Why invest in real estates?
In Malaysia, there are few places where you can invest your money in. Stocks, trust funds, commodity, real estates or even Fixed Deposit (FD). All these have different risks and returns. Out of those listed, most people would prefer real estate investing if they have the money. Why? Because if done rightly, it’s by far the most stable investment with better than average returns.
Courtesy of http://michaelemilio.com
Let’s take a look at some of the reasons why real estate investing is one of the most popular investing types around.
Rental Yield
Most investors would prefer to rent their units out especially during difficult period like this, when flippers might not get good profit out of their properties. There are still a lot of people (fresh graduates, etc) flocking over to the big cities and owning a real estate in the right place will definitely earn you some good rental income. Let’s say you purchase a condominium in Kelana Jaya for around RM 250k. Assuming your monthly rental is 6% (which is the average, unless you are looking at higher cost area which might give you 8%), you get RM 15k per year, which means your rental per month is RM 1250. And assuming your total loan repayment for 1 month is RM 1100, you have additional RM 150 every month.
Leverage
You can leverage on the money you have when it comes to real estate investing. By doing this, you can buy up to 3 properties with 100k with each of them worth a full price of 100k. Why? Because you only use the 100k to pay for the down payments of the 3 real estates. You get your tenants to pay the rest for you once your properties are completed. That’s why if you’re looking at this slightly high-risk option, be sure to get only properties with good rental yield and good returns. Otherwise, be prepared to hold the properties for a very long time, hoping that you will be able to survive when you are forced to pay for all 3 of them upon completion.
Price Appreciation
A good real estate by a well-known developer in a prime location, can cost a lot but the value of these properties also tend to appreciate more than others. Some properties in Mont Kiara, during the boom period (which is over), cost 20-50% more when they’re completed as compared with the price during the project launch. That is a whopping 20-50% gain in 3 years! Also, real estate market tends to go up all the time. Even if it goes down (like currently), it’ll not be a big drop.
Lower risk
Real estate investing has a much lower risk than stock investing though it’s not considered as liquid asset since it’s not easily disposable. However, among so many investment types, real estate investing is perhaps the one with the best low risk:high returns ratio. Just be aware of screwing up, because it DOES hurt a lot.
And after all these renting and leveraging, the real estate concerned is still yours to resell. Isn’t it good to have someone pay for your loan (your tenants) and in the end, you still get to sell the real estate for a huge profit?
Of course, that’s the best scenario and the reason why many people are throwing their money into the real estate market.
Just be aware that if you don’t do your research and calculation correctly, a big “screw up” will drag you down into the unknown abyss forever – or at least for 1 or 2 decades.
p/s…. the article above is based on my opinions and also the information I’ve gathered while learning to be a real estate investor. I didn’t go into it due to lack of fund.
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