There are a lot of advantages or benefits that you can enjoy in real estate property investments. If you are looking for a type of investment which can provide you with income without doing much, give you a lot of chance for socializing and meeting other people, or ease you from worry of financial loses then investing in real estate property is the next best thing. It provides a lot of advantages which other types of investments, such as stocks or gold investments, cannot give you.

1. Rich people have many properties

The first reason is, this is my personal reason, because I find that many rich people invest in properties. You, yourself would be able to notice that most millionaire investors have a long list of real estate properties on their assets. It is either they buy a lot of real estate properties using their money earned from their business or they are in the business of building and selling real estate. In the later case, I am referring to those developers and building contractors.

Why would these rich people do this? They sure did saw something that is worth it in real estate investing. There is a simple fact from PropertyShowRooms.com which says that 50% of the names mentioned on the Times’ “Rich List” made their money through investing in property. It is a proof that most rich people earn their wealth by investing in real estate. This is a plain proof that one of the most important investments which made millionaires out of them, is real estate investing. If these “rich” people made a fortune by investing in properties, then it could probably be also a way for you to become one.

2. Available to anyone

The second reason is that real estate investment is available to anyone. Because real estate is simply everywhere; you can see land, you can see houses – basically you will find that in any place where there are people living, there will be real estate for sale. It is like a basic human need, just as food and clothing are a necessity for people to survive. Real estate property is available in any place or location and it is also very much affordable for almost anyone.

You can start it, in Malaysia, for as low as RM10,000. You can buy a property with a capital as small as that and you can already start on the business of real estate property investing. It does not necessarily take a lot of money in order to invest in real estate. It is very affordable to acquire real estate property which is contrary to what most people think. You do not need to be a millionaire already in order to be able to afford a real estate property. You will always find a property that suits your level of investment.

Leverage with real estate

3. Leverage

The third reason why you should invest in real estate is because of the leverage that you get. Leverage means that you use just a portion of the money required to get the whole control of a very big investment. With just a relatively small amount of money, you will be able to buy and “own” something which costs a lot of money. It is also called in the art of investment which is to use other people’s money to make more money.

I would like to show you this quote. I like this quote a lot: “you see in real estate investment, no other type of investment allows you to purchase with other people’s money, so in this case the bank’s money, and pay this back, with other people’s money too. (In this case it is the rental income from the tenant).

For instance in Malaysia, if you want to buy the first property, say a RM100,000 residential apartment, you can just pay about RM10,000 down payment or even sometimes, it can be structured that you don’t even have to put down any money at all. So as you can see, investing in real estate property is really one of the smartest ways to put your money into an investment. With just a very small amount or even none at all, you are able to gain control of such a big investment. That is definitely leverage. You can do more with less. In what other type of investment can you do that?

4. Appreciation

Price appreciation
Property value appreciates over time

The fourth reason is that real estate is going to appreciate over time due to the effect of inflation. Since inflation is inevitable, the prices of goods, petrol and other commodities are just going to rise over time. And due to that fact, because real estate is made of something real (it is built out of cement, brick and mortar), the property price is going to rise over time. So when it rises, you have more equity built up and you can also do refinancing to get more money. Even if you do not do much about your investment you will gain a lot of profit because of inflation.

Aside from that, you can also get more capital to buy more property. I want to show you a chart, this is taken from the GlobalPropertyGuide.com and this information, the chart here (shown in the video), is taken from the Valuation of Property Services Department in Malaysia. As you can see in the chart here, you see the house price change so every year, like in 2001, it also increases. You can see that the percentage of increase is always positive over the years in every year which is unlike if you invest in stocks or commodities where the price are always on the verge of falling or rising depending on the way the market dictates. And the other chart, Annual Price Change by State, you can see, like in Kuala Lumpur you can see that every year it is appreciating about 5% to 7% every year for the past decade or so. This definitely shows that houses will appreciate over time and you will gain a profit. And this will soon lead to another advantage of investing in real property which is …

5. No need to sell

You don’t really need to sell it to realize a gain. You do not need to sacrifice your property just so that you will be able to enjoy the profits. Of course if you are buying other things like gold, you have to buy low and then sell high and before you sell it, you don’t see any profit that you are making. It is just paper profit. You are not able to see any of your profit in cash only the one which is written on paper, and how do you think are you going to enjoy it?

But in property investment, even if you don’t sell it you will be able to realize the gain. The simplest way that you can do is by refinancing. It allows you to acquire money which is greater than the original amount that you paid for the house when you originally bought it, without the need to sell it. Say you bought the property at about RM100,000 and then after 5 years its value increases to RM150,000. You don’t have to sell the property at RM150,000 in order to realize a gain of RM50,000. You can simply refinance it and you will get the extra 50,000 out from your properties without losing ownership of the property.

