ABCs of Buying and Renting Out a Property (successfully!)
ABCs of Buying and Renting a Property
I was listening to another of my favourite songs, ‘Yesterday One More’ the other day and someone remarked that the song has been around forever. I told her that I agree and in fact a good song is a good song no matter what generation it came from. If it’s a bad song, it’s a bad song even if it is the latest song… She laughed and agreed. Sometimes, there are things which are evergreen and this is true even for investments.
Buying a property and renting a unit out is not easy
When things are just too easy and everyone is doing it, what are the chances that we can get a piece of the action or that the returns are still respectable? Buying a good property requires some understanding of what you are buying. Renting out a property requires some effort, some knowledge and sometimes whether or not we are lucky.
I have properties which have been rented out in a few cities / towns in Malaysia (none overseas…) and the first one in Penang was rented out after I bought my second property and moved to that property in 2008. I bought my first property out of Penang (when I was still working in Penang) and rented it out successfully despite me still being based in Penang and the property was in Kelana Jaya.
Yes, it can be done successfully and definitely everyone can start from the first one… and then the next one… and the journey could continue.
What about challenges?
There are aplenty! Haha. Please do not think I will tell you that everything was so easy, relaxing and without any hiccups throughout the years. If I do, I am lying yeah.
#1 – Bought the wrong property Please remember that a property is usually the most expensive asset we would be buying and thus it is super important to know more before signing a home loan agreement tying us to the property loan repayment for the next 30 years.
#2 – Bought the wrong area There are established areas and there are upcoming areas and there are also areas which could take a very long time. Research these before starting. Prices are different and of course the challenges and returns are also very different. Established areas are most expensive but will have ready tenants. Upcoming areas will take time but may provide a decent return on price appreciation.
#3 – Prefers to do everything to ‘save’ money Let’s always engage the right professionals to help us in our property investment journey. There is no need to do everything by ourselves because the professionals are there for a reason. They help us in our property investment journey. From renting out to managing tenants and even maintenance of the unit, just find someone and not be the one!
#4 – Thinking of quick and big money Property investment takes time. Buying takes time. Settling all documentations takes time. Renting out takes time. Renting out to new tenants take time. Property price appreciation takes time. You can see everything takes time but the returns are very respectable if we take a long term view of 5 years or higher. (My personal and real experience and I have properties in 6 cities / towns in Malaysia today)
How do we start?
#1 – Choosing the right property. This is the base. Know what we really want. If we like office professionals, then do not buy into places without access to the Ts; the LRTs and the MRTs. Most of these office professionals may have a car but it does not mean they prefer to drive daily. We just need to note that because the office professionals are now more prone to change jobs, there is a chance that your tenant may inform you suddenly that they are moving out.
#2 – Choosing a more ‘evergreen’ tenant? We could also choose to rent out to tertiary students too. The good thing about these tenants would be that they are more stable and is usually more predictable based on their university semester schedule. Second thing is that this is also ‘evergreen’ for the foreseeable future.
Most parents are still super proud if their children are a graduate today. I am already making sure my children would also get a degree in the future too. They are just 9 and 7 respectively today! 😊 Your potential tenants would not include my children because their father would also be ‘renting’ out to them too!
Key to renting out to tertiary students?
#1 – Established location, preferably an education influenced township If we prefer to have tertiary students, then choose an established area where there are many universities and where there are already a ready pool of new students every year. Do note that all universities are back to normal face to face lectures today. One such example of an education township is Bandar Sunway. Always busy, always tough to get a parking spot and never ending food to try.
#2 – Renting out by rooms are easier than whole unit I did not know any of my other student housemates when I was studying in Subang Jaya way back in the days when there were fewer university choices. I think it’s the same today because most students would be meeting new friends in the university for the very first time too. This is why renting out rooms by having split-meter would be easier than trying to find a group of students to rent the whole unit.
#3 – Minimize risks especially with the uncertainties of today Renting out by rooms also meant that the risks are minimized even if just half of the rooms were rented out versus not having the whole unit rented out. Some income is better than no income and truth is, when the semester starts, it gets even harder to rent out the whole unit versus just a room or two rooms.
It has been extremely rewarding for me when it comes to property investment. I have a diversified portfolio of share market stocks, unit trust and sufficient fixed deposits. At the same time, I know that this is an evergreen theme because we can look at advanced economies and we should see that properties are getting more unaffordable and prices never stop growing because of inflation effects. Remember yeah, when value of money gets smaller, the prices just move up to balance the change. This is why a bowl of noodle used to be 10 sen during my mother’s time and it’s RM8 today. (maybe higher..)
Do you want to know more? Ask more questions? Come drop by The Property Table Talk: Is Student Township a Future Proof Investment? Register here and get FREE Touch n Go card! (Limited to first 50 only yeah)
I have not seen many of you for a very long time. Do come and say Hi! I am one of the three invited speakers too.
Event details as below: