Tuesday, March 15, 2011

Holding Power

Holding Power, is something you need before you venture into Commercial Property. This is the conclusion of my discussion with friends today. Why So?

Mainly because it would take some times (1 year, 2 years and maybe more) for a Commercial Property to become "WONG". Look at Kota Damansara 3-4 years ago, Bandar Puteri 5-6 years ago, Bandar Puchong Jaya 10 years ago. During that time, most of the shop there are either For Sales or To Let.

Imagine the monthly bank installment is RM10k, and if you not able to find tenant after handover, you will need to pay RM10k installment every month from your own pocket for 1 or 2 years; also means you need to spare around RM250k to throw into sea.

However, if you able to hold and go through this "transition period", your property may able to double from RM1.5mil to RM3mil. So throwing RM250k into sea may fish back RM1.5mil big shark within 3 years. Not bad actually.... but this assumption not apply to all location lar, like Ara Damansara after 5 years already still dead.

Let's do a case study for 10 Boulevard at Kayu Ara, completed end 2009, and until now still many units put on sales/rent after 1 year plus. How long do you think this property need to become "WONG" ? And how much will this property price go up to after it become "WONG"?


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