When your ‘ability’ determines your affordability rating

Malaysia’s number one writer, speaker and coach on money matters, Azizi Ali, said in one of his property books published 15 years ago, that if anyone was currently earning a salary of below RM2,500, he should work harder to earn a higher salary.

Else, this individual best forget about any form of property investments. This simple piece of advice still rings true to this day.

Working professionals must understand that only the top 10% of employees in a company receive big increments or promotions while the remaining 90% receive the usual i.e. an increment slightly above the current inflation rate.

The number of managers (earning higher pay) or sitting in higher positions is also most likely to be 15-20% of all employees in the company. This is why only 20% of Malaysians are classified in the T20 bracket (household income of at least RM13,148).

What choices do the rest of all working professionals have? Work much harder and smarter OR invest to create more wealth and not spend whatever you have.

However, one must understand that not all managers are necessarily richer than their staff.

Some managers live modestly in terrace houses while their staff have enough in savings to buy a shop-office and a semi-detached home simultaneously. While some mangers own just one property, their staff own two condominium units within walking distance of KLCC.

Nope, these staff do not come from rich families. They worked hard and invested well. Here’s what a property expert has to say about this particular issue.

In a recent article in a local daily, Alan Poon, Founder and CEO of SuperiorWealth Group shared how people usually approach the issue of affordability.

He cited a study by Khazanah Institute showing that to be labelled “affordable”, a home should only cost RM270,000. (Well, perhaps this is why affordable homes of 800–900 sq ft launched these days are usually priced as close as possible to this figure.)

Poon also shared that different locations provided different affordability levels because salary versus home price are likely to be different too. (Very true and yet sometimes, salaries may be low but property prices may be high.)

He concluded his article by saying, “Afford-ability is a choice. It will always be your choice to ensure that you grow the ABILITY to generate income over time, which in turn helps you to AFFORD to buy your desired property.”

To rise up faster in the corporate world, it pays to be very good at what you do. It’s important that you already work in a good organisation. There are some companies that will never be able to help you grow much. Holding a good degree helps even if it is not vital to your corporate success.

To invest in a more calculated-risk mode, it pays to read more. In fact, property talks in many property fairs are usually free. These will help boost your learning curve tremendously.

Beyond property talks, try to learn all you can about other types of investments available. A little reminder – diversification is key. Putting all your money into property is likely to be extremely risky.

Happy working and investing!

This article first appeared in kopiandproperty.com

Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.