This is a question most people ponder over, especially when they plan to buy a new property. Of late, Malaysia has seen a decline in real estate prices. There was a decrease in property rates by 1.6% from the fourth quarter of the previous financial year until the first quarter of the current financial year. When a year-on-year comparison was done, there was a noticeable decrease of 3.7%. Even in individual cities, there was a significant drop in prices.
With dwindling property rates, new property buyers can hope to make the most of their new property by making it an investment. Let’s take a look at the factors that affect property investment and in what cases a house can be a good investment.
Factors That Affect Property Investment
The following are some of the factors that can determine if investing in a property is a good or a bad idea:
The price you paid to buy the property
If you have got a good deal for a property in a commercial area, it is going to save you a lot of money. But if you have paid a high price for a property which requires regular maintenance or which is located far away from your workplace, it wouldn’t be the most ideal investment.
The price you are charging for rental purposes
Have you bought a property just to give it out on rent? If you are charging rent which is on par with what all landlords in the area are quoting, then the property is a good investment. However, the amount should be enough to give you profit after you have paid your bills and other debt.
The additional expenses you pay for maintaining the property
All properties require refurbishment and general maintenance repairs at some point of time. If you plan to sell the property someday, you need to make sure that it is in excellent condition. The refurbishment could be anything from reroofing to home improvements. If you keep spending a lot on regular maintenance, then buying this particular property would have been a bad idea.
The price at which you sell the property
Let’s say you bought a property worth RM740,000 in one of the fastest growing cities in Malaysia. After living in the property for a couple of years, you want to sell it off. If you manage to sell off the property at its current value or more, then you have made a profit. However, if times change and nobody wants to buy a property in that particular area, then the property is not a good investment.
Let’s take a look at how some of the reasons how a house can help you in the long-run.
Why Buying a House Is a Good Investment
Real Estate Prices Can Increase
Property prices cannot be predicted. Today, you find numerous housing projects coming up in Malaysia. Furthermore, the government has introduced more and more affordable housing options such as Skim Rumah Pertamaku (SRP) and PR1MA, especially for low and medium income earners. When you buy a house today, you can save a lot as there are high chances to see an increase in prices in the near future.
Renting Out a House
If you own a house, one of the ways to make it an investment is by renting it out. When you rent out your house, you get an alternative source of income. You can use the income you earn as rent to clear off your debts. However, if you have taken the house on a mortgage loan, check the terms of the loan facility. Sometimes, you won’t be allowed to rent out or sell a property within a given number of years. If the loan facility has this clause, you can live in the house for a few years and rent it out after the period mentioned in the clause has ended.
A House is a Tangible Investment
A tangible asset is something that has a physical form. People invest in tangible assets so that they can have an alternate source of investment if there is any uncertainty in the local or global economy. Additionally, tangible assets give you much higher returns than capital assets and can help you save for your future. Since properties are tangible assets, it will be a good idea to invest in them.
A Place of Your Own
Even if you are not renting out your house, you save a lot of money by buying one. When you have your own home, you won’t have to pay rent every month. You could use that money instead to increase your savings or to pay off your debts.
Whether you are renting out a property or are going to live in one, if the house helps you save a lot of money, it will be a good investment. However, if you bought an expensive property and you are just paying money on bills, mortgage loans, and all other loans, then it won’t be a good investment.
When you plan to purchase a property, it is advisable to buy from reputable builders and developers. Also, check the best financing options available for the purchase. You can take a look at some of the top mortgage loans offered by banks in Malaysia and if you are eligible to apply for any of the government schemes.