What do you think when you hear the word “investment”?
Stocks? Bonds? Mutual Funds? How about Property? Let me tell you a little about why I got into Property Investment!
When I graduated from University, I quickly realised that, with what I could save from my salary, it would be very hard for me to become rich. So I asked myself, “Is there any way to earn RM100,000 in 3-5 years?”. My answer was “YES!”. I could make it possible by setting up a business and investing in the stock market, bonds, unit trust and property. Right? Then my second question to myself was, “What is the initial capital needed?”.
Setting up a business needs a very high cost and backup fund while investing in the stock market, unit trust and bonds involves a rolling cash in the region of 5 figures and a good skillset. So……
What about Property Investment?
To invest in property, we could make use of OPM (Other People’s Money) or, in other words, MORTGAGE LOAN. In Malaysia, to invest in a piece of property worth RM500,000, we only need RM50,000 as we can leverage from the bank for the remaining 90%.
What about the risks? Am I protected and risk-free?
I have always dreamt about RISK-FREE investment or business model. Unfortunately, there is practically nothing in this world that is RISK FREE. However, lucky for us, there is LOW RISK Investment. Property investment is Low Risk Investment. Why? Because investors are protected by HDA (Housing Development Act), STA (Strata Title Act) and SMA (Strata Management Act).
In short, these laws protect us and lower the risks. Besides, respond time in the property market is slow, meaning we have enough time to respond to changes in the market. Unlike the stock market where share prices can experience dramatic fluctuations in a matter of minutes, any increase or drop in property prices usually takes place over at few months.
This was when I decided to take a leap of faith to invest in property. I’ve had no regrets about having invested in my first piece of property when I was in my early 20s. After I had signed on the dotted line in the S&P, I was the owner of a piece of property, my very first asset. I felt really confident about my future! Although the commitment took a large chunk out of my salary each month, I considered it as FORCED savings.
One day, this asset is going to generate me wealth.
How can Property Investment Solve my Financial Challenges?
I remember that when I was 27, I faced a critical financial problem and needed to get hold of some cash quite urgently. How? I went to bank and refinanced my housing loan. As my piece of property had gone up in value after a few years, I could get more cash by refinancing it and that solved my problem.
I could also cover the monthly repayments with rental from that property. Just imagine what would have happened if I had taken a personal loan instead. My Debt Service Ratio (DSR) would be higher because interest rate for personal loans is higher than refinancing. That would’ve made my life more miserable, wouldn’t it? This is my personal experience in my property investment journey.
I have met many successful entrepreneurs and, over the years, almost every one of them have used profits from their businesses to invest in property. Based on the facts I have mentioned above, I have consistently reminded myself to buy a piece of property every year and to strategise a way to generate maximum profit from it. But, hardly anyone gets rich overnight. Building true wealth requires middle to long-term investing and a diverse portfolio.
Don’t forget that real estate is an important part of the equation.