Property Investment 101: CHEAP things to know before buying any property

Property Investment 101: CHEAP things to know before buying any property

As you know, kopiandproperty.com is not affiliated with any major media outlet, the founder himself has no REN tag and every engagement to speak (paid or free) is about property investment tips and sharing and not a marketing pitch for any property. So, the below is just another perspective from an investor POV and every investor is different yeah. Some has more money and thus more flexibilities. Some have less and thus better be prepared. Some have very little which is why investing in a property is a must or else, the very little will stay very little for generations to come.

Below are how some property advertisements would appear in your social media feed.

Cheap and luxurious?

Sorry. If it could be made cheap, it’s not possible to be luxurious. The only reason people buy luxury items is for the brand and not just because of the quality yeah. The only reason why people are willing to buy an overpriced property could also be due to the fact that they love that brand too. So, if an advertisement for a property says cheap and luxury, please buy with the understanding that you will get what you pay for. By the way, maybe it’s worth buying because of the potential upside but never buy this property and then expect it to have the same quality as a property twice the price yeah.

Cheap and Size?

Okay, if we look at many popular neighborhoods, the prices are usually already 7-figures. Whether for a small double-stored terrace or a 1,000 sq ft condominium. What happens if an advertisement shouts a price which is 1/3 of the 7-figure then? Please do not click with the hope that you will get a 1,000 sq ft unit lah… Be realistic. It can be priced lower because it was built at a smaller size. Can buy? Of course, if it meets your needs. If you are single and just want to hang out where the richer ones hang out, then yea, that’s a place to buy yeah. Plus if you have been staying in the neighborhood since young and wants to be close to your parents, then it’s also a buy lah.

Cheap and Good Size?

Occasionally, we see an advertisement showing a price which is very attractive and it says 1,000 sq ft or more. Please do not expect this to be in the popular neighborhood lah. If it was that attractively priced and decently sized, they (the developer) do not even need to advertise. They just need to pitch to the current owners in the area and all the units would have been easily snapped up. Owners would buy for their children to stay nearby etc.

So, when it’s cheap, please do expect the size to be smaller, sometimes pretty small too. I asked what is the smallest acceptable size in many of my talks. Thus far the smallest sizes acceptable from the responses are typically around 400-500 sq ft. So, the cheaper means the smaller it gets too. Less materials needed for the unit, less time needed to build, less manpower etc. That’s why it’s cheaper.

Cheap and Distance?

So, if it’s cheap and good size, it would be in some newer neighborhoods. newer neighborhoods would not usually be in the city centre because there is no more big parcels of land lah. So, it has to be further away. Probably starting from 30km away from the city centre.

Good or bad is a matter of perspective and also time. If the whole township has just started, they tend to price it very attractively so that they can move on to the second phase and so on. The higher profit (margins) will come in later phases and in fact they are the most profitable in all the later phases because people could see the value and are now willing to pay more. The ones who bought earliest, as long as the township continues to be successful will gain the most in ROI. Note that not all new townships become successful yeah…

Cheap because of super huge discount?

Guys ah, if you are a property developer, would you want to give lots of discount? Any business out there which wants to give a huge discount? Chances are, none. If there are, that’s where some issues may emerge. Was the price too high to begin with? If they are and now there’s a huge discount, then the property is worth looking at. Maybe there are some reasons that they overpriced it.

However, if the price is way below the whole neighborhood after the discount, I think we better do many rounds of due diligence. There’s a reason for the price; developers also need to build in a profit margin they need in order to continue the project. If they give a huge discount, two things may happen. They will cut a lot of corners (which you will not want) or they may abandon the project halfway because the money is just not enough to cover the development cost. This will be worse because buyers are now in no mans land.

Property Investment is both simple and dangerous

If we read enough, we would know property is a need. Everyone needs a roof over their head. This is true for people in every country. No one would want to sleep in the park or next to the road or even in some makeshift tent except if it’s for some short term adventures. Thus, buying a property is quite simple. Identify a property which fits the needs of most people and at a price we could afford today and we buy. With inflation and the depreciation of the value of money, we would soon see the price rising even if the value remains. 30 years later, our property price could have doubled or more. In other words, a natural hedge against inflation.

At the same time, simply buying without understanding means it is a very dangerous investment. If we buy into the stock market, it is all based on how much we could afford to buy at that point. We may lose what we invested. For a property, the loss is not just based on the downpayment yeah. It is the price of the property which we will be losing. Thus, this may set us back many years before we could even invest again. Sometimes, it could even be the end too.

Would I still invest into properties?

Yes. I would. Am I still looking? Yes, I am. However, the type of property may change. The places I buy may chance. The sizes I buy may change. Maybe more changes versus the first time I bought a property. Anyway, the tenure has to change too since I could no longer afford to stretch as long as I could when I was younger.

There could be even more changes but after so many years of property investing as a working professional, I think it’s something very rewarding for me. I love the stock market without any doubt but with a property, I get that amazing feeling when I unlock the door and step into my own property for the first time. It’s mine. (technically the bank’s since I am still paying the loan lah).

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