avoiding pitfalls in strata property investment€¦ · joint management body (jmb) managed by...

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Sr ADZMAN SHAH MOHD ARIFFINChief Executive Officer

ExaStrata Solutions Sdn BhdDeputy President

Malaysian Institute of Professional Property Managers (MIPPM)

AVOIDING PITFALLS IN STRATA PROPERTY INVESTMENT

A Bit of Background ..

Approx. 6 million occupy strata developments

(30% of the Population in Malaysia)

Approx. 16,000++ residential strata

development schemes

(Condo, apartments, service apartments)

1.5 million strata parcels

Sr Adzman Shah.ExaStrata 2

What is Strata Property ?

Ownership of parcel in multilevel or multi-storey buildings or landed building which will be or has been issued with strata title.


Forms of Strata Property

Multi storey building vs Landed Property


Freestanding Building vs Integrated Development

Low Cost / Affordable / Medium /High / Luxury

Types of Strata Property

Residential e.g. Condominium, Apartment, Flat, etc


Commercial e.g. Office Lot, Service Apartment, SOHO, SOVO, Hotel Suite, etc

Retail e.g. Shop Lot, Retail Lot, Kiosk, etc

Industrial e.g. Flatted Factory, Light Industrial, etc

New Legislation In Force

6Sr Adzman Shah.ExaStrata

New Legislation enforced since 1 June 2015 and soon to be reviewed to address latest concerns.

What is Common Property ?

“So much of the lot as is not comprised in parcels, accessory parcel and provisional blocks used or capable of being used by occupiers of two or more parcels” (Section 2 of SMA 2013)

i.e. the Land and Building are subdivided into ‘Parcel’ and ‘Common Property’.

e.g. open areas, corridors, lobbies,

lifts, fire staircases, flat rooftop,

external façade, etc.


Accessory Parcel

Common Property

Main Parcel

Who Manages Strata Development ?

Within 12 months after first owner receiving keys

- No Strata Title yet

12 months after first owner receive keys - No Strata Title yet

Individual Strata Title

Issued

Managed by Developer

Managed by Joint Management

Body(JMB)

Managed by Management

Corporation (MC)

Common Property


Developer Period JMB Period MC Period

Responsibilities as Strata Owner

Pay maintenance charges and sinking fund for the cost of maintenance and management of the Common Property

Abide by the Houserules and Bylaws

Keep own property in good condition

Respect thy neighbours and live in harmony


Steps When Looking for a Property


Choosing Investment Property

Types of Property :

• Residential – Condos / Apartments

• Commercial – Strata Office / SOHO

• Retail – Strata Shoplots / Retail Lots

• Industrial – Flatted Factories

Purchase from :

• Developer – New Launch or Unsold Stock

• Subsale

• Auction


Evaluation of Surrounding

• Security and safety

• Cleanliness

• Tidiness of surrounding

• Upkeep of common property/areas

• Operational condition of facilities

e.g. lifts, lighting in parking, gym, swimming pool, etc

• Communication, notices on board, signages


Check out the Neighbourhood

• Check occupancy rate of building

• Survey comments from residents on breakdown of occupants

• Owner/occupier : tenants : students : foreigners

• Check out neighbours

• Maintenance of common facilities

• Parking usage

• Check rental rate of units and compare with price


Find out about Charges

• Maintenance charges - before buying, request info on how much the rate to pay and whether there is any outstanding

• Sinking fund - 10% of maintenance charges

• Parking charges - if no parking provided, will need to rent

• Fire insurance apportionment - to inform loan provider that you will be paying to JMB/MC

• Quit rent apportionment

• Bulk utilities meter - check if owing TNB/Syabas

• Any potential risk of legal action


Getting to know the People in Charge

• Find out and get to know management team and security

• Get a copy of houserules or bylaws

• Get to know who the JMC/MC office bearers

• Find out if the JMC/MC is run well and active

• Enquire when was the last and next AGM

• Check when next community event coming up


Pitfalls Alert


Beware of the following Properties :

Still under Master Title and no prospect of getting strata titles

Under Liquidator’s administration

Dodgy developers/developers not registered with Ministry

Potential foreclosure case

Potential Strata Management Tribunal case

A lot of maintenance issues

…… Good start ends well !!


# Pitfall No. 1Sorting out Legal Issues

# Pitfall No. 2Failing to Recognise Best Value

Example : Residential Strata Property

• Walk up or with lift

• Walk up - highest value is FF/GF/2F/3F/4F

• High/tower - higher the level, the higher the price, with premium on view and orientation

• Easy to rent out at market rate


#Pitfall 3Failing to Understand Responsibilities

Embrace responsibilities as a Strata Owner :

Share ownership of the Common Property areas

Joint responsibility to manage the Common Property

Familiarise with Strata Management Act 2013

Pay Charges on timely basis

Avoid breaking the law – Penalty ranges from <RM5k to <RM500k or 3 years jail or both

… Avoid headaches as an Owner !!


Get to know the Management Team – JMC/MC & Strata Manager:

JMC/MC are capable to run the Management and look after the owners’ interest;

JMB/MC has adequate funds to manage and maintain Common Property in good condition; and

Experienced Strata Manager with good knowledge of SMA 2013 and Malaysian Property Management Standards.

… Good Managers enhance value !!


# Pitfall No. 4Failing to Monitor Management

Understand the Functions of Committee/Council Members:

Duties outlined under SMA 2013

Voluntary job, no monetary reward

A legal entity similar to board of directors in a company

Can sue and also be sued

Community Leader, Debt collector, Enforcer, Arbitrator

Find out if the Members are able and capable

…… It’s a dirty job but someone’s got to do it !!


# Pitfall No. 5Failing to Understand Role of Management Committee

Conclusion


Conclusion

Is Strata Property a good investment ?

Increasingly more popular as investment property

More offering of facilities & features

Rental returns tends to be more attractive

Relatively easier to market and dispose.

… A good option for investment property !!


Conclusion

A well thought out purchase can avoid a lot of headaches :

Avoid Properties which have a lot of issues

Choose well located property near public transportation

Full understanding of responsibilities as Owner

Make sure investment gives good return.

… Avoid THE PITFALLS and avoid becoming a deficit investor !!


Thank You.

www.exastrata.net

Better Knowledge, Better Returns !

avoiding pitfalls in strata property investment€¦ · joint management body (jmb) managed by...

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