AVOIDING PITFALLS IN STRATA PROPERTY INVESTMENT Sr ADZMAN SHAH MOHD ARIFFIN Chief Executive Officer ExaStrata Solutions Sdn Bhd Deputy President Malaysian Institute of Professional Property Managers (MIPPM) 1
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. Sr Adzman Shah.ExaStrata 3
Forms of Strata Property Multi storey building vs Landed Property Freestanding Building vs Integrated Development Low Cost / Affordable / Medium /High / Luxury Sr Adzman Shah.ExaStrata 4
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 Sr Adzman Shah.ExaStrata 5
New Legislation In Force New Legislation enforced since 1 June 2015 and soon to be reviewed to address latest concerns. Sr Adzman Shah.ExaStrata 6
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 Main Parcel Common Sr Adzman Shah.ExaStrata Property 7
Who Manages Strata Development? Developer Period JMB Period MC Period 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 Sr Adzman Shah.ExaStrata 8
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 Sr Adzman Shah.ExaStrata 9
Steps When Looking for a Property Sr Adzman Shah.ExaStrata 10
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 Sr Adzman Shah.ExaStrata 11
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 Sr Adzman Shah.ExaStrata 12
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 Sr Adzman Shah.ExaStrata 13
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 Sr Adzman Shah.ExaStrata 14
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 Sr Adzman Shah.ExaStrata 15
Pitfalls Alert Sr Adzman Shah.ExaStrata 16
# Pitfall No. 1 Sorting out Legal Issues 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!! Sr Adzman Shah.ExaStrata 17
# Pitfall No. 2 Failing 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 Sr Adzman Shah.ExaStrata 18
#Pitfall 3 Failing 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!! Sr Adzman Shah.ExaStrata 19
# Pitfall No. 4 Failing to Monitor Management 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!! Sr Adzman Shah.ExaStrata 20
# Pitfall No. 5 Failing to Understand Role of Management Committee 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!! Sr Adzman Shah.ExaStrata 21
Conclusion Sr Adzman Shah.ExaStrata 22
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!! Sr Adzman Shah.ExaStrata 23
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!! Sr Adzman Shah.ExaStrata 24
Better Knowledge, Better Returns! Thank You. www.exastrata.net