My brother discussed about buying properties for rental recently. He asked, if he could afford only a RM400,000 loan today, should he buy one property at RM400,000 or two at RM200,000 each. I told him, as long as he understands the rental market, both options are okay. However, if I must choose one, then it would be owning two properties of RM200,000 instead of one at RM400,000. There are three reasons why I say so.
Spreading risk. The amount of loan is the same but the risk is now halved because assuming you are not able to rent one, but you can rent the other, you only lose half. This is especially if your tenant just moved out and you may need a little time to find a new one. Reason being you do not want any Tom, Dick or Harry to rent your place and then refuses to move out or cause you any other problems.
Easier to rent out. It is also easier to rent out a cheaper apartment compared to a more expensive one. This is especially in Penang where even if you buy a grossly expensive place, you would not get a grossly high rental. New graduates moving to Penang for work are plenty. As long as you are able to put up online rental notices or even get an agent to help out, it should be very easy.
Easier to sell. The market for lower priced properties would always be higher than the market for higher priced properties. That’s the reason why if you see the national average house prices, it always seem very low. The reason being the quantity of lower priced houses are many times that of the higher priced ones. Thus, when they take average, you would see the number is on the low side, especially if you compare it to the condo you are about to buy.
Note, there are many reasons why RM400,000 property is better; lesser headaches, lesser time needed to sign the documents, potential capital appreciation may be potentially faster as it belongs to the upgraders category instead of first timer property and more. However, since this is a question for me, I prefer two instead of one.
written on 16th dec 2013
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