6. Income-generating Assets

Real estate properties are income-generating assets. That means when you own a property, you don’t need to sell it in order for you to gain an income. It is going to produce the income for you by renting it to somebody else. And that somebody else, the tenant, is going to pay for the mortgage, too. So, you are already gaining profit from your property even when you have not even paid for it in full. The tenant shares some of the burden of paying for the loan while you also earn money through it. This is one of the most amazing aspects of real estate investing.

If after paying the mortgage you still have money left, then you are getting passive income from there. You can use that additional money to invest in other investments which will also be able to provide you with more profits. You do not only earn the profit when you sell it, you earn a profit by renting it out to someone else. You will be able to enjoy your profits early and not on some distant future when you will already be able to sell it at a higher cost.

7. Inflation-friendly rental income.

Another advantage having rental income is that it is inflation-friendly. What I say inflation-friendly is when property values appreciate and its price gets higher and higher, it will result in more people cannot afford to buy a house. With the higher costs of purchasing a house, more and more people would choose to rent instead.

This is just a logical thought – more people will get to rent a place to stay, instead of owning one when the properties are getting less affordable. So if you cannot afford to buy a house, you have to or you will be forced to rent a place. This means, that your property will have more clients just at the time or moment when homes and rental incomes are at their peak or highest. That is if you own a property and due to the inflation, property values increase, the rental income also increase because there will be more demand for your rental property. This is great news for you when it is not so for other non-property-owners! You do not lose clients due to inflation; you gain them because of inflation.

8. Control

The next reason why people invest in real property is that it gives you a lot of control over your investment. The first control is – the flexibility to choose the type of tenants that you want. Not all types of investment will give you the option to choose the people that you deal with. If you want business tenant, you will buy a commercial property. If you want a residential tenant, you can buy an apartment to rent it out. So you got to choose your tenant. You got to interview them and you can decide whether to rent to a certain type of person or not.

Another control you get is that you can do some adding value kind of activities like furnishing your properties. You can choose to do this improvement in any time you want. You can fix it up and then through that property improvement, you also increase your property value. You can get a high “after repair value”. It is the amount that you are getting after you buy a property, then fix it up and you can sell it at a higher price. For example, you buy a RM100,000 house and let’s say you put in RM10,000 for the renovation and furnishings and later sell it at RM130,000. That means you made about RM20k of profit. So, you get to control the amount of profits that you make at your own will or decision.

9. Market Price Stability

Let’s go to the next benefit. What we are going to talk about is the market price stability. It is unlike some other commodities or stock, the market price of real estate will not go up and down like a roller coaster. It is not going to be in this case. In the long term of course it appreciates slowly. Sometimes in the same neighborhood you may find a property selling at RM100,000 and the other at RM120,000. There is no fixed price for real estate properties. It is not a very efficient market if you compare house price to stock and commodities price movement. It depends very much on your ability to find a good buyer for your property or your ability to get a desperate desperate seller to sell his property to you at a discount. You will not have to depend on what is the current pricing trend in the market.

In this situation when the market price is not reflected daily, you will have less emotional unease. So you will not feel like “tonight it’s very hard to sleep because today my house just depreciated by RM10,000.” It is not going to happen in that sense. You will be less emotionally disturbed due to the market price stability feature of real estate properties. You will not have to worry about your investment suddenly losing its value overnight.

10. Tax Benefits

One other thing that will benefit real estate investors is on the tax advantage of owning a property. In Malaysia there is Real Property Gains Tax (RPGT). After five years you don’t have to pay any tax if you finally decide to sell it. But if you are not going to sell it, the rental income can be lessened with other deductible expenses such as interest paid for the mortgage and your repair for the house or commissions paid to the agent in order to get you a new tenant. Tax-wise, owning a real estate property have some similar treatments like what a business would get. There are a lot of possibilities in which you can lessen the amount of your tax due to government , which is definitely an advantage to landlords.

11. The Most Forgiving Investment

And the other thing I want to talk about is that real estate is probably the most forgiving type of investment. If you are buying a property at a wrong place, at a wrong location or probably at a wrong time when price is at a peak, and it is not giving you the returns or the profit that you are looking for, provided that you have the holding power to wait 3 to 5 years, the profit will ultimately come. You will not always be buying the right kind of real estate investment at the right location and time. There will be instances in which your judgment will not give you the best outcomes and you may be blaming yourself a lot because of it. But the good thing about real estate investment is that time will eventually correct the mistake that you have done. It just comes later in the form of delayed profit. So this feature is giving you, I say, the most forgiving type of investment you can do.

