Business Idea - Sublet at Rifle Range,Air Itam

In the evening, one of my team mate mentioned that "Have you think of refurbish old unit and rent it out to single or couple or those newly married couple waiting for their house to be ready".
She got the idea when she went back to her old house in rifle range flats. She notice that, there are a few units renovated with fully air-con,that is for a single room with 380sqft
She walked pass by one unit and was amazed with the interior design, so nice as if staying in condo. The whole unit is painted in white color.

She noticed that a lots of owner just left their old houses without any tenant but renovated as their holiday home.
So idea struck her mind, she wonder can rent it from the owner, refurbish it and sub rent it out.

It is doable or not?

Since the current market,even developer also launching smaller unit, and lots of young people can't afford the expensive unit.
Suggest that the interior concept can follow Hong Kong style, which is everything come in compact, space saving etc

I came back and do some homework on the suggested idea:

Property name: Rifle Range or Jalan Padang Tembak
Area: 1 room Flat, 380 sqft
Location: Air Itam, Penang

Current Seling Price:$200 000
Current Rental: $350

Based on the idea given, the most we also only can rent out at the market rate $350.00
So what would be a good price to rent from owner?
Let's do some calculations.

Table below is the estimation cost to refurbish a 350sqft unit.



The total cost is about $7700

Scenario 1:

Assuming that rent from the owner at $100 per month and Sub let out at $350.
Profit is $250 per month. You have positive cash flow deal man.Gosh..what a good deal.
However, if the unit is do not need to refurbish for a single cents. The unit found has to be in liveable conducive condition.

Scenario 2:
Again assuming that rent from the owner at $100 per month and Sub let out at $350.
Still profit is $250 per month. But this time, the unit need to refurbish and the cost is as per table above, spending $7700 before sublet at $350 per month.

Period to ROI = $7700/$250
                       = 31 month

The refurbish cost is a killing for the business.

Another factor is, do we have this demand in the market?
What would be your opinion and suggestion?

About Rifle Range
THE Rifle Range Flats is one of the most densely populated areas in Penang.
There are nine blocks of 17-storey buildings within an area of 16.7ha, with every floor consisting of 20 units of single bedrooms and four two bedroom units.

With a total of 3,888 units within the flats, the average size of a unit is merely 340 sq ft!
Penangites can tell you if you choose to park your car near the flats in the evening, the chances of your car being blocked by other cars is almost 100%.

The likelihood is that the unsuspecting motorist would never be able to get his stuck vehicle out.

The best way would be to return in the morning when the other cars have left.

That’s how sardine-packed the area is.

The almost non-existent parking bays at the flats is simply because the architects of the country’s first high-rise, low cost flats never imagined that the dwellers would be able to afford a car as low-wage earners.

Rifle Range Road or Jalan Padang Tembak is one of the main roads connecting Air Itam and George Town.

Popularly known as pak cheng poh, in Hokkein, is so named because the area used to be a shooting range, according to writer-photographer Timothy Lye.

“It was once an open space used as a shooting range by the police and the military.

“The namesake shooting range located next to the Batu Gantong Cemetery made way for the low-cost flats,” he wrote.

The flats were built by the late Tun Dr Lim Chong Eu when the then opposition Gerakan party swept into power in 1969.

Through the Penang Development Corporation, the Rifle Range flats, designed by a German firm, was built.