INVEST INTELLIGENTLY
by Lim Lay Ying
Property Times, New Straits Times
12th February 2005

Stop for a moment and take a look at the Investment Clock (see Chart). The hand on the clock is now reaching an almost northwest position after having moved out of the depth of the recession in 1999.

Interest rates since then have remained low and stable on the back of strong macroeconomic fundamentals and a financial system that is flushed with liquidity. The stock market has picked up its growth momentum, albeit some hiccups along the way, and this has helped to build up more investor confidence (amongst consumers and the business community).

The Malaysian Institute of Economic Research (MIER)’s Fourth Quarter 2004 Consumer Sentiments Index (CSI) polled a hefty 9 per cent of respondents who are planning to go house hunting soon. This is the highest proportion polled in almost two years according to MIER.

Most of them are from the urban areas, particularly the central region, and earn high incomes. Low mortgage rates, job stability, and expectations of rising real estate prices, are driving them to consider investing in property instead of stocks.

If you happen to share the same mindset as the 9 per cent who have home-buying plans, you may want to move a bit faster in your search for the right property. The hand on the investment clock is only going to move clockwise – and will soon reach the ‘top of the boom’ once real estate values peak.

The opportunity is now before you to build your wealth and enhance your personal net worth through real estate investment – what more when prices and values are rising.

But to do so, you need to know how to invest intelligently. Read on for some helpful tips if you’re a first-timer or even if you’re already owning multiple properties.

· Do your own research and do it thoroughly before you invest

Read all you can about real estate – especially the industry trends and long-term prospects, in press clippings, on the Internet, etc. If possible, talk to reputable, established brokers who have successfully invested in properties. Remember that brokers specialize – so if you’re looking for an apartment, don’t talk to a broker who only knows about shops and offices.

· Watch out for market indicators

A savvy investor is hungry for information. You have to read the newspapers and pay attention to what’s going on in the real estate market around you.

You have to watch the market closely as business cycles are getting shorter due to so much global uncertainties. It takes a lot of practice to understand real estate market behaviour, but by monitoring market indicators closely, it can help you evaluate the past and make better predictions about how the industry will perform in the future.

· Buy a property only when you understand it

Stick to what you know. Don’t go with the herd and buy what everyone else is buying – those types of investments usually end up underperforming. Be particularly careful if the property seems too good to be true – there are lots of charlatans out there who will promise you the sky in order to get you to part with your cash.

· Pick a winning location

When investing in real estate, this should be considered seriously. Be prepared to spend more on a good location – it’s far more sensible than getting a bargain in a lousy area. But if you’re smart, you could make incredible investments out of not-so-great locations.

Use your instinct when picking a location. Is it near enough to your workplace (if you’re buying your home) or to main employment centres? Do you feel safe when you move around the neighbourhood? Are there conveniences nearby, such as eateries, grocery stores, shops, banks, and post offices? What sort of people live and work there?

· Choose a good view

The view is important. Paying the extra for the view is worth it in real estate investing. But you have to be careful because the view you’re getting today could change in years or even months to come. So make sure that the view that you’re paying for today will be there tomorrow.

· Make your property appreciate in value

Once the property is in your hands, appreciate it. Then it will appreciate in value for you. Stay on top of the maintenance and fix anything that is broken, otherwise the property will deteriorate quickly. To increase the value of your property, you can landscape, renovate, and/or decorate the interiors. You can even go further by enhancing the surroundings around your property to gain that extra mileage.

· Be patient when selling your property

Finally, if you’re planning to sell your property and there is little or no activity, or even if there is some activity but no offers, you need to keep watch on the price you’re asking for. Remain patient if you think your property should command the value it deserves.

As long as you’re realistic about its value, there will always be a buyer for it – it’s just a matter of time. Be sure the property you are offering stands out amongst the competition in the marketplace. Use a good broker who can screen prospects for you, negotiate on your behalf for the best price, and take care of the legal and financial processes.

When you invest intelligently, the rewards can be impressive, offering attractive returns and consistent capital growth. For as long as interest rates stay manageable, property prices are only going to rise over time owing to the growing scarcity of land, rising demand, and inflationary pressures.