On the other hand, if you bought some shares of a bad companies, it may eventually go bankrupt and you may lose all your investment capitals as a result.

12. Suitable for People person.

And the last thing I will talk about is that for people who like to invest in properties, they are probably people who have good people skills. Those who are successful may have good negotiation skills. It is simply because of the requirement to make a deal happen with a lot of different people or parties. You will be talking to and negotiating with a lot of persons like lawyers, bankers, property agents, tenants, and also to the sellers or buyers of the properties. So you definitely have to be good at people skills.

If you are this type of person then property investing is probably what you want to do. Real estate investing involves getting into deals with different types of entities and personalities. This means that you need to be able to cope with such variations by your own skills and you need to do that excellently. If you are not this kind of people person, then you can definitely start improving to become one.

SUMMARY – 12 compelling reasons

So these are the 12 compelling reasons why people invest in real estate; reasons why it is beneficial to invest in real property.

  • rich people own properties a lot;

  • 2nd, anyone can do it;

  • 3rd leverage;

  • 4th it appreciates over time;

  • 5th, you don’t have to sell it to make the profit;

  • 6th, it is an income-generating asset;

  • 7th the rental income is inflation friendly;

  • 8th, it gives you a lot of control, to choose the tenant and to improve the property; number

  • 9th, the market price stability gives you the peace of mind;

  • 10th, you get some tax advantage from doing real estate investment;

  • 11th, it is the most forgiving type of investment;

  • 12 if you love to meet other people and you have a good negotiation skills, real estate property is definitely your cup of tea.

Visit Property Method for a full online course about real estate investment.


KCLau
KCLau

Personal finance author and trainer

    16 replies to "12 Compelling Reasons to Invest in Properties and Why You Shouldn’t be Left Out"

    • ron

      thks for sharg KC.very kind of u.i hv learnd sth fm yr article n some of which i need remindg of.pls keep sharing n remindg us of the importance of investg in properties.

    • David

      My thoughts on Property Investment:

      1) Imperfect market where you could purchase an out-lier property.
      2) Investment that earns when you purchase.
      3) It provide a good cash flow, if you did your homework.
      4) An investment which i can add – value to the the property.
      5) Many many more 🙂

      • KCLau

        Nicely said David. I especially like your first point – “Imperfect market where you could purchase an out-lier property”. Even during the time when property price is considered on the high side, there are still many investors who managed to get value buy.

    • maria

      Thnk u 4 sharing KC..really helpful.. Like the point no 9 & point no 12 really make me think twice n improve myself.

    • KM

      Dear KC,

      Here’s some reason that are STOPPING me from investing in real estate:
      1. Lack of fund – still in very initial stage of my career thus lacking in large amount of saving.
      2. Current housing price in JB are very high due to speculation – I am not sure when the bubble will burst.
      3. Not confident in picking strategic location – I worried that the house I buy will not be popular for rental and end up having to fork out the large amount of installment and becomes a burden.
      4. Quality/price – Some of the famous developer in JB produce house with sub-standard quality but charge with high cost. This makes me feel not worth it.
      5. Lack of knowledge – Not familiar with housing costing, interest rate, taxes. Therefore, worried might be paying too much for a low value house.

      • KCLau

        KM, the key here is knowledge and the WILL to put it into practice. Keep learning and you will be confident to invest soon.

    • Altisan

      Dear KC and everyone,

      Mr. KC, you are absolutely tremendous, appreciate your article

      I want to share my experience here, in Properties investment most important is Diversity. I did diversity on investment. This makes you strong, and I would urge everyone should apply to it (recommended for people in middle class), by diversity you able to create properties as investment assets tools.

      One of my friend, he is not rich or from wealthy family, just a middle class with complete degree in engineering. He’s hobby is to purchase property for investment purpose, he has shows investing interest in low cost apartments (Flat), he got around 16units surrounding his living area in selangor. He starts to invest after his complete SPM. Most are purchase he did is from Auctions and few from direct purchase owner. He’s monthly passive income gains around 5k after minus from bank mortgage loan. Few units he successfully complete mortgage (which is fully paid)

      OK, I back to story now, my friend like to sell some units of his low cost apartment try to starts invest in stocks. But he cannot find buyers good rich new generation investor or anyone for own use purpose buyers and market value also not seems very high.

