I had a funny conversation with a younger friend a few evenings ago. This is one friend whom I believe is destined for great things to come. Passionate about her life and willingness to learn. She’s currently working in a public listed developer. Here’s the conversation.
Friend: I am in a dilemma. I have an offer for an affordable apartment in a good area and nearby a college. Not sure if I should accept it as the monthly repayment is huge for my pay.
Charles: What’s the KEY reason to buy?
Friend: I am no longer that young. I feel that I must quickly buy a unit before I get too old.
Charles: (Laugh for a few seconds). Please move on and wait for the next deal.
Reason 1: Not Young anymore. She’s nowhere near 35 yet. For property investment, too young is not necessary an advantage as your salary may be too low to buy something really attractive. When our salary is on the lower we may get stuck with a property which is stretching us to the limit and is not yet considered a ‘premium’ property in a ‘primary’ area. After a few years, when we wanted to buy another property, it is harder to get another loan without selling the first one.
Reason 2: Must quickly buy before too old. Buy objectively, buy something affordable, buy something which has potential or even buy a property which will be built on the last piece of available land near to my mother’s home. Just never ever “buy quickly before getting too old”.
Reason 3: Good area. This is worth considering because hotspots typically have more demand and less supply due to scarcity of land. However, always make sure the area is good because of certain tangible reasons like near to offices or manufacturing plants which meant the potential market is wider with working professionals. If it is simply because of historical perceptions, think again.
Reason 4: Next to a college. Look at the mortgage versus potential rental. Assuming the mortgage is RM1,800 (due to 90% loan) and the potential rental for 3 rooms is just RM1,200, should she proceed due to this reason no. 4? Answer is No. RM1,800 has yet to include maintenance fees and all other miscellaneous which meant huge losses every month.
Reason 5: Potential for prices to appreciate a lot. For this particular potential, it also meant that newer launches next year can still be considered because in terms of new launches, majority of every developer is focusing on affordable launches instead of the luxury ones just a few years ago. Sizes are getting smaller to ensure affordability too. Choices are increasing and not reducing.
Well, she has yet to decide but I think she will make a decision which is to her best advantage. Indeed, she is still very young and truth is, opportunities are everywhere and not even necessarily be within Penang. Last but not least, her reason to buy is extremely weak and should not be the main reason for anyone to buy a property at all. Aim for a roof over our heads but not a price which crippled our ability to buy the second property in the future. Happy deciding my young friend.
written on 11 July 2016
next suggested article: Starting young is better than starting later