How i lost over RM1.2 Million in property value
I am going to tell you a story of how I lost over RM1.2 million in property value and how you can avoid the same problems.
A few years back, I bought into an old-style development surrounded by six acres of greenery fronting the Putrajaya lake that had great potential for improvement that was built some 10 years ago before the start of Cyberjaya.
The property value for this project was increasing with time and it reached RM470psf at one point although it was an old development that needed plenty of upgrading works and upkeep of the place. However, the problem was with the management team (Joint Management Body (JMB) and Property Managers) who were just not up to the task.
There was so much politics and arguments within the management that its focus of was on lawsuits against a developer and some owners. We are talking about lawyer fees amounting to hundreds upon thousands of the committees’ funds that was spent on arguing and fighting with the developer until they eventually lost the case and got nothing out of it.
The management team was only focused on this issue and they diverted all of the owners’ attention to these arguments while the basic management of the property was left unattended, with the maintenance of the building and its environment eventually falling apart. There were no forward- thinking solutions coming from the management team and they took slow action in carrying out their duties. There was no drive to change the managers and get experienced, proactive staff either.
And as a result, the property value subsequently kept declining from RM470 page to as low as RM270 psf which was a huge drop of RM200 psf. So this is an example of how much of an impact a bad property management team can inflict on a development.
The problem is that the owners’ committee which manages the project has no idea on how to upkeep or improve the development, resulting in lacklustre and impractical ideas which contribute nothing towards the development and does nothing for improvement.
The committee needs to not only manage and maintain the project but has to be forward thinking and add value to the project at hand. This takes knowledge and experience which most owners don’t have as these attributes are very hard to find.
What usually happens is that in all likelihood the committee would usually seek a “professional” property manager to come in to manage the project for them. And usually, they end up with some very bad choices because the committee has no practical experience in the industry, resulting in them not even being able to pick out good managers.
This then continues the vicious cycle of poor property management in Malaysia.
A property manager needs to not only maintain a property but also be able to guide others to come up with a continuous improvement plan for the project.
This is the only way the property will keep appreciating and benefiting all owners and residents.
I’m sure I sound very negative above but not all projects are badly run. A good example of a well-run operations is Summer Suites in Kuala Lumpur. This project also had its fair share of problems when it was first developed. However, the proactive owners and the knowledgeable property manager got together and focused on ensuring the success of the development by doing whatever it would take to make it work. To cut a long story short, the figures speak for themselves whereby the development which was once priced at 750psf is now valued at RM1,300 psf.
This is the exact opposite of the earlier example. Furthermore, this price increase was from 2015 to 2017 – the same time all of the property prices were not going up at all. In fact, the two next door projects to this had no increase in value at the same time. Incidentally, the property price increase was solely due to the Quality Property Management Professionals by SCM Property Services, a subsidiary of UEMSunrise and the proactive forward-thinking owners’ committee managing the project.
Another thing that is very important for a project’s success is to solve the needs of potential clients beforehand. One very important elements nowadays is the presence of commercial elements nearby. By this we are talking about the basic supermarkets, restaurants, banks and entertainment components like cinemas, bowling and other hang out places. As people are becoming busier with their daily lives, they also appreciate the ability to access as many conveniences as possible by just coming out of their houses. But none of these conveniences should get in their way by causing traffic jams or excessive noise. If these components can be brought into a project, its value can rise and more people would want to own or rent units there.
Another important thing to bring to the development is the issue of accessibility and transportation. As things get more expensive these days, the sacrifices people are willing to make deals with the ownership of cars. For the first time in history, the number of car ownership per household is actually slowing down and might just take a turn to becoming less per household.
This is more prevalent in the city with the latest light rail transit (LRT) and mass rapid transit (MRT) lines coming up coupled with the new on demand pick-up services represented by GRAB and UBER. So, with great transportation services like trains as well as GRAB and UBER, a project will be more in demand and will attract future generations to come and stay.
In a nutshell, proper management and the right people will make or break your investment. So as owners, one should get the right managers for the project and experienced advisors who can set a future plan to make the building a success.
These managers should also be able to bring in business to make the projects vibrant and exciting. For only then will there be development taking place within the project. Gone are the days when one just buys a property and it will just go up in price. These day, one needs to be actively involved in maintaining and also upgrading the project to increase its value as well as to think out of the box.
The problem with the industry and the law is that there are rules that give owners the right to be part of the committee. As such, it doesn’t take into account the fact that property owners may not even know how to manage the project. So with this, the committee hires “professional” property managers. But in reality, these property managers are not up to the part that is needed in the industry now. Therefore, there needs to be more supervision into what these guys are doing and how the public views these property managers. This public review will be good because then, project owners can really see who is good and who is just of basic standard.
So with this, I wish you happy investing and make sure your management committee and the managers are doing their absolute best with regards to maintenance and upgrading. Otherwise, your investment will turn out bad.
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