Is Real Estate a Good Investment?

By Mrs Liez - 8:30 AM

Is Real Estate a Good Investment?
Real estate is a good investment strategy that can potentially generate ongoing passive income and create financial independence. Real estate investment affords exponential appreciation in value and this is what makes it a good long-term investment strategy, especially in terms of building wealth.

Buying a home, or a rental property can be an expensive endeavour. It doesn’t matter what type of property you are buying, even a melaka apartment, you will need to be prepared mentally and financially. You will be faced with increasing responsibility: ongoing maintenance and repair costs, potential gaps in income between tenants, or operating costs during rental turnover.

Thus, before you begin investing in real estate, you need to know if it is the right choice for you. Here are some tips that we have prepared for you to equip you well before you delve into any real estate investments.

1.    Pay with Cash
n general, borrowing to invest is risky business and many financial experts tend to warn against it. Before purchasing any piece of investment real estate, you need to consider if you can afford to pay for it. The key factor in any investment plan is that you should be able to afford all costs of investment.

However, it should be noted that not all of us are cash-rich. If you cannot afford to pay for the investment property with cash in full and need to take out a loan to finance it, you need to be able to afford the monthly loan repayments and mortgage and still live comfortably when no rental payments are coming in.

Although it is the norm for investors to borrow to invest, and to expect the rental returns to cover the cost of borrowing, you need to be prepared for times when you have no tenants for the property as well as the operating costs associated with tenant turnovers. There is usually a high turnover for tenants and with this in mind, remember that tenant turnover is one of the biggest cash flow killers in real estate rental investment.

2.    Have a solid plan that covers all expenses
Before you start thinking about investing in and purchasing real estate, you will need to consider the hidden costs and operating expenses that are not included in the purchase price. This includes the cost of taxes, utilities, upkeep and repairs. Do not overlook these hidden costs, as they can add up to a small fortune that might derail your investment plans and goals.

A smart tip is to factor in these expenses when you price your rental property. Make sure that these hidden expenses are fully covered. Another tip is to set aside the first few months of surplus rental income to cover the cost of future repairs on the property. Also make sure that your property is insured, and plan for the cost of insurance in your rental pricing. It is a good idea to be prepared with a sinking fund to deal with additional costs and other situations as they arise. Cover all your bases to prepare yourself for any unforeseen expenses that may arise.

3.    Start small to build your investment portfolio
Although real estate investing sounds like an expensive venture at the onset, you don’t have to fork out a fortune in initial investment to be able to be a real estate investor today. This might seem impossible if you’re only looking at the end result, but by taking baby steps in your first foray into real estate investment, you can make continued and forward progress even if you have a limited amount of funds to start investing with.

Start by looking at smaller and more affordable properties. Keep in mind that it doesn’t matter the size of the rental property, as long as there is a good market and income potential for it. Once your initial investments start generating return, you can consider putting these reaped returns to use to buy larger properties with better income potential. As your property portfolio grows, it becomes easier for you to purchase and manage more properties. Starting small helps you work your way up to owning several properties, and in turn generate greater returns on your investments and build more wealth.

4.    Do your research thoroughly
It doesn’t matter if you are going to keep the property for long-term appreciation, or flip the property or quick profits, doing your own research on prospective investment properties is vital for you to make sound investment decisions.

You should have full information on the property itself. Look through the land title and deed thoroughly and check out if there are any liens or caveats on the property in order to anticipate any prospective barriers in selling the property. Extend this research to the neighbourhood and surrounding environment of your property. Consider the comparables (properties that you can use to compared with) in the same area, the general environment, as well as other external factors that could possible affect property and market values. Also find out about the public planning of the surrounding area and neighbourhood to consider how this might affect the value, whether short- or long-term, of your property.

5.    Last Words
Keep in mind that there is always a risk involved in investment. You may make money with your investments; likewise, you may lose money too. Your end returns might not reflect your initial investments. Whatever the case, keep the end goal in sight and deal with any turns in tide with a sound mind and ample preparation.

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27 comments

  1. Setiap pelaburan Ada pasang surutnya. Yang penting Kita sendiri tahu apa yang Kita buat Dan apa akibat atau kesan dari pelaburan itu.

