6 Types of Property Investment in Malaysia to Grow Your Wealth

Property investment has long been a popular way to grow wealth. From earning rental income to property flipping or long-term investments, there are several ways to make money in this sector.

When it comes to property investment in Malaysia, most people immediately think of residential properties such as landed properties or condos. However, did you know that there’s more than one type of property investment to consider?

Whether you're a seasoned investor or just starting out, understanding the different types of property investments can help you make smarter, more profitable decisions. Let’s dive into the five different types of property investments in Malaysia.

Property Investment #1: Residential

Residential property investment is popular because of its affordable entry price and the ease of financing through home loans. It also offers the added flexibility of living in the property to save on rent while benefiting from long-term value appreciation. This makes it more accessible, especially for first-time investors.

There are typically five types of residential property investments in Malaysia:

1. Terrace houses
2. Apartments
3. Condominiums
4. Bungalows
5. Townhouses

An exception to the standard residential property types is SOHO (Small Office Home Office) developments. These are built on commercial land but are protected under the Housing Development Act (HDA). This legal framework allows SOHO units to be used for residential and commercial purposes, offering greater flexibility for investors. For example, these units could be used as flexible co-working spaces which would allow you to charge higher rent while minimising vacancy periods.

Property Investment #2: Commercial

Commercial buildings are properties that hold a commercial land title and are used for business purposes. This type of investment is ideal for those looking for a more stable, long-term income stream and investors who have the capital to support larger upfront costs.

In Malaysia, properties that hold a commercial title typically include:

1. Office Buildings
2. Small Office Versatile Office (SOVO)
3. Small Office Flexible Office (SOFO)
4. Small Office Lease Office (SOLO)
5. Small Office Smart Office (SOSO)

Depending on location, commercial properties could potentially earn you higher rental yields than residential properties. Moreover, the tenancy periods for commercial properties are typically longer than residential ones hence providing a more stable rental income.

Property Investment #3: Retail

Retail property investment uniquely blends property and business elements. While similar to commercial investments, retail properties have distinct dynamics regarding location and lease structures. 

Regarding location, retail properties are typically located in high-traffic areas like shopping malls or retail storefronts. As for lease structures, retail properties have a distinctive option to collect a percentage of the tenant’s profits on top of a base rent. For example, if you lease out a retail space to a popular F&B chain, you can potentially earn even higher returns than just the base rent.

This blend of property and business elements creates a win-win situation, where landlords are incentivised to maintain the property and support the tenant's success.

Property Investment #4: Industrial

Industrial properties are designated for industrial purposes. They are essential in sectors such as manufacturing, logistics, and storage. Common types of industrial properties include:

1. Warehouses
2. Distribution centres
3. Storage units

These properties usually require large upfront capital due to the scale and nature of the properties but they come up with a potentially high yields of 5-8% in the Malaysian market. Industrial property tenants also typically sign leases ranging from 3 to 10 years. This provides a more secure rental income throughout your investment horizon.

Property Investment #5: Hospitality

Hospitality properties in Malaysia can be very profitable due to the rising demand for high-quality accommodation and the booming tourism industry. The properties under this can include:

1. Hotels
2. Resorts
3. Serviced apartments

One advantage of investing in hospitality properties is the availability of various tax incentives for the hospitality sector, such as the Pioneer Status (PS) and Investment Tax Allowance (ITA), which can substantially increase profitability.

Property Investment #6: Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts (REITs) are funds that own and manage a portfolio of real estate assets. They generate income primarily through leasing space and collecting rents from properties. They can also earn revenue from financing real estate activities.

The barrier to entry for REITs is much lower than direct real estate investments as you can start off with less than RM1,000 for most REITs. REITs are also relatively liquid as you can invest in REITs by purchasing and selling units on the local stock exchange. 

Investing in REITs provides a relatively new way to participate in the property market without ownership or management responsibilities. When you invest in REITs, you earn income through dividends, similar to buying stocks. This type of property investment in Malaysia is well suited for those seeking an easy entry point without the burden of maintenance.

Conclusion

In conclusion, when considering property investment, it is crucial to carefully evaluate which type of investment aligns best with your personal goals and financial situation. 

Factors such as your eligibility for home loans, willingness to undertake maintenance responsibilities, and ability to manage tenants or operate a business all play significant roles in determining your right investment path.

💡 The information provided above is purely for educational purposes.