Personal Finance
It could be more cost-effective than buying a brand new one
Eugene Mahalingam writes about how an abandoned house or even an old, dilapidated one can sometimes be worth investing in.
BUYING property and then selling (or renting) it is often viewed as a good form of investment by many. This is especially the case for strategicallylocated homes that are either new or have been well maintained by a previous owner.
However, sometimes, an abandoned house or even an old, dilapidated one, could be worth investing in. Admittedly, reviving an abandoned house can be a daunting task. But with a little bit of patience, effort and money, the home you’re looking to revive could just end up being a diamond in the rough.
Abandoned house
According to reports, there are 177 private housing projects that have been abandoned as at May 31.
Finding abandoned houses is actually not that difficult, as they tend to stick out like a sore thumb! The main issue, however, comes after you’ve found one, and then need to locate its owner.
“One simple way is to ask the neighbours,” says James Wong, director of international property consultants, valuers and estate agents, VPC Alliance (M) Sdn Bhd.
However, a house could be abandoned for so long that even the neighbours might not know of the owner’s whereabouts.
“The official way is if the house is within the jurisdiction of the municipality, local council or district council, and to go to the assessment section to check the owner and address,” says Wong.
“If the house is outside the jurisdiction of the municipality, local council or district council, then you need to go to the land office to do a title search on the property, which will reveal the ownership of the title. Then, you have to check the owner’s contact details and contact,” he adds.
But what if the owner is deceased?
“In a situation where the owner is deceased, one can appoint a lawyer to make checks at the central probate registry at the High Courts to verify whether the family members of the deceased have filed for a petition for a grant of probate (where the deceased died leaving a will) or for letters of administration (where the deceased died intestate),” says National House Buyers Association (HBA) secretary-general Chang Kim Loong.
He says checks could also be made at the related land office to ascertain whether an application has been filed (at the land office).
“They could also make enquiries at the Amanah Raya office for confirmation. Having established the identities of the beneficiaries to the deceased estate, one can approach them and negotiate the offer to purchase.”
Cheaper price
Elvin Fernandez, managing director of property consultancy firm Khong & Jaafar Sdn Bhd, points out that abandoned houses, or homes that have deteriorated over the years, tend to be cheaper.
“When you buy a home, you are buying it for the land and the building. The value of a property is what the building and the land are collectively worth.”
He says that the value of a property is affected when the condition of the building has deteriorated.
“If the house has been left unattended for a long time or has depreciated quite substantially, then usually the land value remains the same but not the building value.
“The greater the depreciation, the lesser the value. In fact, there might actually come a time when the building will have no value at all,” Elvin says.
He says in rare instances, the building’s deterioration level could be so bad that it could create a spillover effect on the land and affect the land’s value as well.
“It’s not a rule that’s set in stone, but usually it’s the building value that drops,” Elvin says, adding that even the location of the property could play a role in the property’s value.
“It depends. A house in Damansara Heights that’s been abandoned for a while could still have its value intact, while a house in a poorer (rural) neighbourhood that has been left unattended for just six months could already see a substantial depreciation in its value.”
A good buy
Elvin believes that buying an abandoned house is definitely worth the investment, seeing as these homes generally retail for a much cheaper price (compared with new properties or lived-in ones in the secondary market).
“Abandoned properties could be worth a good buy and definitely a must to look at,” he says.
Malaysian Institute of Estate Agents (MIEA) deputy president Siva Shanker also feels that purchasing an abandoned house is a “great investment opportunity.”
“You have a lot of this going on nowadays, especially within Petaling Jaya. There are a lot of old houses in that area and many people are buying them – either to move in or to flip it (resell) for a profit.
“It’s a great investment opportunity. People buy the home for between RM600,000 and RM700,000, then spend RM500,000 on refurbishing it and then selling it for about RM1.3mil. You can easily make a profit of between RM200,000 or RM300,000 right there!”
Siva believes that refurbishing an old or abandoned house is much more cost effective than buying a brand new one (or a lived-in one in the secondary market).
“The Malaysian property buyer is such that once he’s bought a house, whether straight from a developer or an existing buyer, he’s going to tear it down and make renovations of his own.
“And this is not at all cost effective, because the developer (or previous owner) has probably already given the buyer everything he needs. But after buying the house for say, RM1mil, he’s then going to spend another RM500,000 on renovations. Better to buy an old house, which is cheaper, and then install whatever you need.”
MIEA president Nixon Paul, meanwhile, feels that it’s “safer” to buy a house from the primary or secondary market.
“Buying an abandoned house will be cheaper, but think of the refurbishment that you’re going to have to do, which could cost a lot more than what you would normally do for a new one.”
“You’re going to need to spend a lot of money on a lot of things that have either deteriorated or are totally gone.”
Siva asserts that although buying an abandoned house and refurbishing it is a good investment opportunity, he does add that it’s not for everyone.
“If you have the money, the holding power and the property knowhow, then it’s a good way to generate income.”
On a personal note, he does wish that it would be possible for buyers to “pre-customise” their homes when they buy it from a developer, and not purchase a “finished” product that will not necessarily appeal to everyone.
“Wouldn’t it be nice if the buyer had a choice on the level of fixtures that go into a home, so that the price could be reduced accordingly? Because most people are going to move in and make changes that will end up being a waste of money.
“We need to slowly move into a more mature market where there can be more flexibility in the property that we buy,” he says.