* Article by Freemind Works *
Since the start of the year, the real estate market has somewhat quiet down. Many asked my view of the market moving forward. Here it is.
It’s time the market consolidated and we reflect on what happened these past years. We experienced one of the most exciting times in recent years, where prices in some areas doubled, if not tripled in value. It’s time to let the dust settle before the market rally up again.
Unlike the commodity or stock market, there are many factors that leads to the over heating of the real estate sector, and potentially leading to a melt down. While I do believe we haven’t reach that level, we certainly have the potential of going that way.
To find out more about Property Market Outlook 2017 And Beyond, please click here
Below are my 3 personal views why the market should slowdown:
1) Are we working for money or is money working for us?
The best reasons to invest into properties is the ability to stretch our investment ringgit to the max.
With just RM100,000, we can take a loan up to 10 times that amount, which is RM1,000,000! The leveraging factor is amazing for this class of investments. While our LTV reduce tremendously to 70% since 2010, we can still buy 2 residential properties and take 90% loans.
Many investors have looked into smart ways to take more loans, while at the same time minimizing the monthly installments. The most popular ways in the past are the DIBS scheme (which have stopped since end 2013), where the developer finances the installment until the completion of the property.
I would like to use this as an example to share how this might be one of the property investment traps that exist in the market.
Assuming Mr. Tan bought Property A, with the following characteristics.
Property Value = RM500K
Loan amount = RM450,000 (6% interest for a 30 year tenure)
Instalments borne by developer throughout the development period.
Instalments after property completed = RM2,698 per month.
If you were Mr. Tan, and you had an offer to purchase properties with little or no money down, and no financing required for at least 3 years, how many of such units would you buy?
Perhaps you were prudent and purchased only one or even none. During the past 3 years, I know quiet a few that bought more than just one of these types of properties.
Assuming Mr Tan was a little bit more aggressive, and bought 3 properties of similar price, upon completion, he need to bear an instalment of RM8,094 per month. Within 6 months he would have paid RM48,564 and in 1 year, RM97,128. Assuming even if Mr Tan earned RM10,000 a month, paying RM8,094 monthly would be a burden to him.
The term for this is over leveraging. For many investors in this situation, what initially was the intention of making money work for you, turned out to be you working for money.
To know 2 more reasons and to read the full article, please CLICK HERE.
Article by,
Michael Tan
To find out more on How To Design Your Property Portfolio For 2017 And Beyond, please click here
About the author: I am an entrepreneur, an investor, a speaker and a coach. I have a thirst for life, and have experienced many failures and success to make me who I am today. The great people I surrounded myself with, and whom have served me, has made me bigger than who I am.
In return, I dedicate my life purpose to helping as many people as I can achieve their freedom through properties and beyond, in my company Freemen. We run courses to educate people and coach them to living life beyond just a normal 9 to 5. I am proud to say we have the largest life changing network through property investment in Asia, being no.1 in Malaysia, Thailand and Hong Kong. Our goal is to empower people to live life to the fullest and make a stand for humanity.
On the 22-23 October, my real estate investor friends and I will be in beautiful Penang to share on how to invest in current property market especially on how to buy with no money down, how to get unlimited access of loans from the banks, 2017 budget & property market outlook and many more. Do come over to meet us.
As seats are limited, please click here to reserve your seats. So see you there.
The Urban Wellbeing, Housing and Local Government Ministry is still undecided on the review of a moneylending policy for property developers although it has been over a month since the idea was mooted.
Bank Negara Malaysia said developing broader home ownership alternatives, including a well-functioning rental market, was deemed a policy priority to protect homebuyers from financial hardship.
