This is a brief write-up about property investment. In Manglish.
Credits to Mama-san for teaching me about property inv(c)estment. XD XD XD
Why invest in bricks and cement?
Because you can get rental income. As in buy the property and rent it out. And if you're good at it, you can make more and it can be your passive income.
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Your first property!
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Soon la. In time it will be yours.
First off, to kick start your venture, you need capital. It can come from your savings or you can take a loan from a family member. If you have enough to buy a house with your own money, good for you. If you don't, then that's where banks come in.
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Banks offer a variety of loans that have a repayment period of up to 40 years (depending on which bank). And usually the younger you start, the longer you have to repay your loan, the less you have to fork out per month. The Base Lending Rate (BLR) is quite low nowadays, if I'm not mistaken. So, in a way, it's a good time to invest la.
I don't know if banks offer 100% loan. The maximum I know of is 90%. And that's if you're still young. Like me. HAHAHAHA.
So for example, Ali, a YUPPIE, is 24 and is looking into buying a house. The house costs RM70000. Ali only has RM14000 in funds, which is 20% of the cost (after all that saving!). So he applies for a loan and gets 90% and the maximum repayment period of 40 years (loan attributes vary by individual).
Therefore..
Ali pays 10% of the RM70000 only, the 90% is paid by the bank, and still has 10% of his savings to spare.
As for the repayments/installments, your rental income will pay it off. Provided the rent is higher than the amount needed for the installment la.
The idea of borrowing money from the banks is.. eew. Not nice la. We don't want to be debtors ma. Some say it's the interest, some may say, 'what if something happens and I can't repay my loan?' So if possible, let's not borrow money at all.
Let's reconsider.
Being a debtor can bring you so much joy XD
Having debts may not necessarily be a bad thing. You have bad debts--or as Mama says, 'unproductive debts'--and good debts, 'productive debts'.
Why the term productive? Because using your bank loan to fund an investment that continues to give you money is productive, as compared to using the loan to purchase frivolous/'dead' items that do not churn out money for you.
With the 'Ali' example in mind, the idea is to LEVERAGE.
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Why pay the full amount with your own money when you can make use of the bank's money? You can then use what amount you have left to invest in another house.
Now that we've established that having debts can be a good thing, we'll look at how to buy your first property.
LOCATION LOCATION LOCATION!
So cliché hor? Haha. But it's true ma. You buy a property that's so damn far away and so remote, who want to rent from you??
Developed areas are always good. Lots of commercial and industrial shops and factories; schools and universities.
Also, take note that climate change is affecting us a lot, so you have to pay attention to slopes, terrain, and stuff. Read the newspaper la. The Star. Lately they have some articles on slopes and properties.
Since you're there, read up on going green, too. What you can do to help reuse, reduce, and recycle. Save money also lo. Grow a forest in your backyard.
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Searching and researching
After you've established an area that you like, start looking for units. And read the Classifieds and scout around for properties on sale on websites. Even those small placards with the words 'bank lelong' that you see stuck on poles.
Auctions are pretty exciting and at the same time, annoying. Exciting because you get to see parties trying to outbid each other. Annoying because the auctioneer sucks. It wasn't like the auctions that I had in mind, or those that we catch on TV. The auctioneer goes, "RM XXXXXX going once, RM XXXXXX going twice.. This property can be good for rental bla bla bla..", and then somebody decides to up the ante. And you have to outbid someone else AGAIN.
You also need to calculate your rental yield [net monthly rental income*12mths/total cost of acquiring property (incl. legal fees)] for that property you are looking at. The higher the better la, of course. For a start, it should be higher than your loan's BLR.
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A little bit more and the title is yours
After you've located a property, you contact the seller and negotiate. The usual stuff. But you'll also need lawyers to prepare a Sale and Purchase Agreement. That also incurs legal fees that you have to add, in addition, to the cost of the house.
Yep. I'm done. ^^
Again, this is really just a general write-up about property investment. You'll need to do your own homework on the loans, BLR, rental yield, legal stuff, etc..
Read more about earning from rental
3 comments:
yes agree. the 3 L's are the most basic thing to know before investing .. Bandar botanic houses are quite cheap and it's increasing due to the popularity ...hehe
wei..why ali? so common lol.. does Ali need a parent guardian to apply for the loan or not?? or need minimal income requirement if he wana apply alone.. hmm something to talk to my aunty about..kekekeke...
Kaeshiuh: I haven't seen the place for myself, but from GMaps, the place looks a little underdeveloped. Granted, GMaps' pictures are old and it appears unclear. Why is it popular actually?
Lester: I was going for the primary school textbook approach. haha.
Some would need guarantor lo. Some don't need. Depends on the "individual's financial standing". Usually those who are already working and have a few payslips no need la. But depends on how much is your monthly installment and whether your salary can cover anot.
Like those who aren't working, means no steady income la. But they got savings wor. But if no steady income, means may have difficulty in repaying the loan. So need guarantor.
Again, the amount the bank is willing to loan you may vary depending on your financial status as well as the individual bank's criteria.
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