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Real Estate Investment: What Should I Know?

Key Points

  1. Investing in real estate can be a lucrative investment, but there are risks involved.
  2. You can choose to earn money through short and long term investments in property.
  3. Doing research and preparing for risk will make your investment more successful.

Investing in real estate can be a lucrative investment, but there are risks involved. Some of those difficulties stem from financial considerations on how much profit an investor makes off their rental properties versus what they put into it. There are several ways that an investor might assess their risk profile when investing into property.

If you are new to investment, you might want to have a look here. However, if you are interested in real estate (property) investment, you come to the right place!

There are several steps you need to know before investing in real estate in Malaysia. We are going to talk about it below.

Why Should You Invest In Property?

Before we start with all the steps, you might want to know why you should invest in property? Is it the kind of investment that is suitable for you? Buying property for investment purposes can seem daunting at first, it might seem like an awfully big financial risk that you may not need or want to take.

There are other types of investments that may not be as risky, such as unit trust or bond investment. This is true up until a certain point, especially when they will guarantee rates of return every year. However, the interest rates on these accounts are only slightly higher than regular bank savings. All your funds will be locked away for years or else you will be penalized.

On another hand, the property market is a much more stable option when compared to investment that is volatile, such as the stock market. And it might let you have peace-of-mind whereby property investment is a physical asset, compared to digital assets such as NFTs or Cryptocurrency.

When you consider property values, it tends to rise over time, and by renting out your home or unit it will provide an income for yourself in perpetuity. All you can sell it after a few years to gain more profit from it, up to you!

Therefore, investing in real estate might not be a bad choice, and from the support of the government nowadays, it is not that difficult to start investing in real estate. Why not give it a try?

When Should You Invest In Real Estate?

There is no straight forward answer for this, however, these are some good ‘moments’ on when you should invest. We listed down below:

  • Your housing loan have lower interest rates
  • Attractive stamp duty exemptions
  • Higher loan percentage relative to the price of property you want to invest

For example, if you are a first home purchaser in Malaysia, aged 18 and above, you will get benefits from MyHome Scheme. The government pays an upfront subsidy to the developer that includes 10% of their deposit, along with a qualifying payment amount. This means that you DO NOT need to pay the standard 10% down payment when buying a house! Isn’t that great?

If you have enough funds, you might also consider buying properties when the market is not so demanding at the moment. Therefore, you are able to purchase with lower price and earn profit if market demand is increasing.

Types Of Real Estate Investor

We can categorize them into short term and long term real estate investors.

Short Term Investors

Some investors will choose to buy or invest in up-and-coming areas, especially those places that are considered ‘trendy’. Therefore, they can buy and sell the property in a short time as soon as they consider the price value has increased.

While many people who buy real estate do so with the intention of holding onto their property, there is still money to be made by quickly reselling it at a profit. We called them house flippers. When the property market is booming and banks are willing to offer loans at affordable rates, this strategy will be best used.

Long Term Investors

They focus ONLY on one thing, the steady increasing of real estate’s value over time. They will earn profit either through capital return or rental return.

If the investors prefer to sell their property, they will only sell it after the value increases a certain percentage that meets their personal target. Otherwise, investors can get a steady, passive stream of income by renting out their property to others.

What Should You Know When Investing In Property?

There are a few things you need to know when investing in real estate.

Don’t Let Your Emotional Make Decision

When buying a home, people often listen to their heart more than they think about it logically. This is perfectly fine when you will be living in the property for many years of your life. However, if the real estate is for investment purposes, you might want to consider more than what you like, but what you or your client need.

Don’t let your emotions affect your decision when buying investment properties. Consider this as a good investment opportunity as any other business deal and negotiate to get a good price when dealing with a real estate agent!

Like other kinds of investment, the lower the price you use to get the property, the better your chances of earning higher profit from it.

MUST Do Research

No matter how others tell you that a certain property is worth buying, you MUST still do your own research.

You need to do proper research on investment property. You need thorough research before making any purchases, as well as market conditions that would help make profit for you in the future.

To ensure that your property sells or rents for the best possible price, you need to know what type of client you are targeting. If your target clients are students or fresh graduates, you might want to choose a location where your clients can afford to rent and easy access to public transport.

However, if you are targeting high-end clients or entrepreneurs, you might want to consider investing in luxury apartments or houses. This is because the needs of your clients are different from students.

Therefore, understanding who your target client is and the market condition before you decide to purchase a real estate investment is very important!

Secure The Real Estate

If you have made up your mind to buy a particular property, you should make a down payment or deposit to secure it. Some sellers or developers require only a small amount of deposit, while some require down payment.

The down payment is an important amount that must be paid in order to purchase property, no matter if you buy from the developer or real estate agents in Malaysia.

The buyer is required to pay at least 10% of the property’s price as a down payment to secure the real estate. This means if you buy a house for RM650,000, then there will be an upfront payment requirement of minimum RM65,000. Other options for paying the remaining amount of 90% can be a home loan or any other similar type of financing.

Deal With Trustable Third Party

No matter how valued your property is, if you cannot get the money, it is useless. One should remember when buying or selling a home, it’s important to make sure that the transaction and payments goes through an established real estate agency or trustable third party.

This is to avoid scammers whereby you will not only lose your money, but also property, no matter if you are a seller or buyer.

Calculate Expenses And Profit Beforehand

It is important to calculate the money that you already have and what loans or other sources of funding can be used before making an investment in property. Your next step should be to calculate how much it would cost you as well as other factors such as renovations and operation costs. Once these have been taken into account, you should estimate the profit you want to make, after cutting out all the expenses that have been spent.

Pay off your debt if needed. Remember that you need to have a good credit history and financial plan before borrowing a loan from banks. You do not want to be in blacklist after or before investing in a house.

Choose A Trustable Partner

For some, partnering up with their friends is the better option than going through a long process of getting an investment loan to start investing in real estate. However, when considering choosing a partner, it’s important that you take into account your comfort level and what will happen if things don’t work out. A trustable and good credit partner will be a good choice.

Willing To Take Risk

Although property investment is a great way to make money, it isn’t always fail-proof! Be aware of the risks involved and how you can minimize your exposure. Have contingencies planned for any problems that might arise.

The factors that could lead to a property market crash are fluctuations in interest rates, the cyclical nature of real estate markets and how external political or economic shocks can trigger similar effects. You should always plan for the unexpected when making a property investment.

Conclusion

Investing in real estate is always an exciting prospect, but it’s important to keep perspective. You could make some money and have a great experience or find yourself bankrupt with nothing left behind except for debts!

If you want to find the best property for your money, don’t base it on personal preference. Instead use an analytical approach that takes into account all financial factors and consider doing some research first!

When making property decisions, be sure to avoid being overconfident or irrational. This is a costly mistake that can lead you down the wrong path and cost more than just money. You might be spending more than you bargained for, resulting in low returns on rental and resale values.

With the information from this article, you are now equipped with everything needed for your first investment property! We wish you all the best and good luck!

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