increase in value. Also, as Malaysia is known for tourism, holiday rental homes in places like Langkawi or Penang can be profitable. That’s why property is often called an asset, something you own that usually gets more valuable with time.

Ways to build wealth with property

Property investment is a great way to grow wealth. While most people think of residential property, there is more than one type of property investment to consider.

Residential

The popularity of residential real estate investments comes from the fact that they’re easily accessible via home loans at affordable rates. Residential property gives you the freedom to live in the property and hence, save on rent. One can always benefit from the long-term value appreciation of these properties.

Commercial

A commercial real estate investment is when you buy an entire building (or a unit within a commercial building) and lease it to a business. The rent the businesses pay can cover your bank loan payments partially or in full. You can turn a profit if the rent you charge is higher than your monthly payment (or once the loan is paid off). That said, location is everything when it comes to commercial property investments, so it’s a good idea to consult a real estate professional for advice before making a commercial property purchase.

Hospitality

Hospitality properties can provide good ROI (return on investment) due to rising tourism in Malaysia and significant demand for high-quality accommodation.

The properties under hospitality can be listed under three categories:

1. Resorts
2. Hotels
3. Serviced apartments

Finding the right place to do business is the key to success in this industry.

Industrial

Industrial properties cater to sectors such as manufacturing, storage, and logistics. Due to their industrial nature, these properties require substantial upfront investment and effort. They come with high returns between 5% and 8%. Clubbed with a long investment horizon, with 3-10 years leases, these investment opportunities can provide long-term, steady earnings.

The industrial property can come in three different forms:

1. Storage units
2. Distribution centres
3. Warehouses

Real estate investment trusts (REITs)

Another option to invest in property is real estate investment trusts , where you buy shares in companies that own many properties. Entry into REITs is much easier as compared to direct investment in property. One can get started with RM 1,000 for the majority of REITs listed on Bursa Malaysia or invest in REIT funds via Unit Trust platform to access global REIT markets. It’s easier than buying a flat, but if you really want to build lasting wealth, owning physical property may offer better returns in the long run.

Retail

Retail property investment is a unique combination of real estate and business aspects. While it shares similarities with commercial investments, retail properties have specific characteristics related to their locations and lease agreements.

For retail properties, it makes sense to do business in crowded areas with access to shopping malls or retail storefronts. With leasing, the investor can earn a commission from the tenant’s profit on top of the base rent. This creates a win-win situation for both investor and tenant with a mutually beneficial partnership.

Things to be careful about

While property can be rewarding, it isn’t always smooth. A wise investor will look out for problems before jumping in:

• Bank loans: In Malaysia, many people use bank loans to buy property. The loans can go on for months. Any loan default can attract trouble. So, borrow only what you can handle.
• Empty units: You are paying your loans even if you don’t find any tenants. That is why location matters.
• Maintenance costs: Apartments charge monthly fees for lifts, security, and cleaning. The newer and fancier the property, the higher the costs.
• Market cycles: Property prices don’t always go up. Sometimes the market slows, especially if too many flats are built in the same area. Be careful about when and where you buy the property.

Investing in real estate may make sense for experienced investors with a good working knowledge of the sector. However, REITs may offer an entry point to novice investors with a keen interest in real estate. It’s a good idea to consult an investment advisor before making major real estate investment decisions.

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