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The ideas expressed are solely the opinions of the author. The
content on this site is provided as general information only and
should not be taken as investment advice. The author cannot
accept responsibility for any losses you may incur as a result
of this analysis. Individuals should consult with their personal
financial advisors.
PROPERTY INVESTMENT
101
SECTION ONE
TYPES OF
REAL ESTATE INVESMENTS
Basic Rental Properties
A person will buy a property and rent it
out to a tenant. The owner, the landlord, is
responsible for paying the mortgage, taxes
and maintenance. The owner may charge
at certain amount of rent in order to have
surplus after deducting monthly repayment
of the mortgage. Most landlords will charge
enough rent to cover monthly mortgage
repayment but in some cases this is not
possible mainly due to high property prices
vs low rental rate. Whether a person should
be renting or buying, a simple indication is to
use Price to Rent Ratio (more at Investopedia).
Buying a property and renting it out is a
good investment strategy. However, there
are much more things you need to consider
when buying to rent. You need to take into
account such as adequate maintenance to
the property, bad tenant who damages the
Rapid Property Connect 2016 - Danny Ko
Investment Groups
Real estate investment groups are like small
mutual funds for rental properties. If you
want to own a rental property, but dont
want the hassle of being a landlord, a real
estate investment group may be the right
strategy for you. In the overseas, it is usually
Rapid Property Connect 2016 - Danny Ko
REITs
A REIT is a type of security that invests in real
estate through property or mortgages and
often trades on major exchanges like a stock.
REITs provide investors with an extremely
liquid stake in real estate. They receive special
tax considerations and typically offer high
dividend yields.
To compare with other investment types,
REITs provide flexibility in term of investment
in many kind of real estates e.g. malls or
office buildings. Unlike other type of property
investments, investors can cash out easily
through REITs.
SECTION TWO
WHY INVEST IN
PROPERTY?
Investing in property can create wealth
but only with the proper planning and exit
strategy. Most people know that in long term,
the price of property will appreciate though
at times there would be ups and downs. If
you are able to hold on during the market
turbulence, then there is likelihood for you
to make a huge profit from it.
If are not an expert in property, by all means
do your own home work and learn from
various websites out there that specialise
in education on investment. And of course,
there are plenty of ways to invest in property
without even need to know anything about
property such as REITs as introduced in
section one.
Most people think that property investment is
about making good profit in a short period of
time. Thats what happening in Malaysia few
Rapid Property Connect 2016 - Danny Ko
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Capital growth
The easiest way to determine capital growth
is overall appreciation of the property minus
the price that you bought it. For instance, if
you bought a property for RM500,000 and
after three years, the value appreciated
to RM590,000; then your capital growth is
RM90,000 for three years. That gives you
RM30,000 per year or 6.0% growth per year.
Rental yield
Rental yield is the money you received when
you rent out your property. If the property
your bought for RM500,000 and monthly
rental is RM1,800 per month; your annual
rental income would be RM21,600. Simply
Rapid Property Connect 2016 - Danny Ko
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When to buy
This is highly debatable by many property
gurus. There is never bad time to buy a
property as in long run, property prices will
definitely increase. Other property gurus
say otherwise to compare property as
stock market where you will need to always
buy low and sell high. For this, there is no
straight forward answer. But what generally
important to take note before investing in a
property is to ensure that you have sufficient
cash flow. A fund that you do not need in the
event of emergency. As we explained before,
property is not a liquid asset and cashing
out quickly is almost impossible unless you
are willing to let it go at loss. Other thing to
consider is whether you have sufficient fund
to service the mortgage repayment. Here we
refer to as holding power. Besides servicing
your mortgage, there are other indirect and
recurring cost such as maintenance, yearly
assessment fee, utilities, etc.
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SECTION THREE
PROPERTY INVESTMENT
GUIDELINES
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