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  2. masa jangka panjang memang cantik property ni tapi kalau location tak bagus boleh hangus modal

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  3. House, land, gold... are the best investment for me. Long term.
    When it comes to property, yes, byk aspek nak kena tgk. Duit bukan sikit sikit nak dikeluarkan. Kena tgk tempat, prospek tempat tu, dari audit geografi, ...

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  4. Pelaburan macam mana pun akan ada risiko. to me, pelaburan jangka panjang yang menguntungkan dan tak perlu keluarkan modal yang besar adalah emas. sebab boleh beli sikit-sikit lama-lama jadi bukit.

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  5. Property adalah pelaburan jangka panjang. walau menguntungkan tetapi tetap ada risiko. Untuk buat pelaburan macam ni kena banyak ilmu dan pengetahuan dalam pelbagai sudut..Yang penting usaha dan semangat..

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  6. Property is like beauty and the beast. Its good to buy when the market is down and you have some good finacial. But if you do it otherwise...bad for your long term financial health.

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  7. what a good tips! sejak habis zaman belajar dan mula bekerja baru sedang2 berjinak2 untuk lebih faham dan bijak dengan pelaburan. memang kena lakukan banyak research untuk betul2 yakin dan faham. terima kasih atas perkongsian!

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  8. Pelaburan hartanah bkn leh buat main2. Kena tgok juga kawasan dia macam mana.. Sediakan plan mcmne nk invest dgn betul.. Kalau silap langkah mmg rugi kita..

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  9. Betul..nak beli property ni kena tau mcm2..dari segi financial kita stable ke tak..loan pulak long term mcm mana..safe ke tak..mcm2 kena gali ilmu bab2 investment ni

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  10. thank you so much...even though I am not seeing it as an investment yet..I am actually in the midst of preparing my 'savings' to help me move out from my parents place. and I think these tips will be very useful in sense that it is still related with property...

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  11. Setuju. Pelaburan mmg boleh menguntungkan. Tp dlm masa yg sama, ada risikonya. Nak melabur nie hati dan jiwa kena kental

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  12. thanks sharing. apa2 perlaburan memang ada risiko sebab tu kena buat kajian betul2 supaya tak rugi kan?

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  13. If I have money, I would really opt for real estate investment.. Coz I love them so much.. I always imagine having lots of real estate

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  14. Pelaburan memang terbaik untuk jangka masa panjang tetapi kita perlu bijak dan berilmu. Jangan tersalah langkap dan sanggup menghadapi risiko.

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  15. Orang kata, masa ekonomi merudum ni la elok melabur. Tapi pastikan ada backup plan. Backup plan beserta wang. Bukan cakap kosong dan atas kertas aje. Bahaya kan kak. Kalau orang berduit, Elok la Tambah property. Yang tiada duit. Sabar dulu. Peluang masih ada. Menabung dan rancang perbelanjaan dulu.

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  16. So many people go into property investing and they want to make money but before that you must do your research as mentioned above..

    Nice sharing Mrs Liez..

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  17. Investment is about how you control the risk..rugi itu pasti, kalau salah percaturan dalam pelaburan..

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  18. Kena ada ilmu dan kefahaman yg baik sebelum invest dalam mana2 pun sebabnya pasti ada risiko yg tak diduga.

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  19. Good advice for property buyers. I don't like to make repairs when tenants move out or when I can't find tenants.

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  20. Good advice for property buyers. I don't like to make repairs when tenants move out or when I can't find tenants.

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  21. This is a really good plan! Thanks for sharing, this would really help me in the future, thank you!

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  22. thanks for this entri.. this would help anyone who want to buy property in the future

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  23. Definitely it is a good investment but also need a good planning or else the investment might fail as well. I love to read all the points here.. so helpful!

    Racheal

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  24. Property memang aset pelaburan yang mengungtungkan. Teknik yg betul pun kena tahu supaya ianya tidak mendatangkan kerugian.

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  25. Not easy to invest in property.. so expensive.. but the return is definately tempting and great...

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  26. Yes! it is if we do our homework and research before making any decision, don't just hear people say and speculate. Real estate is a long term investment.

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