Image source Business Matters Magazine
- Investing in property isn’t a game you should take lightly
- It requires a concrete strategy and reasoning
- The factors that should be considered before making your purchase
- Damansara Utama holds a strong value and potential growth
A property is a reliable investment with the ability to increase your wealth over time. However, it is critical to invest in the right properties because making a mistake in this area can cost you financially as well as emotionally.
Presently, we can all agree that property investment can be a fantastic opportunity, but it necessitates a well-thought-out investment strategy in order to be properly executed. It should be founded on a thorough understanding of the markets as well as an honest assessment of your own financial resources and objectives.
To assist you in moving forward on your investment journey, consider the following factors when selecting the right property for your investment:
1. Where are people moving to
Image source Patch
Now, the good ol’ mantra uttered countless times in real estate is “location, location, location”. However, with the little knowledge I’ve gathered over the years, I may have to disagree with that. Simply because these days, we hear the phrase “when we throw a stone, we’ll hit a graduate”, and all these graduates we’re talking about, where do they move to? That’s a question you have to ask yourself before making the decision of where to invest.
As having a roof over your head is a necessity, it is crucial for you as an investor to go where the people are more likely to move to. So when you are making the decision of which property to invest in, be honest with yourself and ask the question of “where are these thousands of fresh graduates would migrate to”.
2. Have a strategy
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Following that, you ought to have a concrete game plan. I am often asked by my friends – “where to buy?”. Honestly, I can’t give you an answer to that because that may just be a difficult one to answer. Instead of asking such questions, try asking “why do you want to buy?”. Is it for investment purposes or is it for buy and use? Once you’ve established that, then the next question I’ll be asking is “how many people are going to be living in it?’. Your reasonings must be answered thoroughly.
There are more questions you should ask yourself before making a solid decision, but you get what I mean. It isn’t as simple as “what should I buy” or “where should I buy”. But once you have a clearer image of your strategy, then perhaps you may be able to answer the where, what, and why questions.
3. Your investment horizon
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Again, are you buying to use or to rent out? If you’re buying to use, then your horizon is of course, longer. However, the skepticism today when it comes to buying and selling is – it is seen as a strategy that’s no longer applicable due to the fact that the number of properties seemed to be higher than the demand.
This may or may not be happening. I’ll leave that up for you to decide and ponder upon.
However, if you’re asking whether investing for a short-term stay is worth it or not, it is. But obviously, at the moment of writing this piece, I’d suggest putting your dream on hold until things go back to normal again. Otherwise, a short-term stay is a great way for you to maximise the potential return when times are good again.
Image source Intuitive Finance
Yes, it’s still not the location but I promise we’ll get to that soon.
Affordability in this context means the price. I’m not talking about just the total price of the property you’re looking into. It’s also the total amount and the price per square foot – both are equally important for you to take into consideration. Why?
The reason being, if you buy a property and the price per square feet is sky-high, but the properties in the area surrounding you are selling half of the price of what you’re purchasing, then my friend, I’m afraid to pop your bubble but you might be buying an overvalued property.
You may wonder: “If I buy an overvalued property, can I still sell at a higher price later on?”. Well, yes but you’ll only be able to see the results much later. So remember, it’s always good to look at the total price but also the price per square foot. And while you’re at that, do think about your creditworthiness too. Will you be able to get your loan approved?
If you look at the current loan approval here in Malaysia, the loan approval is below 50% already and it used to be more than that. It just goes to show that out of 10 people who applied for a loan, more than half will get rejected. So understand where the affordability is, understand what the debt service ratio is.
Simply put, do your research.
5. Let’s talk about location
Image source Lifewire
Is it in an established neighborhood? Is it a new township?
The answer is simple. If your strategy is to be able to rent out fast with more catchment area, then, of course, you may want to invest in an established neighborhood. In the situation where you wish to find a property for your family, a new township is your best bet as it is rather cheaper and you’re getting a bigger space.
You can’t have the best of both worlds. As with anything in life, there are pros and cons and you can’t win at anything.
So if u look at Damansara Utama, it is very important to remember that this is in Petaling Jaya. In 2015, the population was 500,000. Whereas in 2020, 619,000, roughly 2% growth every year. Looking at that statistics, you can estimate what will happen in the next 8-9 years. There could be a potential growth of 750,000 in population.
The thriving malls like Starling, Atria, One Utama, Ikea, and Paradigm Mall are a good sign that Damansara Utama will continue to bloom. It’s a great point of reference to decide whether the location is growing or people are moving out.
This is a potential growth that is happening. All of these factors and more are important for you to consider before buying into a location or a property.
Essentially, in Malaysia, the market is still moving. Don’t think too much of the existing overhang unit. I always ask people this question “I know the overhang is high, but are you buying or not?” It’s because if you’re not buying the overhang units, buy the property you want to buy and forget about the rest.
But remember, if there’s no economic growth this year, next year, or the years to come, there’s no such thing as a good investment anymore. So it depends on the macro level, of what’s happening before the micro can happen. Secondly, go where most of the population are migrating to.
In Malaysia, there are a few states that are receiving a lot of people from other less developed states. Reason being, career growth. If you’re someone who’s chasing career growth, of course, you can’t run away from Klang or KL areas. Hence the state with the most number of jobs and opportunities will attract the most number of people.
Charles Tan is an avid property investor who often expresses his thoughts about the property industry on his blog kopiandproperty.com – a leading independent property blog in Malaysia. The views expressed here are the writer’s own.