The Complete Guide To Property Investment In Malaysia

Buying a property mainly for investment can seem like a terrifying financial decision, but if you're the type of person who's patient and doesn't mind taking a few calculated risks for good returns, read on!
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Does it seem like everyone (but you) is making money off the property market? You may be thinking that you’re the only one who owns just one piece of property: which is the one you’re living in right now.

Well, we have a wealth of information to help you take those very first steps into the lucrative world of property investment, if you so choose. Read on if you still need convincing!

 

Why Invest in Property?

Buying property purely for investment purposes may seem intimidating at first. It does seem like an awfully big financial risk; one that you may not need, nor can afford to take.

Other forms of investments, like fixed deposits or gold, are decidedly less risky. This is true, up to a certain extent; these types generally have guaranteed rates of return every year.

However, the returns are only slightly higher than regular savings accounts, and all your funds will be locked away with the bank for years.

Contrary to popular belief, choosing to invest in property is quite the stable option to consider, compared to something that's more volatile, like the stock market.

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While there's a high cost barrier for entry (think of the downpayment alone!), the benefits can actually balance that out, or even outweigh the initial money you put down.

You see, property values tend to rise over time, especially if there are infrastructure upgrades nearby. Renting out the property would also provide you with a steady monthly income.

Generally, holding down a regular job while investing in property on the side makes it easier for you to gain approval for loans, especially as a new market player.

Malaysia's Rent-To-Own (RTO) schemes, group purchases, and seller financing are just some of the ways which those with regular incomes can utilise to help them buy a property.

In fact, it’s not impossible for you to begin investing, even with no (or almost no) money! Yup, those who want to invest in real estate with no money can still get in on the game!

If you’re very confident in your real estate skills and just need someone with the cash, you can look into options like (legitimate) money lenders or even real estate wholesaling.

PropertyGuru Tip
The real estate wholesaling process involves cutting a deal with a seller to secure a buyer for a commission.

 

The Different Types of Property Investments

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One of the first things to understand about property investment is that there’s no one-size-fits-all.

There are many ways you can enter and “play” the property market, and it all depends on your budget, risk appetite, and investment goals.

Ask yourself this one important question: what type of property investor are you? There are many kinds out there, but the most common ones are those who're either in it for the long-term or short-term.

First up, we look at short-term investors! Now, if these people play the game properly, they're actually able to make a quick buck. There are 2 ways to go about it:

  • You can choose to invest in up-and-coming areas, or “trendy” types of properties, with an eye to sell as soon as there's a considerable price increase
  • Opting to “flip properties, usually by purchasing an old or abandoned property, renovating it, then selling it off as quickly as possible for a clean profit.

Those who choose the long-term investment route, on the other hand, focus on only ONE thing: the steady increase in a property's value over time. Again, there are 2 methods which can be used:

  • Capital return: When you decide to sell off your property once the sale price has increased a certain percentage above the original purchase price.
  • Rental return: When you rent out the entire property, or just part of it, to others so that you can get a steady, passive stream of income throughout the duration of ownership.

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So, once your short-term investments have produced some money to spare, you can then switch over to a long-term strategy with steady rental returns, which can then become more attractive as you plan for your financial future.

Make sure that when you're in the midst of choosing a property, you optimise your return on investment (ROI) by:

  • Choosing a cheaper property
  • Buying in a favourable area
  • Not buying a fixer upper
  • Thinking about a steady income in case of an emergency
  • Making it look as good as possible without blowing the budget

Also, don’t limit yourself to residential properties alone! There are so many other types of properties out there worth investing in. Commercial, retail, and industrial lots often have great potential for returns.

And if you're the cautious type, you can always invest in Real Estate Investment Trusts (REITs) where professionals will manage your investments for you.

PropertyGuru Tip
REITs is essentially a practice where you buy the shares of a corporation that deals with real estate, and distributes its income as dividend.

 

Making Money Through Property – Doable And Profitable

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Sometimes, you just need to go with your gut feeling when it comes to making a decision on a property. However, this sixth sense often only comes with experience.

While you're busy gaining said experience, we’re here to help! As a new investor, you’ll need to make sure that you are in a good position to invest in the first place.

For a start, make sure your own finances are in order, and have in place a good risk management strategy. Next, educate yourself on the basics of property investment.

You'd also need to figure out how to spot a good deal based on its location, market value, property quality, and rental market.

Keep an eye on market trends and demand drivers, and learn how to take advantage of scarcity as well as exchange rates.

PropertyGuru Tip
The rule of "scarcity" is that you should look for something that sets you apart from the rest of the properties flooding the market, whether it’s creative interior designs or remodeling and renovation.

Once you’ve dipped your toe into the market, you can now start to grow your personal wealth by increasing your investment asset base while keeping an eye on your cashflow.

In addition, you'd need to be regularly reviewing your portfolio to see if anything can be done to improve, while giving your properties time to appreciate.

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Keep track of how you are doing by calculating your returns, either based on cash-on-cash returns or Return on Investments (ROI).

When it comes time for you to make a decision to buy or sell, think about what is the right price for you – understanding your own life (and financial) goals is the first step to understanding the ‘right price’.

Doing a professional property valuation is an important first step, but the price you decide on at the end also depends on your own personal circumstances and investment goals.

Sometimes, it may be tempting to just focus on profiting from property sales. However, don’t forget to consider the long-term benefits of steady rental returns when planning your exit strategy.

 

Look Out For Red Flags Though!

Finally, even though property investment can be very profitable, it's crucial to bear in mind that it isn’t exactly fail-proof!

Be sure that you're aware of the risks involved, how to minimise your exposure to them, and have in place any contingency plans.

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Some of the major risk factors to consider are fluctuations on interest rates, the cyclical nature of property markets, and how external political and economic shocks can lead to property shocks as well.

Don’t forget to prepare for these eventualities as you make your investment plans. Leave all the speculation to the professionals, especially as a beginner.

While property speculation is a legit type of investment strategy, don’t be overconfident or irrational when making property decisions to avoid making costly mistakes.

Unfavourable rental circumstances can pose short- and long-term risks as well. Generally, avoid properties in the areas where tenants are hard to come by, and those that require a lot of renovations and repairs.

You'll end up spending more than you bargained for, resulting in very low ROIs on both rental returns and resale value.

Now that you are aware of both the benefits and risks of property investments, you’re in good stead to start thinking seriously about your first investment property! Good luck!

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