Property Investments: Top 10 Benefits You Must Know

Property Investments: Top 10 Benefits You Must Know

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. However, you may not know who the writer is. Well, at least if you have been reading kopiandproperty.com or even having listened to me in one of the talks, you know I am a real person.

After having invested into property for the last 23 years (first one was forced…) and having properties in 6 cities / towns in Malaysia, here are 10 reasons I think are important for property investment. All the WHYs…

Lots of reasons NOT to invest into property too, just google please

Before I start, I also want to say that we can also google for reasons NOT to invest into properties. There could be an ever higher number of articles why not to invest. Reason is clear, most personal finance ‘experts’ would say property investment’s returns are low… it’s no longer doable… or that when you follow their save here, save there, invest here and invest there you will earn more… Well, just remind them to tell you what happens when you retire and you still have too pay rental for the next 25 to 30 years yeah. Hopefully the investment returns are enough to pay rental for 30 years 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?  Or even getting a job in Singapore and having to pay SGD1,000 per month for a room? For as long as we work and we dot own a place and the rental of that room continues? 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… Hahaha.

I can safely tell you that returns are real and no scams yeah. Returns are ALWAYS based on Return on Investment. Stop some amazing calculation of returns using the property price lah. We never paid the property price in full… how can we use that as the base for calculation and then we call it as Return on Investment?!

#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, property price does not need to rise too high or even double digits. Just need to follow the typical inflation rate. That’s already super good enough.

#5 – It does not suddenly lose half of its value overnight. 

Okay, except for that time when it dropped by double digits in 1998. However the year after, it recovered and two years later, it has more than recovered yeah. 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? Crypto 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. Do not just look at Malaysia yeah. Look to all the more advanced property markets of the world. From London to Melbourne to Singapore, we can learn so much from looking at their property market and reading the many news articles about the property markets there as well.

#6 – Demand will always be around. 

(I mean for Malaysia).  Looking at the demographics, Malaysia has a median age of 29 or 30 depending on which media and when. This is as safe as we can get. For median age, we are young by advanced economy standard. 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. So, demand for first property is there and the demand for the next upgrade property could also be appearing too. First property may not be big enough for the next phase.

#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… if they kept launching ever lower prices with every phase.

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 still buy. In fact even your neighbours and fellow owners would not want prices to fall. If we believe buyers want prices to fall, that’s true until they buy and now they joined the gang of wanting prices to keep rising…

#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. Property could just be that key to having this assurance 30 years later.

#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 doubled in price, that’s RM1,000,000. (again super low probability if we want it to be sudden but with time…) Think Sunway in the beginning when everyone thinks of it as a mining land and today… Think Puchong then… and today. Reminder that once upon a time Bangsar South was Kampung Kreinchi… or Desa Parkcity was in Kepong… and more.

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. However, many would suffer if they do not at least own one property because once our income stops but the rental does not, we will feel very stressed. When we are old, we should enjoy our life and not needing to worry every month end whether we have the money to pay rental or not.

The above is just for general understanding. 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, mature townships versus a total new township where not even shops are available yet and more. That’s another article. Till then, happy deciding.

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