At 18, sitting down with friends at a mamak stall, a sleek looking BMW, dark blue, 5 series, stroll pass us and stop a few meters ahead. A young chap, jumps out of the car and runs across the street into a shop, and few minutes later runs out and drives away. We looked at each other with a smile, was it a hope that one day, we will be driving a car like that or was it that he is at our age already driving a BMW by we are still on bicycles. “Ah, that must be his father’s car, rich man’s kid”, the silence is broke by one of our members in the group. We go back into our routine discussion about other stuff…football….movies……girls….etc….but never on how to make such money and big dreams.

But it was a point to brood over, 20 years later, I am still shy to drive off a BMW 5 series Dark Blue Metallic, but right now I have different reasons. Yes, the mortgage is huge, the maintenance is expensive and I’ll need to leave on a different level of lifestyle – as we normally worry about “what people will think”!!. Of course, we want to drive a luxury car, so that people will think “WOW”. But is it really that what we want? I am thinking to myself.

Recently, as our normal window shopping on properties have been my family’s weekend activities, with condition, we strictly “window shop” and upon interest, we would make an absolute “financial decision” to decide if that property is worth investing as an investment with regards of its appreciation value or rental income. We visited a gated community bungalows with club house in Penang, my wife fell in love head over heels on that place and the bungalow unit, exactly the dream home that we have been dreaming about since our college.

Location, build-up, styling with a kitchen in lower ground floor is exactly what we have been looking for and it exactly falls into our attention. Sure more appealing was the club house, the sales person so calm and helpful, only later to find out that his boss is our friend, Juanita Chin [author, real estate investor in Penang]. Everything fall into its place wonderfully. Only setback was that it was a leasehold property – but it’s our dream house replication.

Well as we promised on the “window shopping final decision” will be negotiated base on our financial standings. Well, the property cost $1.6M and there is a maintenance fees; of course we would need to relook at our utility bills etc too. So checking with the bank, it would cost us about 6.8k monthly on mortgage, which means easily with all in (utilities and maintenance), it is $7.5k a month for next 30 years ?!!. Well okay, base on our household income, we are still OK to have $7.5k put aside for the property + put aside for a car reimbursement + other monthly expenses, at the end of the day, we would still have monthly savings going into our accounts provided my wife keeps her business income coming at the minimum range as per what she have been doing for the past one year. So, do we decide to move on with this investment??!!

There are 2 side of the coin here. IF (is a big word) we move to our dream home, we feel good, our dream achieved at 38+. We have settled in our lives, maybe something to be proud off with our family and friends – well many people get more attention when they live in bigger homes and drive bigger cars, surely I don’t know why!!?? But that is the nature of our life, we work hard to get what we want, achieve our dreams. And now when it is knocking at our door, let’s go for it. Emotionally, I would sincerely thank Allah for giving us this as we have always wanted it. Then there is the other side of the coin, financial decision.

If I were to engage such a property, there are decision that have to happen such as; would need to delay my $1Million savings goal – maybe now it may take forever, stop my property investments as banks would stop giving me loans due to my mortgage is in Million only in 1 property, would need to delay all my dream holidays to US, Europe, Australia, Egypt, Turkey etc until I am able to gather back my position in the financial world again maybe in another 10 years or so and will I have the money to spend when my kids go to college in 10-15 years from now?

[Note : (1) Soon we are moving to a landed property – 3 storey town house; not our dream home but what is affordable, (2) It is a family of four, us and 2 kids, (3) If we ought to buy that bungalow, we need to sell this 3 storey town house; we need $$ to replace our savings for the down payment if paid and renovation].

So we have 2 side of the coin here, heads – we are okay in terms of monthly expenses + savings to move to a bungalow unit or tails – we would need to give away or delay our other goals that we planned for. So what would you do if you are in our situation ? Heads or Tail ?!!

Sayeed is a senior manager in a large MNC in Penang. He wrote an earlier blog post titled “From Credit Card Debt to Owning 6 Houses”. His philosophy in life is sharing and learning, “the more you share, the more you learn”. Following his association with the world of investments focused in the past 5 years, both Sayeed and his wife are confidently leading to a financial successful lifestyle, his wife retired as an employee and today runs her own business, blessed with 2 kids, this couple have learnt through tough times about their financial literacy. Sayeed is currently focus in accumulating wealth and dreams of becoming a future speaker, author, trainer and coach to help others achieve financial success.

    7 replies to "Head or Tail!! Financials?!"

