First timer stress: Buy now? Buy leasehold?

First timer stress: Buy now? Buy leasehold?

I think this is an issue for all first-timers; the thought of buying that first-property of a few hundred thousand ringgit. 16 years ago, when I was ‘ADVISED’ by my father-in-law to buy a property before getting married, I too was stressful. What if we bought the wrong property? What if I could not afford to pay for it after a while? When my wife and I found that property which seems perfect for us, we used the next 2 months to think, rethink and think again. A reader of wrote in to me a few days ago. She had the same issues as my wife and I when we were thinking of whether or not to buy that first property. Here’s her two questions briefly.

— start —

“Hi Charles, I became an avid reader of your blog recently after I stumble upon it accidentally. I’m stuck in a situation and I really hope to get your advice before I finalise my purchase for a property.”

1. We are not sure what to think about leasehold property. Is it a wise investment?

2. Is it a good time to buy now?

— end —

My brief answers

1) whether it’s leasehold vs freehold, it matters more whether you like the property or not. Leasehold represents good value because it is typically 20-30% lower than freehold property within same area. We should however make sure the leasehold does not expire in less than 50 years. I have personally bought more than 1 leasehold properties in my 15 years of property investment journey. When the opportunity is right, the question of leasehold or freehold is towards the bottom of the consideration list. It’s not the first, usually. One very real example, when I bought Kelana Puteri condo when it was still RM182k, many people mentioned to me that it’s leasehold and that it’s less than 90 years left. I just smiled. I sold it a few years ago for RM460k.

2) There is NO such thing as the best time to buy. Frankly. However, it’s very important to know the “WHY” you buy. If the WHY meets all your reasons and you can AFFORD it, then it’s the best time to buy. Please do not borrow funds from Ah Long to buy for example. Using bad debts to buy good debts is still a bad decision. Plus you are buying for your own stay, which meant that even if there’s a crisis, you will not be forced to sell. Remember, financial crisis never lasts forever. 1997 Malaysia got hit by a financial crisis, by 1999, it was back to normal and booming. US’s mortgage crisis hit in 2008, by 2010, it was back to business as usual.

Last but not least, the market is slow currently. This represents an opportunity to buy. It is not suitable for speculation. Only when market is good that speculation fluorishes. By then, itmay be best to be very prudent because when prices rise way too fast, the property bubble builds up quickly and may just burst too. Here are a few signs to refer for those signs. Understanding the 3 property bubble signs and more Happy investing.

written on 24th Oct 2018

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