Real Estate Learnings From The Road: Malaysia

Hey, Billy here. Last month I had spent two weeks in the beautiful city of Kuala Lumpur at the invitation of Golden Property Investors group, a leading real estate agency in Malaysia which also happens to be our associate office representing Billy Taggart Realtors in Southeast Asia. In the next few blog postings I will share with you some learnings on real estate – especially useful if you are considering about investing in this lovely country.

Property Investment In Malaysia – A Primer

Buying a house in Malaysia, on its own, is quite risky. You will never know how well the house is or how well it suits your homely needs until you move in and there even are things that happen during the negotiation (especially the technical stuff) that you may never get to know just because they are trade secrets. The Malaysian property market is quite opaque, and property agents often keep their clients in the dark. True story – as relayed to me by our good friend Stephen Chan of Kinrara Realty.

Buying a flipped home in Kuala Lumpur, considering everything that comes with buying homes among many other things associated with buying homes, doubles the risks. There are more things that go on, and have gone on, in a flipped home than a regular home and all that need thorough consideration before making a decision. Flipped homes are now crowding the Malaysia property market as they have been purchased with this scheme called DIBS – or the Developer Interest Bearing Scheme (click here for a more thorough treatment of the subject). This scheme has since been banned in Malaysia due to excessive speculation which drove up the prices of Malaysia real estate.

That, among other things make buying a flipped house risky; here are other reasons:

  • Unreliable contractor. Anyone with extra cash savings or access to a big bank loan in Malaysia can invest in home flipping – anyone. You don’t need to be an experienced contractor with a lot of professional knowledge on building standards and quality. This means that with a questionable contractor’s reputation comes an equally questionable flipped home quality. You’ll never be sure which homes have just been overlaid with a fresh coat of paint and Martha Stewart-inspired interior decors and which ones have been faulty or moldy because it looks so perfectly brand new.
  • Questionable house history. Some homes in Malaysia are dodgy – particularly those in areas like Semenyih, Kepong and Rawang (although major developers like Mah Sing are crowding those areas now). The main point of flippers getting into this kind of investment is to get profit from it. And if the house’s full grotesque history can hinder them from getting it sold at their ideal price, they might just skip that part because they are not knowledgeable about it (or at least pretend they’re not).
  • House issues. Most flipped homes in the Klang Valley are foreclosed homes bought at auctions or old homes both types are usually those that have been sitting around for a while unoccupied and exposed to wear and tear and lack of maintenance before someone finally decided to flip it. And there are a lot of issues on that home that cannot be covered with paint, a new drywall installation or some fancy carpeting. The dryer vent, the AC, plumbing, and more importantly the wiring are big issues that might be too expensive for low-budget house flippers to take care of.
  • Property bubbles. In certain pockets in Kuala Lumpur there are areas which are prone to pricing bubbles – for example the Kuala Lumpur City Centre (or KLCC). For a good resource on KLCC condominiums, click here (it’s my go-to site to check for KLCC condo reviews).
  • Questionable permits. These are much harder to check than usual because hardly any flipper would fully reveal what kind of work has been done to the house. And this could be a problem because you wouldn’t know which work needed permits and which ones actually got the necessary permits. This could be very dangerous because any change and renovation without proper inspection from the Malaysian authorities could destabilize the structure of the entire house or cause irreversible damage to its structure.

Most of these problems stem from one source: an unreliable flipping contractor. To fully eliminate the risks of buying these problematic fixed homes, always take the time to check the portfolio and reputation of the builder behind the flipping project. It will help tell you a lot about the quality of home you are about to spend your hard earned money on and paying for most of your life on mortgage.

Alright, I will post more about Malaysia property in the coming weeks.

-Billy “Not An Atlas Shrugged Fan” Taggart, Kuala Lumpur