SOHO / studio units – my personal opinion

A friend asked me for the 3rd or 4th time, why I have not bought any SOHO / studio units. I asked her, why do you like these small units? She said it can fetch high rental. Actually, that’s quite a true statement. Imagine paying just RM300,000 for a nice 500sf SOHO unit, furnish it and renting it out for RM1,800 – RM2,000 if you are lucky. Today however, can you still find a lot of these RM300,000 SOHO? A simple check that majority of all the SOHO units are already priced at RM750sf or higher. Thus, it may not be possible to get such an amazing rental yields anymore.
What about capital appreciation then? Surely it can continue to go up? Well, if you are a first time buyer, looking for property to buy and stay, would you buy a 500sf SOHO for Rm500,000 or a RM400,000 condo somewhere in Kelana Jaya? Even if second hand? If you just got married and have is expecting a baby and would like to upgrade your current 700sf apartment, would you switch to a smaller unit? Even if you love SOHO / studio unit very much, if it is priced at RM800,000 would you still want to buy it? Let’s assume the unit is in an amazing location, would anyone pay a rental of RM3,500 to stay there? Of course, it is so easy to argue YES. Think about it, these people, if available are the minority and would never be able to occupy the thousands of small units everywhere nearby your unit.
Thus, my opinion of SOHO / studio unit remains. If you are able to get a very good priced one from some seller somehow, please buy. However, if you are buying at RM750 psf thinking it will continue going up, good luck. I am not a property  guru and cannot predict anything. If you ask me though, a RM400,000 condo in Kelana Jaya versus a SOHO / studio unit somewhere nearby KLCC which is already RM900psf or higher, my choice is clear. Take care.
written on 12th dec 2013.
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