CAN old houses be a good investment? What are the common problems, hidden costs and benefits when purchasing such property?
There are a lot of old houses in Malaysia. In some parts of the country, the housing stock is far older. On average, owner-occupied houses outside of Kuala Lumpur have been around for more than 100 years. These are usually wooden houses in rural villages.
By contrast, newer houses and bona fide new constructed homes are common in Greater Kuala Lumpur, Penang, Johor, Perak and Sabah.
AN OLD HOME HAS CHARACTER
As a general rule of thumb, houses built after 1990 are considered new, and those built before 1920 are considered “old”. But house age is a subjective condition.
This term ‘old house’ covers properties from colonial mansions to faded terraced houses in well-established neighbourhoods.
Older houses may offer an interesting alternative to the pristine modern developments which are rapidly emerging across Malaysia.
“Buying a house is an exciting step, but buying an old house adds some increased complexity to your property purchase journey. Here’s why a second hand house may, or may not, be for you,” said PropertyGuru Malaysia, in an article entitled “The Simple Guide To Buying An Old House”.
BENEFITS OF AN OLD HOUSE
1) Cost savings
While some old houses are beautifully-maintained bungalows transacting for millions of ringgit, there are still many which offer more affordable prices.
PropertyGuru said faded old houses can offer potential buyers significant cost savings, giving them a more affordable option than pristine new properties.
2) Better return on investment
There’s low cost involved when buying old houses, and this provides a substantial potential for return on investment. After buying an old house, spend a bit of money to turn it into a well-manicured home to bring in significant financial rewards in years to come.
3) Transaction Time
It takes a short time to buy and own an old house or a property in the secondary market. You can own the property after a few months of completing the deal and do whatever necessary to upgrade it, rather than wait three to four years to get the keys for a new property from the developer.
4) Buying an old house on prime land
Land is scarce in prime areas and more expensive, so buying an old house in can be a good deal although it may require some repair works. But make sure you know the neighbourhood and that it is in a desirable location.
CHALLENGES THAT COME WITH BUYING AN OLD HOUSE
1) Non-stop repairs
Old homes can require a lot of work to make it safe for the family. You may need to fork out a bit of money before you move in to get this done.
2) Hidden faults
Old houses have faults like hidden leaks in pipes, old wiring, water filtration issues, roof leak and rotting timbers. “There are some of the major problems which could be hidden from the sight,” said PropertyGuru.
3) Hazardous materials
PropertyGuru said renovation work can reveal some unfortunate truths, and one of them is that older homes can be built with hazardous materials.
“Lead-based paint and asbestos are two of the more frequent challenges found in older homes built before a certain period. While asbestos is not illegal for use in housing in Malaysia, owners should be aware of the significant health risks it poses. You may need a professional team to help replace these materials,” it said.
4) Sudden cost to incur
There is possibility of spending more than you expected on repairs and renovation. It will be a while before you see some significant improvement in the value of the property with all the money spent.
5) Pest infestations
Imagine moving into your newly-acquired old home and finding rodents and cockroaches that had made your home theirs long before you moved in. You will have to call pest control to get rid of them before you can enjoy your new property.
You are going to get a headache or bad migraine every now and then if there’s mold in the property after you have moved in. Mold remediation can be very expensive, but technology has come a long way and make sure you get the best method to remove it. It would cost a lot to remove the mold and hopefully it is a one-time investment.
“The idea of financial return is obviously a big part of the pros and cons of buying an old house. If you’re purchasing a house in a desirable area for RM1 million, renovating it for RM500,000 worth of your time and effort and selling it on for RM2 million at the end... you can see why some people might be tempted by this equation.
“Of course, an old house is also a great place to make a new home. So, the financial return in that case might be more of a long-term investment bonus,” said PropertyGuru.
It advises those looking to buy an old house to do a survey on the property before committing to a purchase, particularly if the house is in a state of disrepair.