If you're thinking of investing in Malaysian property and unsure how to manouver through unchartered territories, read our 3 do's and don'ts here!
Apart from your own home, if you're a first time investor in Malaysian properties, here are some pointers to keep in mind when you go real estate hunting.
There are many types of property in Malaysia for investment. The most basic one is residential property where you buy landed or high-rise units to flip (sell to other home buyers upon completion or after a few years) or rent out to tenants. Those with a penchant for something more may choose to invest in commercial (shop lots, mall retail lots etc.) or industrial (factories) property. There are different costs involved when investing in different types of properties and the initial outlay such as the down payment and the margin of financing from financial institutions may also differ greatly from residential units.
Many a time, we might be caught up in the hype of buying (because our other family members, friends, colleagues, former college-mates have bought their own properties) that we lose track of what we can or cannot afford. Most property investors will leverage on borrowings from banks to finance their property purchase. In general the bank will assess whether you can afford the loan for the property you want to purchase. A borrower's debt service ratio (DSR) is one measure of borrowing ability. The DSR is the ratio of total debt (other home loans, vehicle loans, personal loans credit card balances, PTPTN and other student loans etc) to household income and the formula is as such:
Different banks will have different DSR thresholds. Some stand at 65-70%, others may be less. Other determinants of loan affordability include credit checks (CCRIS and CTOS reports), property valuation, as well as the maximum Loan-to-Value (LTV) ratio or Margin of Finance depending on how many properties you currently own.
These are interesting times in the property market. While it's certainly not a boom, we can't say we're in a decline either. But there are certainly several initiatives and programs surrounding house buying that did not exist before. Various schemes can be adopted from the Home Ownership Campaign (rehda.com/hoc2019/) that the government introduced.
Budget 2020 has also revealed additional schemes including Rent-to-Own and Youth Housing Scheme You can read more about it at www.edgeprop.my/content/1597796/budget-2020s-real-estate-highlights .
It also goes without saying that you should do your due diligence when looking at a property. Visit the show room and conduct a site visit if possible. Check out the surrounding public amenities and neighbourhood. Ask the sales representatives pertinent questions: What are the maintenance costs? How about utility (electricity, water, internet service) rates?
If you intend to flip a property, do find out what costs are involved. Some mortgages with banks have lock-in periods that incur a penalty for early settlement. Another cost may come in the form of (RPGT) that is the government tax on any profit you might gain from a sale of your investment property.