This article first appeared in Property Insight magazine July 2016 issue. Yes, this magazine contains lots of other great articles too. Buy to learn. Or read a few here: www.propertyinsight.com.my
In 2002, I bought my first property, a 700 sf apartment in Relau, Penang. In 2005, I bought a 1,258 sf condominium. When my friend who is a senior manager in a US multi-national heard about it, he told me that I should be careful. The next crisis is around the corner. This was because a financial crisis is predicted every 10 – 12 years. The last one was in 1997 and he read many predictions that it would happen in 2008. He was right, it did happen and for a while everything seemed negative. However, both my properties did well even during the crisis. I think the reason was because I bought it at a very low price per sf, in comparison to many other more popular projects or areas. In brief, buying OBJECTIVELY saved my investment, not the timing.
Anyway, the crisis did not last long and the world started growing again. Malaysia’s property boom for both transactions and prices started rising and it was too fast for comfort. Cooling measures were implemented. One day when we met over a dinner in 2010, he told me about his prediction again. He said Penang’s property market is getting way too hot. People were queuing to buy properties like buying fish. He said he has decided to only enter the market when the market drops a lot. In 2010, the typical prices for my 1,258 sf condo was around RM500,000. In other words, it was less than RM400 psf. I told him that I believe RM400 psf is a safe level and he should just buy one unit and wait. Anyway, I sold my condo two years ago at RM645,000. Today, my 1,258 sf condo would fetch between RM600,000 – RM630,000. Oh yeah, even at RM645,000 it was only at RM512 psf, a level I considered normal. Not cheap but definitely not as expensive as some of the more popular areas in Penang.
My friend earns much more than me but he has been staying in the same 700 sf apartment because he was waiting for the best time to enter and buy. In total, he has waited for over 10 years. I am very sure he has been saving his money and investing is elsewhere where it’s safer. Seriously, have we ever wondered when is really the best time to buy? Personally, I believe the best time to buy is when we are financially ready and has viewed enough units to be objective. What about the second property? Sorry to disappoint but the answer is exactly the same. It’s when we have enough down-payment for the second unit and we have viewed enough units to be objective. The first property could be rented out fully furnished because by then, the rental could be enough to cover your mortgage which would have remained almost the same every month. Second property would be the start of our real journey into property investment.
After speaking to many fellow property investors, I think the general conclusion I have are just 4, for those who intend to invest instead of speculate.
- The best time to buy depends on us. (When we are ready financially)
- The second best time to buy was 20 years ago. The second best time is now. (When we are ready financially, haha)
- If there were people who are able to predict when the crisis would come, they would already be so rich that they have no time to predict. I have not known of any economist who has been right in every prediction. If you know of any, please tell me. I will follow him closely.
- BUY (right property) and WAIT is better than to WAIT and BUY (when the price drops a lot)
Oh yeah, assuming we really would want to buy when the price dropped a lot, do we already have a target price? If the answer is, ‘It depends,’ then I wish you all the best. Fellow investors who are still reading this, I think it’s time we start viewing more units in different areas. It’s time to start reading more property news. We can always say we intend to buy in the next two years but it would be foolish to only start reading about property investment news a few days before we buy. By the way, if we bought the wrong property, it does not matter when we bought it. It is still a wrong buy and that would set us back many years. Happy investing.
written for Property Insight in June 2016.
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