    • Eric Thiner

      Assuming you pay down payment of 10% 160k and are taking a loan of RM1.44m with interest 3.9% p.a. for 30 years.
      1) after 5 year, your interest paid = 268k
      your outstanding to bank = 1.3m or settle 140k over the 5 year
      if you don’t buy the bungalow, 5,5k for 5 years at bond rate 5%, if base on compound interest, = 374k (if base on 8% return then is 404k – unit trust return)
      situation 1)
      assuming the house is increase value to 1.88m after 5 years
      your down payment = 374k +205k (160k with 5% return)
      your loan = 1.3m
      so if you invest in bond , and estimate the house value is go above 1.874m in 5 years time, then you might need to purchase now.

      situation 2)
      assuming the house is increase value to 1.94m after 5 years
      your down payment = 404k +238k (160k with 8% return)
      your loan = 1.3m
      so if you invest in unit trust , and estimate the house value is go above 1.94m in 5 years time, then you might need to purchase now.

      Since you are looking for a dream house, and it is whether to start now or to start later, then they are only 2 question for you
      1) what is your estimate of the house price after 5 years.
      2) what do you expect to return from the saving in this 5 years.(may be you can get more then 8% return)
      if the return from the saving, are unable to cover the house price increase, then you might need to buy the house now.

      if whether to purchase the house or not, then other thing needs to consider :
      i) will the interest rate go highier, base on 3.9%, if the rate go up, will there any problem in paying?
      ii) conservative people will prefer cash in hand.
      iii) emergency fund – what is the emergency fund available if purchase the house now.
      iv) education fund – will it affect your son education fund.
      v) retire fund – will it affect the retire fund.

      • Sayeed

        Hi Eric;
        Thank you for your detailed analysis and advise. Really appreciate it, make sense in making my decisions more fruitful.
        Fortunately, I would need to spike up to 7% as Malaysian National ASB fund’s return is about that and most of my cash / saving (planned) are in there. Of course the plan above is to purchase dreamhome without impacting emergency, education and retirement fund.
        2011, started with me dropping the 1.6M dreamhome and choosing to move to our affordable 3 storey house [done]. Now, the next plan with more targets and goals set to move forward.
        Thank you Eric once more.

    • Ken

      You mention that the purchase may delay some goals…what do you mean? Will you be getting a pay raise later? how long is this “delay”? If it’s too long you may want to keep shopping…my 2 cents..

      • Sayeed

        As simple as you live in house pay monthly $2k mortgage, you live in bungalow pay monthly $7.5k mortgage, you can invest or save the $5.5k if you don;t move to the bungalow. That used properly can make a lot more money for you in future.

    • ronmahsih

      From your words, it seems that you’re more inclined towards ‘Tail’. You can find no other reasons to get that bungalow besides the envy of others.’Appreciation in value’ are sweet words used by developers to entice others to buy. It’s meaningless as long as you stay in that house. It’s good only after you sell that house with ‘appreciation’.
      If you really have the means to fork out more than 1 mil for a property, go for commercial properties. Then rent the units out. You will get monthly cashflow and the banks would fall in love with you and give you more money. Then MAYBE you could think about a bungalow.
      In the meantime, stay in the townhouse.

      BTW, I don’t get it. Why would a family of four stay in a huge bungalow when most times are spent outside of the house?


    • Laikos

      Hi Sayeed,
      I’m sure you are more expert then me in property, but I can clearly recalled I’ve read one book saying: “If you are about to buy something that you want, wait 1 month… then if you still want it wait another month..” then I’m sorry I can’t recall what was then ending of it. Perhaps I try to browse through my books and let you know of the final decision. It surely is a good book by one of the author on financial freedom. Just my two cents


    • headhunter


      First of all thanks for the article. Secondly I am going to give you my first impression, it is just an impression and not advice per se, hope you are ok. One thing caught my attention is leasehold, somehow I have this morbid fascinasim with leasehold/freehold thingy, guess I am not alone here?, just that it is this obsession that often drives buying decision I supposed – imagining we sell next time eh. This freehold vs leasehold is confirmed by many of my friends & relatives (fr wife side) who currently live in Singapore, they have the same if not kiasu obsession with freehold as against leasehold. Guess, I am driving this one a bit here.

      Second item is the potential prospect of re-sale value in future. Of course many people can get emotional if being told real profit is normally much less than our commonly bullish outlook. Since I am more inclined to trust facts than opinions or forecast, I tend to be a bit more careful although we all take certain risks when buying something as big and expensive as house. There are people who take it that buying a property is always a right investment i.e. the timing is now they said…yes we do get mixed thinking on that..but going back to the house that you are interested in, if I were you, I would try my best to get a feel (listing down as much facts) on its potential future marked market (compare with similar past properties).

      Good luck with your moving to new house soon. I am looking forward to do the same, my bank has just released about 80% of the loan to the seller, so looking forward to handover. Coincidently I saw an advertisement for the same house we bought this morning (must be belong to my new neighbour) at RM1.3 million..(we bought ours at RM950k) wife is quite quite elated with this latest “market value”, but I told her we have to factor here and there, although it is quite motivating.

      Wishing you the best.

Leave a Reply

Your email address will not be published.