Just the thought of buying your own house is a daunting prospect. Is it not one of the most expensive purchases you could ever make in your lifetime? And with the rising house prices and cost of living, the dream of owning a home seems to drift further and further away.
But here comes the jaw-dropping fact from expert property investor Datuk Michael Tan. He believes that people should start property investing as early as 21 years old.
“If I could wind back time, I would start as early as 21 years old. Investing into property to me is like buying insurance. The earlier I do it, the better off I will be by the time I retire,” said Tan.
According to him, many people misunderstood how property investment works. A large amount of money is not needed to purchase a property, as the individual can simply leverage on bank loans. The key is to get a steady income.
“A fixed salary is more important than large savings in the bank when it comes to property investment. I have seen clerks with a small salary of RM2,500 per month get their property loan approved compared to youths running businesses getting RM5,000 to RM7,000 a month get their loans rejected,” he said.
If a person has a stable job, contributes to the employee provident fund and has his tax deductions monthly, he is one of the most qualified people to invest in property at a young age.
Tan provides an example in the form of Razif, a 23 year old executive in a trading firm who earns RM2,500 per month. With his salary he was able to buy a property valued at about RM220,000. It was a low medium sized three bedroom, two bathroom apartment in Ampang Indah.
He saved up enough to pay the downpayment and the rest was on loan. The bank approved a 90% loan of RM198,000 for 35 years because he is so young.
“He pays RM906 per month to the bank and another RM120 for maintenance and other fees. That is a total of RM1,026 per month. He rents out each room to young executives who are working in the city. Each room, he charges RM700 for it. After paying everything off, he makes about RM1,000 extra from his property per month,” said Tan.
Yet again the point being stressed here is that property investment requires little cash, being one of the highest leveraged assets in the world.
Malaysia has been especially accommodating to property investors, as you can get a bank loan of up to 90% for your first two residential properties with a loan tenure of up to 35 years.
“If Razif were to repeat the process, he would have made a residual income of RM2,000 per month,” Tan added.
Furthermore, there are a lot of easy financing schemes and even rebates offered by developers to help with the down payment of the property, so there really is no excuse for you not to start property investing at an early age!
About The Contributor
Michael Tan is a real estate investor, entrepreneur and business coach in Asia. He founded Freemen Education and offers numerous online training courses to help people make money in real estate investing.