What if you bought the wrong property? What if you can’t afford to pay for it after a while?
Once you find a property that seems just perfect, it’s not uncommon to use the next few weeks or months thinking, rethinking and thinking again about the purchase.
A reader of kopiandproperty.com wrote in recently relating her struggles on whether or not to purchase that first property.
Here are her two questions in brief:
“Hi Charles, I became an avid reader of your blog recently after I stumbled upon it accidentally. I’m stuck in a situation and I really hope to get your advice before I finalise my purchase for a property.
“1. We are not sure what to think about leasehold property. Is it a wise investment?
“2. Is it a good time to buy now?”
Here are the answers:
1. Regardless of whether a property’s leasehold or freehold, what matters more is if you like the property or not.
Leasehold represents good value because it is typically 20-30% lower than freehold property within the same area. We should however make sure the lease does not expire in less than 50 years.
When the opportunity is right, the question of leasehold versus freehold should be of low priority in your list of considerations.
One very real example: A Kelana Puteri condo on leasehold (less than 90 years left) and bought for RM182,000, was sold a few years ago for RM460,000.
2. There is NO such thing as the best time to buy. Frankly. However, it’s very important to know “WHY” you should buy.
If the WHYs meet all your reasons and you can AFFORD it, then it’s the best time to buy. However, please do not resort to borrowing funds from an Ah Long so you can purchase the property.
Using bad debts to buy good debts is still a bad decision. Plus you are buying for your own stay, which means that even if there’s a crisis, you will not be forced to sell.
Remember, financial crises never last forever. In 1997, Malaysia got hit by a financial crisis. However, by 1999, the country’s economy was back to normal and booming. US’s mortgage crisis hit in 2008, and by 2010, it was back to business as usual.
Last but not least, the property market is slow at present. This represents an opportunity to buy. It is not suitable for speculation. Speculation only flourishes when the market is good.
By then, it may be best to be very prudent because when prices rise way too fast, the property bubble builds up quickly and may just burst too.
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.