A preference for rental income

While some may choose to buy and sell properties to enjoy capital gains, there are those who prefer to just rake in the rental income. With over 150 properties for rent, Hai Soon Properties is probably among the landlords with the most number of properties for rent in Penang.

Its list of properties for short and long-term lease ranges from exclusive villas and bungalows, condominiums, serviced residences, semi-detached homes and terraced homes to commercial offices and retail lots on Penang island.

In 2000, Hai Soon director and general manager Kelly Lee took over the management of the rental business which was set up by her father in 1980. Lee, who is currently based in France, is the eldest in the family. She joined Hai Soon after completing her business management degree course in the US.

The company was set up not only to manage the properties but also to see to the tenants' needs, she tells City & Country.

"My father has been investing in properties since the 1980s. He is an old-fashioned man who prefers long-term gains from owning properties. He would not sell them despite the appreciating values but prefers to collect rental income.

"Now I manage his rental business while he looks after the family's barter trading business," she says, adding that products traded include rubber, oil, teakwood, rice, electrical items and clothing. The main business partner is from Myanmar.

Among Hai Soon's properties are 28 units of the 66-unit Desa Pelangi Condominium in George Town. The units were acquired over the last decade. The rest of the units are owned by individual owners, who, Kelly says, have benefited from Hai Soon's tenancy programme.

"Under our tenancy programme, we have raised the rental rates at Desa Pelangi which have benefited the other owners. For short-term monthly stays, our rentals range from RM3,100 to RM5,200," says Lee, adding that most of the tenants are middle to upper-class expatriates.

The higher rental is not surprising as units are refurbished and fitted with brand-new furnishing. The 1,030 sq ft 3-bedroom, 2-bathroom Desa Pelangi condo units also come equipped with a 21-inch flat screen television, DVD player, washing machine, stove, oven, dishwasher, writing table, and balcony coffee table and chairs. They are also WIFI-enabled. Tenants have access to amenities like the pool as well.

In fact, this has been the business strategy since Lee took over. By adding value to the units and providing full maintenance services, the company has been able to attract higher-end tenants.

Hai Soon refurbishes its properties every two to five years, be it a new coat of paint or even putting in the latest electrical gadgets and quality finishings.

For short-term lease, one can rent a serviced apartment from Hai Soon for a few months or a few days at a holiday bungalow or condo. Such options work well for businessmen as well as corporate clients, says Lee.

"For only RM240 to RM280 a night, we can offer a 3-bedroom, 2-bathroom apartment which can accommodate up to five people as opposed to a hotel room for only one," she says.

Among Hai Soon's other properties are apartments at Bayu Emas Apartments in Batu Feringghi, Jesselton bungalows and seaside bungalows in Tanjung Bungah. Hai Soon rents out commercial units as well such as shops and offices.

Better returns
Unlike her father, the well-travelled Lee believes in short-term strategies when it comes to property investments. Before joining Hai Soon, she was involved in buying and selling properties, mostly overseas.

After high school, Lee's parents sent her to New Zealand to further her studies. She was barely 19 years old when she bought her first property there — a brand-new townhouse in an upmarket and exclusive neighbourhood which costs NZ$240,000 in the 1990s.

After completing her diploma 1½ years later, Lee eventually sold off the property for NZ$270,00. "Due to the stronger value of the ringgit then, I actually made more than RM100,000 on that sale. Naturally, I thought that real estate market would be an easy way to make money," she says.

Still keen to obtain a degree in business management, she went to Oklahoma, US, and stayed there for more than five years.

"The prices of houses in Oklahoma were attractive and you could easily find a property on the secondary market with prices starting from as low as US$20,000."

Her first purchase in the US came three months later when she paid US$53,000 for a 3-bedroom, 2-bathroom single renovated home. While that was meant for investment, Lee herself rented and shared an apartment with some friends in Oklahoma.

Eventually, she upgraded her home when she bought a secondary 3-bedroom, 2-bathroom unit with a built-up of 2,200 sq ft. Costing US$95,000, it also came with a swimming pool and Jacuzzi.

Although Lee was studying full-time, investing in property became her part-time job. So, where did she find the money to do that? "I used the education fund allotted to me as rolling capital while the money I made from my property investments funded my studies," she explains.

Through her constant search for suitable properties to invest in, Lee also came to realise that renovated properties were able to fetch better returns on investment. So, she started to hunt for cheap homes in good neighbourhoods with a view to renovating them for resale.

"For my personal investments, I always target to make at least an average of US$10,000 for each property. I will usually buy a crappy property in a good neighbourhood and have it renovated — give it a fresh coat of paint and change the carpeting, windows, blinds and fixtures. After that, sell it off at a premium," says Lee.

"Working with three others, we do the renovation ourselves. The whole process — from buying to renovating and selling — would take about three months," she says, adding that she invested and sold off over 30 properties throughout her stay in the US.
Lee also leased out the properties before selling them.

"Renovated properties can be leased out at a higher price and the rental returns range from 15% to 30% in small towns. Depending on the location, size, quality of renovation and value of tenancy, my returns on investment easily range from 25% to 100%. I also target to sell at least four properties each month," she adds.

Back home, Lee finds that some local landlords are tight-fisted and unprofessional.

"They are more like slumlords... they rent their premises but do not bother to look after the property nor the well-being of the tenants, particularly when they have requests or complaints," she says.

"Before I came on board, there were complaints from the tenants but these were not dealt with properly. For example, they complained about a plumbing problem but were told off by the staff," she adds.

Despite being based overseas, Lee says she is only a phone call away and is constantly in touch with her team. "I come back to Malaysia about six times a year. We have a team of 35 to manage our portfolio and run the day-to-day operations like seeing to tenants' complaints. Having tie-ups with about 40 contractors, we are able to solve our tenants' complaints within 24 hours," she explains.

Is Hai Soon looking to acquire any more properties to add to its list?

Lee says her father is still looking for properties to buy. "As long as it is in a good location or good neighbourhood, that is, near public transport and amenities like schools, my dad will be interested, be it from developers or on the secondary market."

by The Edge Daily

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