Is buying property a must? Seriously, it is not. If you have barely enough for monthly expenses, why “waste” it on mortgage payments?
If you are moving from a smaller town to Kuala Lumpur for work and intend to stay for just two to three years, should you buy a property?
One school of thought is that if you are only going to be based at a new place for a few years, renting is a better option.
The argument is that because you are moving to another place for another job, you don’t have to worry about selling your property, which is both time consuming and troublesome.
But this argument only applies for the short-term, which is defined as 12-18 months.
Property investment is not about buying because you need a place to stay and then selling when you need to relocate. When you relocate, you can choose to sell or rent.
Both these options can be executed easily enough with a good Real Estate Negotiator (REN). You can rent the property fully furnished too since you would already have furnished it when you stayed there.
Renting a fully furnished unit means a higher premium rental income compared to what an empty unit will get you.
The target market is also totally different. After all, one does need creature comforts like air-conditioners, water heaters and a refrigerator.
It is not usual for rental income to cover one’s mortgage payments these days. The reason is because rental can only increase on a yearly basis, while property transactions can take place any time and property prices may rise with every transaction.
This is why after a couple of transactions, especially for those above RM50,000, the valuation for similar properties will also inch upwards. Banks will also be willing to finance at the new higher valuation.
This also explains why mortgage payments usually go up faster than rentals. High rental returns do not change much or may even reduce due to pressure from many sellers in the same market.
The market may be good for rental income today. But will it be good for rental income forever? Well, that depends… but the answer is obviously “no”.
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.