Why buying one property or more properties is a good way to counter inflation?
The hype and trend of investment nowadays is to buy property. How is buying real estate going to help to counter inflation? Why is everybody flocking to the new property launches and forming long queues? Sometimes, I really think that it’s more like a queue for free lunch? But after realizing the inflation in the country, something must be done in order to increase the current amount of cash so that I can afford my current standard of living despite the sharp increase in inflation in Malaysia. Here is 7 reasons on why you should buy property in Malaysia.
7 reasons to invest in properties
1) Recession proof investment
Buying property is one of the safe investments. Other investments like shares, index, forex, commodities, bonds, etc are impacted by the changes in the economy. Of course, when there’s economic downturn, some of the properties might be affected. But do not panic and sell all the properties that you hold. Of course, you must ensure that you have the power to hold the properties even in bad times. This is protect you against force selling at lower than market prices that will cause a big hole in your pocket. Even in bad times, the real estate market will bounce back even higher to the original prices even before the recession. So it is quite a recession proof investment if you buy the correct property.
2) High return from capital gains
How much can you gain from the investments in shares, forex and commodities? These are very high risks and quite unpredictable fluctuations. If you can predict the movements accurately, you might be millionaire by now. The investment assumptions is high risk, high returns. But for investment in property, it’s high returns with low risk. It’s not NO RISK because it depends on whether you bought the correct property at the correct location. But it’s definitely lower risk as compared to shares, forex and commodities. The return is exponential. It really depends on your power to hold and your power to resist temptations to sell. If you can hold long enough, you will see the capital gains in your properties.
3) Get positive cash flows from rental
If you purchase the house for investment be it commercial property or residential property, you could rent the place to get cash flows. The rental yield would depend on the location and the convenience of the location of the property. By renting it out, you can use the rental that you received to pay the mortgage instalments. If your rental is high enough, you can even have some positive cash flows to use! How cool is that?
4) Low money down
To buy real estate, you don’t need to come out with the whole amount. Unlike all the other investments like shares and bonds, you have to pay in full upon purchase. For properties, you just need RM1K – RM10K deposit for the house depending on the requirement of the seller or the developer. Some developers give out perks such as early bird discounts, VVIP discounts, fittings and club facilities. Some other benefits for new developments come with Developer Interest Bearing Scheme (DIBS) scheme – no need to pay until you get the keys! Some even absorb stamp duty and legal fees. You can take loan up to 100% loan in Malaysia for selected projects.
5) Tax deductible expenses
All the expenses that you paid for the property for the purpose of renting it out are tax deductible. Expenses such as advertising for tenants, fire insurance, interest on loans, repair and maintenance charges, pest control and quite rent are a few expenses that you could claim tax and to be netted off against your rental income. In essence, this can reduce your tax on your rental income received from the property.
6) Tax free on capital gains after 5 years
If you want to make sure that you are not taxed for the capital gains when you sell the property, be sure to sell it only after 5 years from the date you acquire the property. If not, you are subject to Real Property Gains Tax (RPGT). My personal suggestion is to aim to have the power to hold the property for medium to long term, at least in Malaysia terms, sell it only 5 years if you don’t want to get the tax on capital gains. But if the price is good at the present moment and you are happy with the capital gains after incorporating the RPGT, go ahead to sell your property.
7) Have a roof under your head
If all else fails on the property, at least you have a roof under your head. You can use it for your business or to stay with your family. A house is a basic need for everyone. You should be thankful that you have a place to stay now and in the future.
So are all the 7 reasons sufficient to convince you that buying properties is a good investment to consider. Of course, I am not suggesting that you put all your money into properties and ignore all other investments. But a bit of diversification into different instruments is good. Our ultimate goal is beat the rising inflation and to earn some passive income for comfortable living.