Is property investment good?
I have many clients asked me questions relating to properties because of my years of experience in property investment. They sometimes are amazed how I can accumulate a number of properties in my early 30s. They key is to keep accumulating the capital and keep investing.
However, talking about the property investment experience, I really need to admit that the experience is not really a very good one. When you are handling a few properties at the same time, perhaps you will feel the pressure.
First of all, not all properties can be easily rented out. If the property is a new project, you will face many of the vacant units in the same area. Finding a way to win the competition is not always easy. Things that we need to do will be to furnish the unit with better ID design to attract the tenant to rent out the unit faster. The downside of this is the huge capital outlay on the renovation cost after the vacant possession.
Secondly, the tenancy management is not as easy as it thought. There will be many types of tenants available. Some good tenants will pay the rental on time without asking. Some will drag the payment and eventually we need to find a way to kick the tenants out after many months’ outstanding rental. During MCO, many Malaysians are in fact struggling with pay cut, this is the time when tenants will be calling to ask for rental reduction. Once the rental is reduced, it will be hard to increase at the later stage. Loyal tenants always pay the same rental since the beginning of the tenancy agreement as we definitely do not wish to lose the good tenants. Raising the rental could trigger the good tenants to look for cheaper place to stay.
Thirdly, there are many unknown costs involved in property investment. It is not just the loan commitments. Other costs like maintenance fee, legal fees (loan agreement, Sale & Purchase agreement and Memorandum of Transfer), renovation cost, repair cost after each tenant leave the unit, quit rent, assessment fee can add up to a big amount too.
Considering the recent trend of property investment, it is not easy to find a property that can give net rental yield more than 4%. If you are really considering buying an investment property, do get prepared a larger sum of payment for renovation, legal fees. Instead spending huge amount buying a real property, you might consider looking in Real Estate Investment Trust which is much more hassle free. The risk is also lower as there is no loan involved.
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