Property is often a popular choice for investing but it can seem quite daunting to begin with. We break it down into three simple questions to ask yourself before you decide to get your first property.
1. Why am I looking to buy property?
You may have heard the (cliched) three most important factors in property investing is “location, location, location”. Before that though, the question you need to ask is” rent, flip, or stay”. Are you buying the property for investing / rental / flipping / or for your own stay? Answering this question is important to determine the type of properties you want.
- Investing: you want to enjoy passive income from rentals or from reselling the property at a profit.
- Rental: the most important thing is the cash flow whereby your tenant pays for your mortgage and you keep the property.
- Flipping: to lock in capital gains with appreciation in property prices over time or with factors driving up property prices (i.e. property cycle boom, new malls or facilities nearby)
- Own stay: while most people no longer stay in the same place for the long-term, you should still buy a home that you like, in a place you love at a price below what you can afford.
2. Do I have at least RM25,000 saved up?
If you have not been able to save up at least RM25k, you may not be quite ready for property investing and the long-term commitments that come with owning a property.
Before you invest, you need to make sure that your emergency savings and risk management is in place. Otherwise, a financial catastrophe may wipe out all that you own, and you may even be forced to sell off your property at a loss.
Another reason you need cash is that you need to make sure you have enough to cover buying costs (i.e. booking fee/deposit/legal). Even for no cash (re: cashback) deals, you will need some cash for the initial cash flow outlay. If you’re buying a property at market price, you will need to have at least 13.5% of the property purchase price available to cover the 10% down payment and minimally 3.5% administrative costs.
Another option to boost your funding availability is to consider a EPF account 2 withdrawal or *FAMA bank. If you do not have the 25k saved up but (die die) want to invest in property, consider property investment exposure via REITs (or if you have no interest in managing the property and cannot yet afford to hire a property manager).
*FAMA = Father and Mother
3. How much do I know about MRTA and MLTA?
Click here to know more about the differences between MRTA and MLTA.
