One of the smartest ways to make money is to invest in real estate property. By doing so, you get to socialize and meet people and at the same time, make money buying profitable assets. There are lots of advantages of investing in real estate and here are the top 12 reasons why shouldn’t miss this chance!
1. Real estate properties are available to all
Practically anyone can invest in real estate. Look around you, there are plots and houses everywhere. Wherever people can live, real estates must be there for sale. It’s just like food and clothing – a very common human need. People need a place to live and survive. In Malaysia, you can get a small piece of property at as low as RM50,000. So it’s pretty much affordable as well.
2. It is the proven way to become RICH
Find the richest person you know and there’s a more than 50% chance that he/she is involved in real estate business. Most millionaires of the world have a large number of real estate assets. They might make their first millions from business venture. But later on, many of them park money in properties. Why do they invest in properties instead of investing in something else? If these people can make a fortune through their real estate investments, why can’t you?
3. Get More with Less
The leverage you get by investing in real estate is another important reason why it’s a very good idea. Leverage can be defined as the state where you get to control a big investment at a very low initial capital. In Malaysia, you can pay RM 10,000 as down payment for a residential apartment priced at RM 100,000. This leverage is something that you won’t find in any other type of investment. Every dollar of your own money allows you to borrow nine dollar to finance the purchase.
4. Appreciation of property over time
The price of a real estate property always increases with time due to the inflation effect. Inflation will never cease and the prices of materials will keep on rising as time flows. Real estate properties are constructed from building materials which become more expensive day by day. As such, the price of the property will rise too! For the last 10 years, the price of properties in Kuala Lumpur has been increasing by 5-7% every year.
5. Properties are assets that can generate income
Your real estate properties can generate income when you’re renting it to someone else. When you have a tenant living at your apartment, the tenant will pay for the mortgage. That means, you can gain profit even though you haven’t paid the full payment. One of the most amazing things about investing in real estate is that your tenant will share the loan burden with you, along with providing you some profit. When the loan payment is completed, the entire money earned by renting your property goes to your profit account!
6. Rental income is inflation friendly
Due to inflation, prices of commodities will rise and this will not adversely affect your rental income. That is to say, rental income is very inflation friendly. Inflation will produce more people who cannot afford to buy their own homes and they will choose to go for rentals. Instead of owning a place to stay, they will be forced to rent and thus, rental incomes will become the rice! Although, this is not very good news for the tenants, it’s great news for real estate investors.
7. Gain from refinancing
It’s not required to sell your property if you want to enjoy some profit. That happens in the case of other things like gold or silver. As in property investment, you can enjoy the profits even without selling your property. This can be done by refinancing. Without selling your property which was purchased at a lower than present rate few years back, you can gain the additional profit corresponding to the current price by refinancing your property.
8. Total control on properties
You will always have absolute control on your real estate properties. You have the flexibility to choose your tenants. For dealing with business tenants, you can buy commercial properties. For residential tenants, you can purchase an apartment and put it on rent. You can control the furnishing, maintenance and any sort of renovation in your property and sell it at a higher price, making a sizeable profit. That means, you can also control the profit that you can make from your property, other than the market sentiment which is out of the control of anybody.
9. Tax benefits
Being a landlord, you’ll have to pay income tax on your collected rental. You’ll have to pay the taxes and your net rental income will reduce. But just like any other business, there are a lot of ways in which you can reduce these taxes and acquire the advantages of being a landlord. Mortgage interest quit rent, assessment and maintenance are tax-deductible expenditure. Moreover, if you have a few properties, the rental gain from one property can be offset by the rental loss on the other property under your portfolio.
10. Stability of market prices
For stocks and some liquid investments, the price may fluctuate within days. Unlike stocks, real estate prices are quite stable. Property valuation changes over a longer period of time. Transaction just doesn’t happen as frequent as stocks. So you don’t have to check and monitor your property value every single month. Do it once a year is sufficient to know the value of your portfolio. Besides, the price for the same type of property in the same neighborhood may differ depending upon the buyer and the desperation of the seller to sell.
11. Investment that forgives you the most
Obviously there will be some bad investment no matter how careful you are. But when it comes to real estate properties, the bad investment can turn good provided that you have the capacity to wade through the tough time. You may buy a property at a wrong place and at a wrong time. But a time will come around when you can actually make a very good profit out of it. It might take 3 or 5 years, but the profits will eventually show up. Sometimes, even your worst decision will bear fruit someday.
12. Great for people with good communication skills
Are you a people person, incredibly good at communication and negotiation skills? If you are, then real estate can be the best possible investment for you. In a real estate business, you’ll have to deal with different types of people and convince them to buy or sell properties, convince them to finance your property, convince them to make a better deal for you. If you are such a people person, investing in property is exactly what you need to do. There are lots of reasons why one should invest on real estate properties in Malaysia and these are the strongest ones. Share with us your thoughts in the comments section below!
This is a guest post by KCLau, the best selling author of Top Money Tips for Malaysians. His popular personal finance blog is one of the most visited websites in the financial blogosphere. He also hosts regular and free financial training online (http://kclau.com/webinar) featuring different financial experts. You can follow his latest updates by visiting www.KCLau.com.
Next suggested article: 40 years later – Malaysia property market in my personal view