What are the intrinsic qualities that make a property a good buy?
It takes great effort for both developers and investors to closely examine and plan the development that will be introduced. This process is one of the most important elements apart from location and pricing that will impact your investment choice and ensure strong yields and returns over time. If one can go to great lengths to comply with trendy principles, why not also consult a checklist of factors that make a development concept great?
In a recent conversation with a close family friend and a developer himself, he revealed to me that building and developing is relatively easy but developers also have to bear in mind that most or some of the home buyers may only qualify for and afford a single credit line loan facility from a bank at any one time. Therefore, as a key component of the buyer’s ‘financial lifeline’, developers ought to ensure not only the timely completion of the project but also to deliver the project with the right concept, with the right details and ultimately, a project that lasts.
This ‘duality of purpose’ (developers’ obligation to deliver a good Development Concept and investors’ prerogative to recognize and zoom in on such) certainly inspired me to delve deeper into the matter of Development Concept, expanding on my previous opinions on Location, Pricing and Development Concept where we established that the right combination of location, pricing and concept is key to maximizing your property investments now and in the future.
Revisiting the very first article of this series, we explored that having the right location with the right price but the wrong concept is not going to make your investment stand out among the countless options in today’s property market. The right development concept complements and enhances its immediate surroundings and caters to a targeted profile of end-users, giving the development a very defined and evident DNA.
A common mistake for many is to allow sentiment and emotional attachment to cloud our judgment instead of accepting that the concept has been carefully designed and honed for the select target segments which may not necessarily be us. We must remember that investment properties are not meant for us but for the target market in question.
Distancing ourselves from our personal feelings is key when assessing the right Development Concept which can be distilled into three components – the concept vision, the micro details and the maintenance element:
1 The Concept Vision – suitable for current needs and relevant through the generations
Analyzing the location and visualizing the end product is critical to ensure it is relevant, well-understood and embraced by all parties. We may be clouded by our own thoughts and mindset from our previous experiences so we must be objective when we analyze and visualize the concept. Ask yourself, what did the developer set out to achieve? Or, is this what buyers want?
One good way is also to consult the professionals who work closely with the population of a specific neighborhood and have intimate knowledge of the community. Choosing the right professionals to advise you is also important in order for investors to have the right information for decision making.
Through my observations, investors often seek advice and opinions from friends and relatives who may not be entirely objective. It is good to hear from them too but the choice of friends and investors is equally important if not more.
To elaborate further, some may have experienced in a particular segment of property investment, for example in the commercial sector, but if your portfolio leans towards residential properties, then the input you receive may not necessarily give you the right information for decision-making.
2 The Micro Details – applying the right details to the right product to compliment the concept
The point that I wish to drive on this part is quite similar to the point above but zooms in further on the micro details such as quality, facilities, fittings, finishing and practical concerns such as unit sizes and layouts.
Practicality comes into play as we must understand the end-user’s needs and whether quality, facilities, add-ons and layout planning is very important. Again, thorough research and sound, professional advice is essential for you to give your seal of approval to the development.
3 The Maintenance Element – the ‘software’ and the continuity of the development over its lifecycle
Good ‘hardware’ without the right ‘software’ means nothing. Therefore, the feasibility and appeal for the product over the generations is crucial and enhanced further by a good maintenance track record.
Investors also pay attention to the developer’s profile and its vision to build a long-lasting product that will keep their flag flying high for a long time. This is how reputations are built over time and once lost may be difficult to get back.
This can normally be seen by their track records of previous developments or if they are new, then their previous ventures, leadership and their brand personality or DNA is important. A hands-on approach and an emphasis on continuity by the developer will be something that goes a long way with investors.
To conclude, the gist of the story I shared earlier about a family developer friend who firmly believes in and prioritizes customer satisfaction is that this reflects well not only on the developer’s obligation to come good on what may possibly be the buyer’s only opportunity to own a property in his lifetime but also enhances his reputation as a developer who delivers what people want.
It’s a two-way street and sound business practice since giving customers what they want and sincerely ensuring that their needs come first will show-through in the development. The savvy investor is one who recognizes such a good development concept and how it will impact market demand and appreciation, providing you with a very calculated risk towards a great investment.
Article is written by Christopher Lim, Co-Founder and Senior Vice President of Property Hub Sdn Bhd, MIEA Residential Agency of the Year 2012 and 2013. Log on to www.propertyhub.com.my for more information. The article represents his personal views.