07 July 2014

Property Talk with Uncle - July 2014

Not too long ago, I had a chance to talk with an uncle who has experience in property investment. Here is the summary that I tried to recall before I forget later: 
  1. Property investment is always a good alternative investment in long run (e.g. 10 - 20 years ). Although the price also will fluctuate like stock market, but in long run, a property in good location will always rise further. Why? It could be due to the two main reasons:  - inflation; - real value increase due to lesser land supply & increase in economic activities. 
  2. A land investment in KL during financial crisis 1998 at RM1.2 million can be sold at RM10 Million this recent year (about 14% cagr). It implies that if you have enough cash flow, a land investment is always a good investment (but you have to bear with the lack of cash flows during the period if you purchase a land just leave it there for nothing). 
  3. Kulai land price rose from RM5 psf during 1998 crisis to around RM16 psf today. It is about 7% - 8% compound annual growth rate (better than putting in fixed deposit). 
  4. Property investment is always treated as long term investment, hence although it is volatile during crisis, but if you have holding power, the long term return is good for you. Many people can be a millionaires through property investment is because they are prepared to invest in long run and they will not easily sell it to others just because a drop of 10% in the market, which is quite common in shares market. 
  5. Sometimes the property price could fall about 20% or even near to 50% during financial crisis. It is really a good opportunity for us to grab when market crash, but at the same time it is also harder for us to borrow money from bank. So, we should always be ready with some cash flow to back us to purchase property during the crisis. 
  6. Risk management is also key to success in property investment. DO not overestimate the financing cash flow, and always be ready for plan B. 

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