“Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth” — Robert Kiyosaki
Real estate investment has been around for thousands of years. Although the rules are different than the stock market and other investment instruments, real estate investment can make you wealthy if you do it with a proper plan.
Like other investments, property investment has its advantages and disadvantages. Everyone has different opinions towards investments, likewise in property, some have made good returns, while others were not so successful.
I personally have a close attachment with property investment and I’m an active participant in the property market for almost 17 years. I’m not an expert (property guru) but I can safely say that I have valuable experience and the learning is continuous. I have also made some good decisions and have made my share of mistakes; its parts and partial of any investment.
We need to understand the fact that property investment is very much tied up with government policies, supply and demand, economic activities and social economic factors. The main thing is, property demand will always increase in the current era due to the growth of population and limited supply of land. Now, let’s discuss three common mistakes new property investors commonly make:
Poor property investment knowledge
Many of us get into property investment without proper knowledge. The first thing for a newcomer, in my opinion is to read at least two books in relations to property and investments.
My all-time favourite “Rich Dad Poor Dad” by Robert Kiyosaki and “How to become a property millionaire” by Azizi Ali, really helped me when I first embarked on my journey.
Subsequently, there are many other good books in the market. Please get them and enhance your knowledge. Another way to increase your knowledge is to read articles from property bloggers.
I personally garnered valuable insights from blogs like kclau.com, PenangPropertyTalk.com, rejib.com and many more. For those who are not big on reading, attend seminars by property gurus but do be cautious on the credibility as there are some who may not be credible. Best to do your research on the presenters prior to attending a seminar.
Join property investor forum groups like, Facebook group, forum.lowyat.net and other social media platforms to get more information. The ultimate message, with limited knowledge it will be very difficult for you to be a successful property investor.
Do you have a financial plan?
To be very straight forward, without a financial plan we can’t move forward with any investment. Having a financial plan is as equally important as property investment knowledge.
A financial plan can help us set the right financial priority in our lives, since the first element in financial planning is setting goals. This will help us realise our objectives and keep us on track, even when there is a distraction. To prosper in property investment, there are some key important numbers you need to monitor such as your cash flow, debt ratio, rental yield, credit history, emergency fund, tax planning and others.
This will only be visible and transparent when you develop your own comprehensive financial plan. If you have accumulated property of more than RM1,000,000, you should start engaging a licensed financial planner. Without a professional third-party’s view, it’s going to be very difficult to justify your investment decisions.
As I always say, by engaging a licensed financial planner or advisor, you are not going to be less smart, but you increase your financial knowledge and capability.
A good financial planner will identify your strengths and weaknesses, puts your interest first and provide independent advice. These are the three important attributes of a professional licensed financial planner or advisor.
Letting emotions overrule investment logic
While buying a home is all about individual satisfaction and the overall comfort you would like to have, buying an investment property is all about maximising returns. When investing in property, people often listen to their hearts.
Remember, you can’t make this decision based on your emotions. It is essential to think from an investment perspective to find a perfect place for your first property investment. Your emotions must not impact your decision.
If you want to invest in the property market, carefully evaluate valuable and available amenities surrounding a proposed property like LRT stations, MRT stations, hospitals, universities and other facilities. Make sure to collect enough information to avoid making the wrong decision. Don’t become a “motivated buyer”.
When I first got involved in property investment, I didn’t understand the cyclical nature of the property market, my only experience was a rising property market.
By increasing my knowledge, developing a financial plan and taking investment logic decisions, I survived the economic cyclical in the property market. After avoiding the above mistakes, my property portfolio has performed very well.
Over the years I have treated my property investment like a business. Investing in real estate allows you to protect yourself and your wealth from inflation. While the real estate market has gone up and down, it has never declined over time.
Many people ask me, “What are your successful clients doing? How are they surviving the economy crisis?” And I tell them: Almost all of my clients include property investment in their portfolio, for diversification purpose and building wealth.
Trust me, you cannot ignore property investment as it is an integral part of your investment portfolio.
Gunaseelan Kannan, a licensed financial advisor by Bank Negara Malaysia and a licensed financial planner by Securities Commission (CMSRL/B4198/2013), is currently pursuing his PhD research on financial planning and financial technology. He also lectures on accounting, finance and business fields in Asia Pacific University of Technology and Innovation (APU). He is the Malaysian Financial Planner of the Year 2018 and 2019 Award winner (1st Runner Up), from Financial Planning Association of Malaysia. Email: [email protected]