Target Readers: Beginner – Intermediate Property Investors; Middle Income Group.
2015 has been a really tough year for property market in Malaysia after the introduction of GST in April, to make the matter worse, our economy was also haunted by 1MDB scandal, falling of oil price and weak Ringgit value! By asking around property agents, developers and well-known property gurus, nobody has any positive prediction on the property market in 2016.
The consensus reached within the property industry is the prices of properties will fall and discounts will be given by developers to lure home buyers. It’s also common expectation that more property investors and speculators will be dormant or at least less active in the coming quarters in 2016. The heat wave of BBB mode (buy x3) has been dimmed by cold water and many people start to realize it’s time to get back to work.
In 2015, there were many ‘expert’ predictions that after the implementation of GST, the property prices will shoot up. But in reality, this has not happened and we don’t see it’s happening soon.
Before I share my Tips of Property Investment in 2016, I have to bring to your attention (especially for new investor) that investing in property is Risky if you are not doing your homework and buy property based on emotion and guess work. Buying a property is the biggest spending of people in a lifetime. It’s one of the biggest decisions in our lifetime besides choosing our husband or wife, don’t you think?
So here’s my No-nonsense Property Investment Tips for 2016:
Beware of flipping
Flipping is not a good property investment strategy for 2016 simply because you might be competing with unsold units by the developers. This is applicable especially for the high density condominium development. If even the developers are struggling to sell all their units, just imagine what kind of obstacles you are running into to successfully find a buyer. Developers can offer the original price with lots of goodies and perhaps even with negotiable discounts.
Flipping could be working for some good landed property project with very limited units or even better that there is no more available unit from the developer. So you have to do your homework properly and if you find that not many buyers are queuing up at the launching, then the project may not be suitable for flipping.
Other factors including the quality of the property and whether it can arouse the desire from the buyers to willingly buy from you. If you are hoping to flip landed houses which cost over 1 million, most probably you will expect to wait for months if not years to make the deal.
Buy a quality property
There is no good tenants in this world. Period. Tenants come and go, even the best tenant you are having now could be leaving your house after the contract ends and you will need to pay agent to find new one. My advice to you is don’t buy properties by hoping that you will get positive passive income from it by relying fully on tenants only. Buying a quality property is more important to cut down the property investment risks because you know that the property is still marketable even during the bad times.
Always buy a property which you can afford the repayment even there is no tenant in it for at least 6 months. There are few tips and indicators I can give you to judge whether the property is a reasonably good buy or you have bought the right property:
1) The units are almost sold out by the developers.
2) The track record of the developer is very good.
3) Your property agent or developer tell you that your unit can be easily rented out in 1 to 2 months. (Don’t trust fully, but at least they are telling you that)
4) Your property occupancy rate is high with 85-95% or to some extent you are confident that it will be within 1 year after handover by developer.
5) Your property agents tell you that they can find potential buyers for your property within reasonable time frame (i.e. 3,6 or 12 months) and there are at least 1 quality viewing by potential buyer per month.
6) The location of your property is good with amenities, highways, public transport system, mature business activities, banks, schools, shop lots, restaurants, famous shopping malls and hypermarkets are within short driving distance from your property.
If you can get all positive answers from the above indicators, then congratulation! Your risks in property investment is lower, but not zero. Investing in property is still risky especially if the location is far away from town and with not enough amenities. For example, many investors were caught up by buying houses in Nilai, Rawang and Port Dickson many years ago and ended up in failure because the houses are not marketable due to bad locations. Occupancy rate is also the most important factor to determine whether you can easily rent out or sell the unit. Well, sometime you will need some luck too, but that’s not the topic here.
Sustainable income source
Yes, many property investors have successfully earned their big fortunes if they purchased their properties (i.e. landed house) in year 2007 – 2012. The success stories of the property investors are overwhelming during that great times for property market, but moving into 2016, even the property gurus have woken up and advised to the public that 2016 will be the ‘worst year for property’.
I am not saying that property investment is no longer viable from now onward. I am just suggesting to my readers that to go back to the basics of life and find other sustainable income source which is valuable for your personal career growth or even for the good development of our country. There is no free lunch in this world, so for working class, continue to upgrade yourself with knowledge and skill is important for you to secure a good income source. For business owner or entrepreneurs, focus on innovations and quality products and services are your only path to pursue.
By focusing on earning good and righteous money from other productive sources, you will gain the true financial freedom to buy whatever dream houses you want and set yourself free from any economy crisis or property bubble. So my advice is, don’t dream anymore that you don’t have to work to make good money with just property investment only! Starting in 2016.
Buying a good property for long term investment plan is still a satisfying and correct thing to do. To do that, you need to know your own risk tolerance level (or most of you don’t know yet but will get the lesson learned soon). So my advice is really you need to be careful making any decision on property purchase, especially for new investors. To cut down the risk, you may consider share the risk with a partner whom you can really trust. Sharing the risk will mean less commitment but also less reward.
In 2016, should all of us stop exploring good property investment chance? Probably no, because when the market is down, we will be entering the ‘buyer market’ and you will get the bargaining power back to get the best price from seller or developer. Equip yourself with right attitude, think long term, shop carefully for a quality property and most importantly assess your risk tolerance level and financial capability, buying a property for investment in 2016 is still a possible thing to do.
By James Chow
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