Investing in properties can be daunting if you do not know where to start and how. There are many ways to put your investments into properties and all types of strategies too.
Risky to invest in real estate?
A lot of talks have been going on about investing in properties especially in Malaysia. With the market being volatile due to the global pandemic, traders have since moved on to other money markets like cryptocurrencies and looking for alternatives to bring more value to their investments. While conventional markets can still be profitable, it is wise to look at others apart from the normal ones. One of the ways to invest in real estate is by taking a more direct approach and make your money through rental. If you are new to rental investing, here are some pointers to get you started.
You must start somewhere
Rental investing is not something you can achieve overnight. If you are still in debt, you need to get out of it. If you have a sum of money to start, then it might expedite the process. Ultimately, you want to achieve financial independence with this platform. Hence, you need to get into a strategy that fits your financial health so that you do not run into debts too high you cannot get out of.
Get into a strategy that works for you
This is where you need to check your risk appetite. There is a lot of homework to be done before you start investing in properties. The first thing you need to do is to know your ROI (Return on Investments). This includes factors like capital gains taxes, real estate pricing and location. Bear in mind that you are not buying a property to sell it later but to get rental from this for a long term. Hence, the location and type of property are very crucial.
Knowing your market
If you are starting out in this venture, it would make sense to buy a property near to you. This makes traveling a lesser hassle. If you are in KL and the property is in Seremban, it might not make money sense even if the potential is very good. Among the factors that should help you determine where you should buy are:
- Demographics of the people there
- Commercial and employment potential
- Growth of population
- Convenience and amenities
- Crime rates
Start your shopping
Logically, you start with your first property. Use the 1% principle. A good rental property is determined when you make this equation. Divide your monthly rental (estimate will do) with the price you are going to buy at. It is a good rental property if the result is within the 1% range.
Expand your reach
Once your first property is done, then you would need to rent it out so that you do not have to cover too much. The idea is to have the rental cover your monthly installments or at least 90% of it. Do note that rental increases over time and if you start at 90%, you should cover the installments by the time you reach year 5 and beyond. Now, you can start with your second property. Use the same principles and work your way up. It might take a while before you will see actual income but over time, this should work in your favor.