Former US President Franklin Roosevelt once said: “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world”.
Entering the real estate industry often seems like an exciting prospect. Many feel the urge to jump straight away in purchasing their first piece of property. However, failure to equip oneself with the necessary knowledge can be disastrous. Just like other types of investments, adequate information and proper strategies are needed in order to succeed.
Here are 10 important things newbies should know before they embark on their real estate investment journey:
1. It’s unlikely you’ll become an overnight millionaire
Many people think real estate is an instant solution to their financial woes and a shortcut to the land of unlimited wealth. Sorry to break it to you, but this isn’t a get-rich-quick scheme.
Unlike other types of investments such as shares and stocks, this industry lacks liquidity and volatility. Selling real estate requires time and numerous other costs. However, this doesn’t mean that it isn’t profitable. But you will require patience, persistence, and act strategically.
2. Networking is important
Real estate is not a competitive sport so the more people you can collaborate and learn from, the better. There are plenty of real estate meetings, seminars, and talks for you to meet people and build your contact lists. You can’t expect to become an expert overnight.
3. Know the proper market value
They say information is power and knowing the current value of a property is a critical piece of knowledge to have. Thankfully, websites such as Brickz saves investors from hours of research time.
At the site, everyone will have access to reliable, accurate, and up-to-date information on transacted properties in Malaysia. They are a reliable source of information too as they get their data from the Valuation and Property Services Department (JPPH). This is the government agency which officially records a property transaction once the stamp duty for the Sales and Purchase is paid.
4. Get help with the deposit
Need help coming up with money for your property down payment? Well, the government has an initiative called MyDeposit specifically for this purpose.
The scheme is applicable for first-time home buyers and for properties priced up to RM500,000. Here, the government offers a 10% incentive on the sale price or a maximum of RM30,000, whichever is lower.
5. You can get a full loan
If you were unsuccessful in your application for MyDeposit but still want to purchase your first property, you can consider a different strategy. One such option is by forgoing the down payment and going for 100% financing.
The government has a scheme known as Skim Rumah Pertamaku which allows first-time home buyers to do that. Among the qualifying criteria for the applicants are individuals aged 40 years and below, gross income not exceeding RM5,000 for single applicant or RM10,000 for joint applicants.
6. Another discount you can take advantage of
It seems that being a first-time property owner in Malaysia isn’t as hard as many initially feared. Other than the last two government schemes, real estate newbies can also take advantage of a 50% stamp duty discount. This exemption is applicable for properties priced RM500,000 and below.
7. One more exemption to be aware of
Real Property Gains Tax (RPGT) is a form of Capital Gains Tax that is imposed on the disposal of property in Malaysia. It was suspended temporarily in April 2007 to December 2009 and reintroduced in 2010.
There are, however, some exemptions available for RPGT, such as:
- Exemption on gains from the disposal of one residential property once in a lifetime to an individual
- 10% of profits OR RM10,000 per transaction (whichever is higher) is not taxable
- Exemption on gains arising from the disposal of real property between family members
8. The real estate market is cyclical
One thing newbie investors should realise is that the real estate market will not always go up. In truth, it is seasonal – when the market’s good, it’s really good and when it’s bad, it’s really bad.
9. Get exposure as a real estate agent
If you plan on becoming a real estate agent, you will need to publicise yourself and advertise your portfolio. This means building a website and getting active on social media. This often means you should also learn marketing and content creation skills too.
10. Know the mortgage financing rates
For your first or second properties, an individual is usually entitled to a 90% mortgage loan. After that, the financing rates are usually 70% loans for each property. Therefore, it is important that you have a proper strategy when choosing your first two properties. You can use the profits from those two investments to help finance the down payments for your other properties.
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