Investing out of the city you live in.

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A reader, S.C. wrote in with this message. “Hi, I read your article on investing in Melaka and its very interesting. I am from Penang basically and would like to know about your thoughts in investing in other states. Is it manageable and what are the things we need to know before we jump into it? Maybe you could consider to write an article about it? Thanks and have a nice day.”

When a reader asks ever so politely and happened to be from the state I worked in for 15 years, I have to reply. 😛 Penang was also the state which my property investment journey started. From the ‘not-so-respectful’ remarks to never ending debates about ‘why you buy that…’ I think I have seen the many reasons why many Penangites never ever started their property investment journey and why many continue to believe that waiting for the property bubble to burst is the best time. Here are 7 things to think about before we invest in other states.

#1 – Do we already own a property in the place we are staying / working today? (Skip this question if you have a cosy and free home to stay in courtesy of your parents). The reason we should have a property as nearby to us as possible is because we understand the area much BETTER than anyone who’s not staying nearby or staying in some areas they love. When we understand what we intend to buy, the chances to buy a wrong property is much lower.

#2 – Do we visit the place we intend to buy a property often enough? The first time I decided I want to buy a condo in Kelana Jaya was after visiting my good friend 6 who was staying in the condo for many years. She continued to pay RM1,300 as rental for it for many years. (furnished) Every time I was there, I slept in the living room while my wife slept in her room. So, I know the surrounding, I know the condo and I know the reasons why she was staying there; convenience.

#3 – Future potential? Diversifying is good if we know that there’s potential that we may be moving there in the future. The other reason I bought in Kelana Jaya? I thought that if I were to move up in my career, perhaps KL will be a place I will be going to. Funnily enough, I really did move up in my career and moved to KL. My last day in Penang was on Friday. I drove to KL on Sunday with a luggage and that’s how fast I moved to KL. I already have a home…My wife and daughter moved over within the next 30 days and we have been here in KL for the last 6 years.

#4 – Price and returns are essential. I did a comparison actually. In Penang, at the time, I could buy a RM200,000 apartment and I could rent it out for RM600 or up to RM800 if furnished. The condo in Kelana Jaya? RM185,000 and rental was over RM1,000 per month! This was the major reason why I think diversifying into a market with potential is a wise decision. It need not be in the Klang Valley yeah. In some smaller towns / cities, the price can be low but the rental can be positive.

#5 – Is it manageable? Actually, back then it was even harder to manage. However, it’s a matter of finding a good tenant who pays on time. Good people always find good people. Get the idea? Calculative people will also find … calculative people. Today, it’s so easy to get connected to many good Real Estate Negotiators who could help you rent out the unit or if it’s homestay possible, then they could handle it for you too; based on profit sharing. So, yes it’s now manageable.

#6 – Please be ready for some extra work / unforeseen circumstances. If we bought a leasehold property for example, it may take some time for the consent to be given. We may also need to apply for the water and electricity by ourselves. Renting it fully furnished meant we also need to find time to get the unit renovated and furnished. By the way, all these are very good learnings because by the time we do it again, we are already familiar. This is a very rewarding journey I can assure you. Especially for working professionals.

#7 – It does not need to be just the Klang Valley (though it should be a major choice). For example, I love Cameron Highlands. My parents love Cameron Highlands. I hope to go there a few times a year. So, I bought a place there and I think the returns will be pretty okay because the crowd during holidays are ‘crazy.’ Melaka is right next to Kuala Lumpur (1.5 hours) and it’s visited by lots of foreign tourists. This itself tells us of the potential opportunity.

Actually there are a lot more reasons but in brief, investing in properties in other states could be a rewarding one. Just make sure we are already familiar with property investment in a familiar area first. Working professionals may not be able to save a lot of money by themselves. Buying a property forces us to save and after a few years when we look back, we suddenly realised that property is actually an asset which is appreciating. Okay, minus the inflation, then it’s just a hedge against inflation. When one retires, one realises that paying rental is a huge commitment! If we own a few properties in a few different states, hey, we can even treat it like a vacation home! Haha. Okay, that’s a long story in the future. Happy following.

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written on 18 April 2019

<Featured Image is courtesy of Stock Photos from DifferR>

Next suggested article: Everyone should hate property investment because of these 4 reasons

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