Investing in properties

Last Monday, I had lunch with several colleagues, one of whom is quite interested in property investment. She was telling us about an advertisement in a property magazine she subscribes to, colonial bungalow for sale in Cameron Highland, suitable for boutique hotel, which she said gave her an idea of what to do for retirement (run a boutique hotel). Another colleague shared his friend’s experience of buying a bungalow for RM1.3 million, spent a few hundred thousand ringgit on renovations, and sold the bungalow for RM3 million.

I was quiet most of the time, not having much to contribute, and then confessed, “I still haven’t DARED to invest in a property.” “Why?” she asked. “Because of property bubble, is it?” I just nodded, though that’s not really it. Together, these two claimed, “You should buy! There’s a lot of good properties on Malay reserve. We would have liked to buy, but well, we can’t.”

Coincidently, when I read the paper later that day, I saw a headline in The Star ‘Property Ownership Gap Could Cause Political Instability: PM’. Before I touch more on Amanah Hartanah Bumiputera (AHB) which was the topic of the headline, Let me explain a bit on why I haven’t dared invest in properties, despite the fact that I can afford to do so (for now, at least) and despite having read books about it (for example Azizi Ali) and people sharing tips on tip (for example Mommy Lyna) – for which I’m thankful for. Somehow, just reading about it and never seeing it done before (no one in my family has invested in properties before, not the for-rent type anyway) is not enough to ‘free’ my mindset. Hmm … this is sounding like a lame excuse. But it does make a difference somehow. It’s just like I never needed to ‘think and decide’ whether to breastfeed my children because I see the mothers in my extended family breastfeed their kids all the time.

I think I’m naturally a risk-averse person (actually I’m pretty sure I am). The thought of taking a loan to invest in properties does not appeal to me. Yes, they call it a ‘good loan’ in financial management books, but I still feel that being committed to additional loan is getting me further away from my goal of attaining financial freedom. Yes, they said ‘other people’ will help us service this loan (tenants), but what if I can’t fetch a rent that is enough to cover the monthly installment (negative flow)? What if long periods lapse in between tenants? It would still be fine if I have a fixed income that’s enough to patch those up. But what if I don’t? Between me and my husband, we are a servicing one loan (housing) currently, and even that feels more than enough. I wish I can buy properties on cash basis, haha! Or perhaps what I’m looking for are other type of assets (may not be properties) that are low enough in value such that they can be bought on cash basis, that can still give reasonable continuous income.

Ok, now onto AHB. Pakdi has summarised some points about it pretty well, two of which I’ll highlight here. AHB is syariah-compliant and expected to give 6% return. I haven’t found out whether we would need to pay zakat on the amount we stash away in AHB (should we decide to invest there), but let’s say we do, then our cash is better off in Tabung Haji, which gives about 5% return AFTER zakat (more than 6 minus 2.5=3.5). And then, there’s the other fees involved for transactions, for example when selling the AHB units etc, which are not clear yet at the moment. So, I haven’t decided whether to take up the AHB offer or not. Afterall, many seems to opine that the return could well be above 6%.