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6 reasons why property investment should be avoided :)

Posted in Property, KL / Selangor, and Starting Property Investing

I get these questions from my friends all the time. ‘Is 2018 the best time to buy a property?’ or ‘Where’s the best place to buy now.’ Frankly, the best time was 20 years ago. If only I had the money to buy just 10 landed homes in PJ then, I would not need to go to work everyday, today. When is the second best time? That is when we are ready to buy; when we have down payment ready and our monthly salary is enough to get our loan applications approved. So, is property investment a must-have investment for everyone? Let’s run through 6 reasons why property investment should be avoided. (Hopefully you get the right idea after reading this article)

Too easy, maybe it’s a trap.  When it comes to property investment, the investor gets to leverage. Buying a RM500,000 property requires only a down payment of RM50,000. Surely this is a risk because instead of owing the bank RM50,000 the investor is now owing the bank RM500,000! Fortunately, these days, there are complaints that it is hard to get loans approved. Besides the banks also do not simply lend to anyone who wants to buy a property unless they qualify for it. Oh yeah, the loan is to be repaid over a long period of time too.

Leveraging on our investment is wrong. When we invest RM50,000 we should expect to receive returns on our investment from this RM50,000 only. In property investment though, the property prices increase based on the overall price of the property and not on our down payment of RM50,000. This does not make sense! The owner may get returns which are up to 10 times more versus his investment of just RM50,000. (down payment).

Easy to be cheated – An ex-colleague bought her second property 1 month after listening to my talk. There has also been reports of new property launches which were fully booked within the same day. Why are all these people so easily cheated? What if the property bubble bursts tomorrow? No one knows though when the bubble will burst or if there’s a bubble. If we look at all the advanced property markets as well as our very own, property prices would drop after a crisis but it has always recovered and would reach a new peak after each crisis. (Please pretend you did not see this last sentence)

No one gets rich from property investment! There are people who got rich from their property investment, they will tell you. However, there are people who bought the WRONG property and they lost money. They will not tell you. (Yes, the word is WRONG property…). So, I definitely think there are people who lost money in property investment! Most high-net-worth individuals usually have property investment as part of their portfolios too. I am very sure when these tycoons invest in properties, it is not for potential returns but only for them to show off how much they have. They must have earned their money elsewhere!

It takes too long.  Property investors like Charles Tan of kopiandproperty.com tells me that I should not buy a property if I am thinking about flipping for huge profits in 1-2 years. This is absurd! If I have invested in that XXXX scheme or that XXXX stock, the prices have gone up in days or weeks. This property investment takes years! In fact it took months for the property transaction to be completed and when I need to sell, it takes another few months!  If I had bought stocks instead, it could have risen the very next few minutes. As for which stock will surely rise, can some readers give me some tips? I am equally scared the stock price may drop after I buy. 🙂

In future, no one buys a property, everyone rents! When we google for this topic, there are lots of debates about whether buying or renting is better. How could buying be better? If the owner dare to increase my rental, I will move. When that next owner increased my rental, I will move again. I do not want to the the owner who increases the rental every year. I want to be the one moving from one home to another every year and after 20 years realised that I have made many owners rich. In future, when everyone wants to rent a room or a place, it’s more advantageous to have the place for them to choose from.

There are many types of investments that yield good profits faster. Property investment may or not may yield that return on investment percentage that we want in a short period of time. Timing is always crucial in investments. As for property, time is important because this is one investment which will help us hedge against inflation every year. As salaries continue to rise, people would be able to afford to pay higher prices for properties. With a property, we do not worry how high the property prices would go because it is to our advantage. Without a property, we have to work harder to earn much faster so that we can afford a higher rental in future. Property investment may just be that forced savings plan that will keep us away from spending whatever we have when we have some extra every month. Happy investing into whatever you love to invest as long as you are happy.

written on 20 Aug 2018

Next suggested article:  Nope, not about investing in ‘youngest’ country of the world

 

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