How to make money from properties
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`SO Azizi, is property a good investment?” The question echoes around me on a weekly basis. “What do you think, ah?”
Since they asked it that way, I would smile and nod approvingly. “Of course!”
But deep in my heart, I know that while the answer is correct, it is not complete. Of course properties make good investments. But then, the same thing can be said about stocks, unit trusts and a couple of others as well. While they are all good investments does not mean anyone can make money from them. Buying the first house you see or the stock that takes your fancy is a sure recipe for disaster. It is a guaranteed formula for exchanging your hard earned money for a long-term headache.
So this will mean that you will still need to do your homework when investing in properties. This will include reading books, magazines, articles, observing and yes, learning from the experts. Of course, this will require time, effort and yes, even money. But all that effort is peanuts compared to the reward that awaits you. And yes, even the price is miniscule compared to the problems that can happen if you bought wrongly. (Just ask the unfortunate people who bought houses in flood prone areas. Worse, they have to bear the brunt of listening to jokes about water proof furniture and getting free boats from the developer.)
The median price of a house in Malaysia is RM160,000. That figure jumps to RM334,000 for properties in Kuala Lumpur. I don’t know about you but that is a lot of money. Not too many of us can afford to throw that kind of money around. (And even if you could, you have to admit that it is not so nice to lose that money!)
Further, the house is the most expensive purchase we will make in our lifetime (for most of us anyway). And it also forms the highest amount of debt we will incur and for the longest time - often lasting 20 years or more.
That being the case, doesn’t it make sense for us to do a little bit (or better, a lot) of homework before parting with our money? Doesn’t it make sense to tread very carefully before buying a property? Obviously, the answer is “yes”.
As an example of treading carefully, a colleague of mine viewed the plot that he wanted to buy three times: one in the morning, one in the afternoon and one at night - all on different days. Mind you, it was only a plot of land at that time as the house was not up yet. Now some people may think that may be overkill, but his answer was spot on: `Before paying RM810,000 for anything, I want to be sure that everything is right and in order first,’ he remarked. I totally agree.
And oh yes, he sold the house when it was completed two years later for RM1.1 million. Even taking into account that he had to pay Real Property Gains Tax (that was still applicable then), real estate agent’s commission, legal fees and all, he still pocketed a tidy sum of money. I’d say the three trips was certainly worth the RM200,000 plus - don’t you agree?
But I have seen people buying houses on the spur of the moment. I have seen people rushing to buy properties as if they were buying groceries. For their sake, I sure hope that they have done the homework beforehand though my heart tells me something else. And these are the ones that I have witnessed personally. What happens behind closed doors is anybody’s guess.
Why buy properties in the hulus - in places no one heard of or in places you cannot even spell properly? While they may be cheap, who’s going to buy them from you later on? (There’s a very good reason why such properties are cheap - not too many people are buying them!) Of course, after reading that last statement, some people will rise and claim otherwise: `This is going to be the next Subang Jaya/Bangsar/ Damansara.’ (The magic word in properties is “Damansara”. Any property having Damansara as their address will cost a minimum of RM20,000 extra!)
While that can happen, it can just as easily wind up as the next Lembah Beringin. Anyone who is willing to risk the highest amount of money he will raise in his lifetime is welcome to jump in. If others are willing to risk their money, please go ahead. But I will not be the developers’ test pilot! I want to see rows of houses (with people in them), completed roads (and not just “proposed”) and shops with at least two banks in the area before I even consider the area.
by Azizi Ali
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