Investing in property – the basics (updated)

There are a lot of investments you can do. From FDs to Unit Trusts to Insurance savings plans and even opening your own company, the choices are aplenty. What about property investment? Let me share my reasons why property investment is attractive and applicable to me, who’s working full time, has a lovely wife and a mischievous baby daughter.
Passive income. People can shout all they want but the truth is, there are still a lot of properties available for RM250K to RM300K. The rental is still acceptablelah, even if the yields are notes crazy asa yesterday. There’s potential capital appreciation too,in a few years time. However, you need to have around 15% downpayment for the loan, lawyer’s fee, etc. Depending on how old you are, this is sufficient to cover your mortgage and gives you a positive yield no matter how small this yield may be. If I can, I would like to continue buying to rent out. The reason being after a while, this becomes a passive income for you. The capital investment that you do would most probably be once, apart from the maintenance but the rental will only increase over time and the property will only increase in price over time. If you are able to rent out for a few years, you would notice that the rental yield becomes not just better but GOOD.
Family planning. Don’t tell me you want to buy a property for your kid in the future. Do it now. Chances are when they are old enough, you can either sell the house for their education or even give them the house as a gift. Even if a property is worth just RM300,000 today and rising with just the same rate as inflation, it will more than doubled when you sell it later. If you are staying in a landed property today, when you are older and your kids are no longer staying with you, it may be wiser to move to condo for easier maintenance, security and convenience. By then, your current landed property would be worth so much that after you sell and bought a condo, you would have enough for your retirement. Thus, property buying serves both your kids and even your own ‘ageing’ planning.
Great investment. Honestly, if I was richer or borrowed from my parents and bought double of the properties I bought and sold off everything today, I could now be sipping coffee and reading a book beside my swimming pool. Yes, it is true. However, it is ok, I may still retire earlier by 5-10 years perhaps than the official age of 56. You can save a lot of your income by not going to Starbucks so often, buying a Saga instead of Vios but if you take the ‘save your way to riches’ route, it will take you a very long time. Surely you will get there but it will be slow. You can also borrow huge amounts of money and drive up to Genting and perhaps you may win big or lose it all. With property investments though, the route is faster, more fun and ‘surer’ than many other investments because property is after all, a human need. That’s why they call it ‘home sweet home’, ‘home is where the heart is’ and when you feel tired after a full day of working you call your wife and said, ‘I wanna go home’.
Caution. Property investment is however not without any risks. You must have read sufficiently to be knowledgeable about your buy. You should do a thorough evaluation before buying. There’s no such thing as simply close your eyes, point and buy. The last thing is to listen to your friend. If he is right, you are good. If he was wrong, you have just lost a friend. Secondly, no matter how bullish you are about property, you must have your fundamentals right, sufficient savings in FD, coverage in insurance and work hard in your current job.
There, back to three basic reasons and one little caution on why I love properties and perhaps the reasons for you to start loving properties too. Just be reminded, there is no super fast route in property investment. On and off, you may hit a jackpot but that is just pure luck. The fortunate thing is, ‘luck comes to those who work hard’. 🙂
updated on 8th March  2014
Next suggested article: Buying property – too far, too expensive, too soon


  1. Hi Chialih,
    To those possess more than 1 property or earn up to certain threhold of income, Are they still eligible for buying property below 400k in Penang after cooling measure is implemented?

    1. Everyone can buy secondary property. Happy buying.

  2. Is the number of properties important? I think whats most important is the quality of the asset we acquire. I have only one simple in 2011 – 2012 that is any property I acquire must give me at least RM500 monthly pocket money with 10% capital invested and a minimum 6 figure capital appreciation within 3 years. (I don’t trust zero down payment strategy)
    For a property that selling from 250K to RM300K rental fetching from 1.1 to 1.3k. If bought at RM300K rented it out at 1.4K, monthly installment is RM1,320 for 30 year tenure with 10% down payment. I am very dilemma on the current market now. Buy or not to buy! As you can calculated if included the legal fees, stamp duty, and some renovation cost the total amount could reach to 330K. Also, don’t forget the monthly maintenance fee, quit rent, fire insurance and assessment fee. I don’t think you can collect pocket money from the new purchase but i am sure you have to fork some money from your own pocket money. Yes, agreed the rental will be increased, it can be adjusted based on market rental maybe 3 or 4 year you could increase another RM100 or RM150.
    Another dilemma is capital appreciation. I think 6 figures on capital appreciation within 3 years is impossible on the current market now. Any thought…!?

    1. I dont have an answer to your question. However, my goal in my next purchase is just to make sure I have positive yield. % wise, secondary. I aim at % for capital appreciation instead of absolute number. Thus, 30% return per annum is considered very healthy to me.

  3. As for the new launching of new property, it is quite hard to gain the 6 figures in capital appreciation because high selling price, i wonder who really from local could afford that as income vs property peice is getting far apart.

    1. there is no such thing as 6 figure capital appreciation anymore. need to be realistic and thus I only believe in rental first for now. as for income vs property price, again, be realistic. buy further, buy in less favoured areas. as at now, there are still choices.

  4. Agreed with you as the entry level of new launching property in pricing is very high now, 6 figures is hardly to be achieved compare to those who entered in the market in 2008 before, even for sub sale market, it is rarely to see an under market value unless those who intended to sell off their property urgently. maybe there are opportunities out there. it is just the matter of more study is require.
    Please comment if any, thanks

  5. I notice that some hotspot areas rental has dropped a bit but price has increased. May be due to supply is more than demand.

    1. It is possible. This is because information is now easily available. If I m able to get a cheaper place elsewhere I would. Furthermore if I m ok to drive I may have even more choices. It is always supply vs demand but bear in mind urbanisation would continue.

  6. Rental is always the concern as Penang is lack of business energy and activity to sustain on it. It is quite challenging of buying property for rental yield purpose in Penang. Especially for those newly launched property with high price, you may have very little cash flow or negative after the monthly bank installment if it is in rental market, To my case, I had advertised my apartment in last 2 years, total of 3 tenants had stayed in before but all of them can’t last longer in less than 1 years for all. So bad.

    1. Yea that is a possibility. Sometimes luck plays some part too.

  7. Chin Min avatar
    Chin Min

    Hi Chia Lih,
    I have a doubt here. How do you define or judge since nowadays is very difficult to have positive yield from the monthly loan amount vs rental income.

    1. Hi Chin Min, I do not mind buying a property for rental and having negative return if I have done enough study on the said property and determined that it is good value. Always bear in mind, the best is buy with positive ROI. However, in some cases some prices have gone up way too fast and the rental has yet to catch up. If the said property is a good one, it would not hurt to be negative for a while. Note that this is NOT an easy or recommended strategy. Negative every month is not good feeling. As for positive ROI, check online, there are still many of those. Do our homework well and it should be just fine. I assume you are still able to stretch your loan to 30 years. Cheers.

      1. Chin Min avatar
        Chin Min

        Hi Charles,
        Thanks for the reply! I have 2 properties with me at the moment, 1 with positive ROI and the other with negative ROI. I have the same thought with you too, it is okay to have negative ROI if the property has a good value! Happy buying, happy investing and happy harvesting to you 🙂

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