So what should you do if you are young and thinking about investing in properties?
Do you ever ask yourself; should I be investing in property at all, and what can I expect to get from it? If it is the road to quick riches that you are seeking, then this is not the right path to take.
Yes, we have seen some huge run-up in prices over the years, and it is true that property prices, like the economy, tend to run in cycles. As such, we will obviously see more price increases in years to come, despite the current negative sentiment enveloping much of the globe.
There is a whole bunch of other factors pointing to future price increases too. In some cities, the lack of new building stock will keep the supply lower than it should be, yet the population continues to grow and so does demand. However, do not bet everything on this happening. Instead, expect to see, over a longer period of time, steady increases with plenty of troughs along the way as the economic cycle rises and falls.
Now, here is the cue for readers who argue that the market is about to tank and that now is not the time to buy property. With Europe perched on a precipice and the United States still in an uncertain state, you have to ask yourself if the bottom of the market has been reached yet despite the pretty strong fundamentals underpinning the Malaysian economy at the moment.
However, if you are a young person just starting to save for your first property, you have a bit of time to sit back and watch the market while you save, so do not fret too much at this juncture.
If you plan on being a landlord, you will need to have some extra cash to cover the loan while in between tenants, and also to pay for any repairs needed on the property. If you are buying an apartment block or townhouse, you may also need extra money to pay for special levies such as building repairs not covered by the sinking fund.
So the smart thing to do is to save a good amount of money before purchasing any property to ensure that you are not taking an uncomfortable risk. Buying a property close to the city can be good, however, one should also consider the public infrastructure that is available, and whether or not the suburb has the potential to develop over time.
Buying near MRT or LRT stations is always a good bet as the infrastructure will be there for a long time. In fact, as the local population continues to grow and the area becomes more congested, the infrastructure will become even more important. Keep your potential tenant in mind – what type of person would like to rent your unit and do these people generally live in the area?
Direct any spare cash you have to your savings account, not your investment loan. While it is not advisable to dump all of your extra cash into your investment loan, it is prudent to pay the property off over time to gradually reduce your liabilities. You should also be prepared to spend on maintenance over time and keep your property up to scratch. This will help you attract better tenants; in addition, property will also hold its value better. Rundown rental properties look shabby and often do not command a good price when it is time to sell.
As a young investor, it is advisable for you to find a partner who knows the market and who can help you get started. Find a real estate agent or broker who is familiar with the area you are interested in, and who wants to work with you in the future.
You cannot buy a property without the necessary capital. As such, you may want to meet up with a professional advisor before seeing a lender to make sure you are ready to handle the ups and downs that come with being an investor. As a real estate investor, you will certainly experience your share of lows, including vacancies on your rental property, your property staying on the market longer than you would like, and tenants who can no longer afford to pay the rent. So be prepared for the worst.
It is also important to make accurate monthly repayment according to the current Base Lending Rate. If you have your sights set on owning more than one property, do not be in too much of a rush. Maintain an investment portfolio that is balanced. When you have built enough equity, you can then consider buying a second property. You would want to hold onto each property for as long as you see fit, rather than be forced to sell should