Do you ever ask yourself should I invest in property at a young age? If you are always looking for something to generate quick riches, then this is not the right path for you to take.
As everybody known, we have seen some huge rise in prices over the years and it is true that property prices tend to run in cycles. As such, we will see more price increases in years to come, despite there’s a negative sentiment around the globe.
In recent years, the property in Malaysia is getting huge attention from many investors. According to the national House Price Index, the property prices rose steadily from 97.9 – 150.7 in the past 10 years. And, a residential property would have risen in value from RM135,293 in 2000 to RM208,725 in 2011, up 54%.
From the chart above, we can see that there’s a rapid growth of house prices over the years.
Many of my friends who did not have higher education are all to be more adventurous and grab any golden opportunity to earn a higher income in a strong currency. Most of them went to working oversea as they think that the amount that earns working overseas in 1 year is almost equivalent to at least 3-5 years of working in Malaysia.
I hope one day I managed to accumulate extra income over RM10k per month to allow me to retire comfortably. I have promised myself that my goal is to retire debt free, which is before the age of 65. But now, I have changed my mind and set higher target, which must achieve it within the next 10 years by just property investment.
Consider between the ROI and interest cost. Assume that you are investing in low medium cost apartment below RM100k in a good location:
Do you think investment through property rental can guarantee you to earn higher return in the long run if compare to fixed deposit saving? Anyway, you should make a proper plan before buying any property for investment.
Based on my understanding, if buying a house now, then for sure the price will go up. But, will you really earn? You need to know that some of the money have to be paid to bank interest first and also you might spend some money to renovate your house and other expenses like maintenance fees for the house.
How to Calculate Return On Investment for Property Rental?
Property Type: Apartment
Size: 650 square feet
Housing Price: RM 75,000
Down Payment: RM 7,500
Housing Loan Amount: RM 67,500
Loan Interest Rate: 5% (assumption)
Loan Tenure: 15 years (assumption)
Housing Loan Installment: RM 534 per month
Gross Rental: RM 600 per month
Other Expenses: Maintenance fees and renovation cost
Monthly Net Rental = Gross Rental – Loan Installment
= RM 600 – RM 534
= RM 66
Fixed Deposit vs Property Investment
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After considering several places and you have decided to buy a house and the price is agreed by both parties, you will need to pay some earnest deposit (min 2%) for booking purpose. My advice, don’t pay the 10% straight, just in case you changed your mind later.
After paying the earnest deposit, you will need to appoint your lawyer for the Sales & Purchase Agreement. It may take up to 2 weeks to prepare. Once the SPA is ready, you will need to make the balance 8% of the purchase price upon signing of SPA. (Assume your applied loan is 90%)
Besides, you must prepare some funds to pay the legal fees for S&P(Travelling, Stamping, Photocopying, Miscelllanous fees), which are relied on the purchase price of your property. Basically you should be able to estimate your lawyer fees based on the following:
Note: This is payable to your lawyers to get the land title transferred to your name.
What To Do After Signing The Sales And Purchase Agreement?