Property investment can be a massively profitable venture if done right with the proper preparations for the risks that come with it. However, do you know if you are TRULY ready to get into this exciting (and ALSO risky) endeavour?

Read to find out about the things you should consider before thinking about investing in property.

1. KNOWING YOUR INVESTMENT PURPOSE

   There are many ways to invest in property, and you should know your options and strive to make the best decision for your current needs and affordability. Not being aware of why and how you are investing is definitely a recipe for disaster for your finances in the future!

   For the uninitiated, below are the more common ways to invest in property in Malaysia:

   • Buy to rent
     Provides regular income but requires a long-term commitment. As a landlord, you will have to fork out money for repair and maintenance costs and spend time dealing with problematic tenants.

   • Buy to sell (short-term)
     There are two ways to invest this way. One way is to simply buy a property, sub-sale or brand-new, and sell once its value increases within a short period of time. Another way is to buy a sub-sale property below market value in an in-demand area, renovate it, and then sell at a higher price for capital returns.

   • Buy to sell (long-term)
     Buying a property to hold for a long duration, so that it can be sold for a profit when it appreciates in the future. If you go with this, you should be sure that you can commit to the maintenance costs as you wait for its value to increase!

   • Real Estate Investment Trusts (REIT)
     This relatively new way of investing involves you buying shares of a company that owns properties, and distributing its income in the form of dividends.

2. FINDING THE RIGHT LOCATION & PROPERTY

   When investing in property, location is key – it will make or break your investment. And to ensure that you make the best decision, you should arm yourself with knowledge of the current market and trends by doing your research, and not rely on hearsay or the advice of friends and family. Here’s a simple guide:

   First, choose the right market.
   Key things you should look at would be:

   • Growth of Market: Research projections on whether the area’s population is set to increase OR decrease in the future. An increase in population means continued demand for rental housing and increased value of your home.
   • Local Economy & Job Market: A bad economy will result in low property prices and lower demand. An area with a diverse source of jobs, good mix of people with different job types, a rising median salary, and a low unemployment rate has good potential for investment.
   • Value of Home: Even if you are planning to rent, you should make sure that the home you invest in appreciates in value over time. You will want to ensure that your investment is worth its price.
   • Rental Rates (if applicable): Finally, you will want to ensure that the area’s rental rates are favourable, so that you get the returns you desire. Click here to get a rough estimation of your desired area for investment’s rental rates.

   Then, choose the right neighbourhood
   You will want to take into account factors such as:

   • The property’s proximity to amenities
   • Good schools close by
   • Accessibility via roads and highways
   • Access to public transportation
   • Income levels

   Finally, you will also want to choose the right property
   You should aim to get the best property within your budget that will give you the best returns. Consider these three factors:

   • Purchase cost (price of home and upfront costs)
   • Ongoing expenses (mortgage, taxes, insurance and maintenance)
   • Valuation of property (by a third-party appraiser)
   • Inspection of property for potential repairs required

3. DETERMINING YOUR CASH FLOW & AFFORDABILITY

   This might seem like a no-brainer, but it is VERY important that you are clear about the costs involved, potential returns and whether you can actually afford to invest in property in the first place!

   First and foremost – your cash flow (money left after expenses) should be positive. To ensure that you are well prepared financially, you should be aware of the costs involved and projected income. Some of the things you should take into account are:

   • Current loans and debts that need to be repaid
   • Expected cash flow from rental income (if applicable)
   • Estimated profit from the sale price after deduction of expenses (if applicable)
   • Expected increase in value from price appreciation
   • Available liquid funds for the down payment, and upfront home purchase costs
   • Credit score (which will affect your loan approval if you are looking to get a home loan)
   • Type of home loans, interest rates, monthly instalments, taxes and insurance
   • Property management expenses
   • General upkeep costs (cleaning, repairs, utilities, maintenance, etc.)

   It is highly recommended that you do a cost-benefit analysis when it comes to cash-down payment vs loan, mortgaged loans vs. value appreciation, the period of the loan and forecasted appreciation over a particular time period. If the costs were to outweigh the benefits, it would not make any sense to proceed with the investment.

4. KNOWLEDGE OF THE RISKS & HAVING A RISK MANAGEMENT STRATEGY

   With any investment, there are always risks involved. Be sure to have a proper risk management strategy set in place and flexibility (and a reasonable amount of emergency funds set aside) when it comes to your finances. Among the significant risks you should be ready for are:

   • Bad tenants, resulting in repair & hefty eviction costs and efforts
   • Unpredictability of the property market
   • Unexpected repair and maintenance costs
   • Negative cash flow
   • High vacancy rates due to difficulty in finding tenants/buyers
   • Increase in interest rates resulting in higher interest variable loan repayments
   • Lack of liquidity

   Also, bear in mind – if you are expecting a quick return in investment, or are looking for a liquid asset that you can convert quickly to cash without a decrease in value, then property investment is not for you. Even with short-term property investment, it will still require a minimum of 5 years from you. Plus there are many circumstances where you could potentially lose money, through no fault of your own at all.

   You should also plan a clear exit strategy in the event that the investment does not work out as planned.

5. A TEAM OF REPUTABLE & QUALIFIED PROFESSIONALS WORKING WITH YOU

Buying a property for investment is an entirely different ball game compared to buying a property for your own stay. In order to make the best and most informed decision you possibly can, you should definitely tap into the expertise of relevant real estate professionals and other more seasoned investors.

Some experts you should consult are:

• • Real estate agent
  • Real estate lawyers
  • Contractors
  • Third-party appraiser

Needing a reputable and qualified real estate agent, lawyer or contractor? Find them all here on Guyub, where you will find a good selection of reputable real estate professionals that will help make your property journey smoother and fuss-free.

And those are the few key things you should take into consideration before you decide to invest in property!

Looking for the ideal investment property to invest in? Click here to start your search here on Guyub! Here on this platform you will discover a wide selection of properties, both residential and commercial, in prime locations all over Malaysia!

The statement and information in the articles are the opinion of the writer and meant only as a guide. Any property purchase, rental or lease involve many legal issues and other complication depending on the individual facts and circumstances. Readers and Users are strongly advised to seek professional advise including from qualified and competent lawyers, bankers and/or real estate agent to verify the information and the statement before embarking on any purchase, rent or lease of any property. To the fullest extent permitted by law, we exclude and disclaim liability for any losses and damages of whatever nature and howsoever cause and arising including without limitation, any direct, indirect, general, special, punitive, incidental or consequential.