      Firstly I would like to apologize or say sorry to all reader here, I don’t mean for hurt someone felling in here I just share the true story of my friend and fact. I also invest bought few units low cost apartment and experience myself living here…
      Most of low cost is hard to sell due to government rules, market value is not high demand and living peoples majority is low profile incomes, many issues generally overall…. So now day’s investor generation is not shown interesting to live around or invested many…. So he my friend stuck, and he withdraws to sell and do re-finance with bank give only 50% from market value….

      Let’s we analysis and go back to my friend life, if he after complete SPM he has shown same interest but he think he should diversity, of course now he will not facing any problem. If he did few purchases low cost flats, few apartments, few condos and few terrace single story house/Double story, of course now he is rich…. He finds easily to sell off his property.

      Nowadays, property investment is looks very difficult hard for new generations. Bank Negara comes out many rules. Bank loan approval getting tough, looking for property is not going to be cheap anymore. I think middle income people are going to be out soon. Because the BNM gives many rules, earning is slow overall expenses is getting high.

      “Learning is our Life Long Process”

    • […] I’ve made a video and article talking about why you should invest in real estate. Now, let’s talk about why you should invest in stock, which is an ownership of an existing […]

    • Rene Lapp

      This is a really great summary of why you should invest in property. Thank you. I’m inspired to start looking to buy my first property.

    • […] you are still a newbie and you would like to get started in investing in properties in Malaysia, you are probably wondering what should be the first type of property that you should buy.  You […]

    • Steven

      Dear KCLAU,

      I found this property on sale @ RM195k. Currently being rented @ RM1k per month so condition is very good with minimal maintenance. Est market value is RM15ok. Booking fee – RM5k. If I want to buy this, I need to put down at least RM (195 – 150 + 5)k = RM50k. If the bank can only give me 80% loan based on the market value, then I need to add RM30k, so total roughly RM80k.

      I haven’t approach the bank yet, do you think I should go with this transaction?

    • tony

      KCLAU, nice article with lots of common sense but you summarise all the essential points into 1 posting. with no offenece intended, and i do think property investment is the single best investment option for myself,
      however i wonder if this is really a good time to keep on drumming only the positives into readers, especially the beginners in property investment, since property prices are at the peak now and other countries outside of SEA are already seeing downward correction.
      would it not be cruel to see newbies jumping in now to buy properties at the peak prices before market price crashes/see downward correction ? as you very well aware, property investment is very much sentiment driven.

      imho it would be more responsible of you to caution your readers at which point are we now in the property cycle so they make an informed decision.

      • KCLau

        Hi Tony,

        Thanks for your kind reminder. In fact, I didn’t realize that this post will be a calling to invest in real estate right now.
        Until you pointed this out, now I do think that I shouldn’t have posted this because it really sounds like asking people to keep buying property.
        Which is not really my intention. I want to show readers why should someone invest in properties, certainly not investing blindly.
        Every investment needs thorough analysis and evaluation especially you are making a big financial decision which may be too costly.
        So, everyone who is seeing this post, please understand that my intention is not asking you to “buy property NOW”, nor “simply buy properties”.
        Get education first and you will know what to do to make money from property investment.

        • Tony

          Thanks KCLAU for putting that reminder up promptly. I have come across many freshies who just joined the workforce are now very gung-ho about buying any new launching from developers who offer zero or low entry cost with DIBS package, not for own stay, mind you, but for flipping. therefore i urge anyone of you who are beginners in property investment (or flipping), please learn from the people who have been there, like KCLAU. he has a good investment seminar coming up, so do take advantage to sign up for it.

    • Netmask8

      Greetings + G;Day,
      Great Informatives. However, the disadvantages are :-
      1. Hard to get good tenant for monthly rental collection.
      2. Need long term (> 15yrs) monthly commitments payment to bank.
      3. If you misses the monthly payment/commitment due to economy recession/depression , bank will call you, give notice, serve lawyer’s letter and lelong/sell yr property at very low price/under market price.
      4. Re-finance ==> Depends on you age / working employment term.. If you got
      high ratio debts/commitment, and near retirement, bank do not allow to re-finance.

      Special Note : The property is only Belongs to you once you have 100% settle the loans. If you got unemployment(VSS/layoff) / bad tenant collection / bad economy in middle tenure, bank will contact you and ask for right compromise on your propertes. All the best.

    • Mohamad Rosli Ismail

      KC Lau,
      Indeed very true and I couldn’t have written it any better. Use OPM to make money. How I wish I realized this much much earlier as that would give me a good head-start. Still I am lucky to have realized this at a later stage of my life rather than not at all. It is OK to tighten your belly to buy properties rather than assets that depreciate the likes of cars. The safest way to generate passive income is to buy middle class properties as there is huge demand for it.

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