Categorically speaking, we can’t say for sure that one form of investment is better than the other. What we do know, however, is that property investment is a good place to start — especially if you’re interested in earning passive income, acquiring an asset, and diversifying your wealth all at once, in the long run.
We believe that you shouldn’t put all your eggs in one basket. Like the food we eat, different risk appetites can determine the different levels of time and financial inputs we need to put in before we can start generating passive income. The key thing about property investment is that, while it is a common passive income strategy, it also requires a lot of upfront capital to start. Think renovations, maintenance fees, furnitures, etc. It’s important for you to feel comfortable knowing you’ll be responsible for the monthly payment for the duration of your mortgage, if in any case, you can’t find the right rentee. When you do, however, the pay-off can be quite worth it.
For one, you won’t have to worry about your bank loans for a while. Given the rental agreement between you and your rentee, the rent could potentially cover your bank loan (be it the principle, interest or both) so you can enjoy the extra bonus of owning a property without really paying for it. Depending on the property’s location and condition, you could even get a competitive advantage to rent out your space at a better price. Ergo, the start of your passive income (but you didn’t hear it from us! Ahem).
Secondly, some people might also see owning a property as a type of forced saving, much like your EPF, or having insurance. You may not be able to see the benefits that come with it right now, but you will eventually in the future. Property prices generally appreciate at a 8–10% rate per annum*. The good news is that Bank Negara Malaysia (BNM) has announced yet another reduction on the overnight policy rate (OPR) by 25 basis points to 1.75% on July 7, 2020.
This is especially encouraging if you’re looking to buy property regardless whether it’s for own stay or investment. Depending on how well the location of your property flourishes, property appreciation has the potential to double up on its original value in the long run.
Unlike cars or machineries, where the average lifespan of ownership is between 8–15 years (or more, if you’re lucky), properties have a higher likelihood to appreciate in value over time — even more so if you own one that is freehold. Compared to its 99-year-limit leasehold counterpart, a freehold property has the higher potential to be passed down from generation to generation indefinitely, so your grandkids’ grandkids won’t have to worry about having a roof over their heads. What’s the difference between freehold vs. leasehold, you ask? Well, that’s another topic for another day.
If you’re considering investing in property now, or even in the near future, let us help you find the right investment with the PLOT MY app. We’ve got a 100% genuine user rating, and our app is designed to maximise your property journey by matching you to the right property and the right agent. No scams. No spams. No double bookings. Download PLOT MY on Google Play or Appstore today.
*Disclaimer: not all properties promise an 8–10% appreciation rate. Such appreciations are still dependent on location, timing and value of said property.