Property Investment 101: 10 Reasons to start the property investment journey
Learning from someone who has invested as a working professional since 2002
Google for reasons for property investment and you will an unlimited number of articles about this topic. After having invested into property for the last 18 years or so and having properties in 6 cities / towns in Malaysia, here are 10 reasons I think are important for property investment. All the WHYs…
Let’s not kid ourselves. There are a lot of reasons to buy or not to buy a property. In fact depending on which side we are in, we could debate until the fish can fly and we will still be debating. For those who seriously are starting to believe, here’s one article for you. “10 reasons why we should buy a property.” For those who prefers to rent, feel free to google for why renting is better than buying too. Hundreds of thousands of articles I think. Happy reading to both sides yeah. Here are the 10 reasons according to me.
#1 – It’s safe and real.
Shelter is the first thing everyone needs based on Maslow’s hierarchy of needs. In brief, this is the foundation before we start thinking of other things. Imagine getting a job within Greater KL (Selangor too) but we have no place to stay? Yes, it’s true, we do NOT need to BUY because we can rent too. Well, someone has to buy that property to rent to people who love to rent, no?
#2 -It’s safer and easier.
View a home, like it. View the surrounding amenities, like it. Check google map for the duration of drive to office every morning, like it. With these three likes, we have already done the minimum due diligence if we are buying a home for own-stay. Of course, then look at the price. Try doing the same with stocks? Understand the business… maybe. Get to know the management team… maybe. Know who their competitors are, know the industry and more… wah, not easy. It’s not that easy to invest into a stock yeah… Buying one is easy, not investing into a good one.
#3 – Leverage is possible.
Invest RM50,000 into the stock market and when it rises by 10 percent, we gained 10 percent. Invest RM50,000 into the property market (10% downpayment) and even if it gains just 5%, that’s RM500,000 x 5% up which is RM25,000. Our total investment was RM50,000. Return on Investment is thus RM25,000 which is 50%. The reason is because we usually buy a home with a loan and usually it’s with 90% home loan. Sounds unreal, just like a scam…
#4 – FORCED to save.
In a good way, anyway. We buy an affordable place to stay as a start. A RM200,000 home with just a 2% increase in price every year will be RM500,000 30 years later. 2% is like inflation rate. Someone would exclaim that RM500,000 30 years later is NOT MUCH! It’s true, RM500,000 30 years later may not mean much but how else could we save RM500,000 if not forced through buying a property? By the way, the property price increase has been 6.7% on average for the periods of 1990 – 2016 for Malaysia. Here’s that earlier article.
#5 – It does not suddenly lose half of its value overnight.
Okay, except for that time when it dropped by double digits in 1998. As for losing the investment value suddenly, there are many other types of investments which would lose that. If you are around my age, you would remember a company called Enron. The stock price was over US$90 and in a few months dropped to less than US$1 and in the end, worth nearly nothing. Gold fluctuations? Oil fluctuations? It’s hard to control them but with a property, as long as we did not buy the wrong one and we could wait, the trend is always moving upwards.
#6 – Demand will always be around.
(I meant for Malaysia). Looking at the demographics, Malaysia has a median age of 29. This is as safe as we can get. Any lower and Malaysians may not have enough demand since not that many Malaysians have worked and saved enough yet. At 29, that’s pretty okay! Graduated at 23, worked for 6 years, saved RM8,000 per year and that’s already RM50,000 for a first property… Plus the fact that people at 30 may have just gotten married and is now looking for an upgrade property followed by another one a few years later when a baby comes.
#7 – Everyone’s on your side.
Developers would not want prices to fall. Block 1 at RM400,000 and Block B at RM350,000? I think the developer would need security guards to protect them… Banks would not want prices to fall. They lent to us based on a value of RM400,000. A year later, the price falls to RM350,000? I think the banks will be sweating because if something happens, they will immediately lose RM50,000 even if they were to auction our property…. The government will not want prices to fall. They prefer prices to stay almost the same so that voters will be happy that they could buy.
#8 – It’s the least we could give to our kids?
Let’s not think about giving them money because in future, that money we give them will only be enough for them to buy a home VERY far from us or VERY SMALL if it’s nearer. However, if we give them a property, they will thank us for thinking well ahead before they even need to think about property. Plus, if we suddenly need money for their studies, we could also sell that property too. Saving half a million ringgit for their studies is super hard. Slowly paying for a half a million ringgit property is much easier.
#9 – Retiring better if not earlier.
Without an income when we retire, do we really want to worry about rental if we did not own a property by then? If we bought a property every 10 years, we should have 3 properties when we retire at 65. Selling one is more than enough to last us longer than what the average Malaysians have in their EPF account. EPF says the minimum savings one should have would be RM228,000 in their account when they retire. At the moment, majority of Malaysians are nowhere near this number.
#10 – When we get lucky in property, it’s super huge.
Our RM50,000 worth of stocks may increase 3 times (super low probability) and we suddenly have an extra RM150,000 to spend. However, if we used the same RM50,000 for a 10% downpayment and our RM500,000 property tripled, that’s RM1,500,000 of extra money. (again super low probability but with time…) Think Sunway in the beginning when everyone thinks of it as a mining land and today… Think Puchong then… and today.
Last but not least
If we google for ‘reasons to invest in properties,’ there will be never ending articles about it. Don’t worry. If we google for ‘why NOT to buy a property,’ there are just as many articles. So, the world is fair and everyone has their own say. From my understanding, no one has actually gone bankrupt simply because they did not buy a property yeah. It’s usually due to some other reasons.
Haha. If we dive deeper into the types of properties to buy, then we have even MORE debates; high-rise versus landed, popular hotspots versus emerging new spots and more. Renting to students or to office professionals. Perhaps that’s for another article. Till then, happy deciding.
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Next suggested article: It’s not an investment if we know nothing about it
first written on 6th Oct 2018, edited 9th Dec 2019, reedited 3rd May 2021 and now reedited 5th March 2023.