Robert* is a property buyer who has much experience in buying residential properties - and has also met many fellow buyers. From his experiences, he has come across the much believed conventional wisdom of “If you are buying a home for your own stay, don’t worry about it! As long as it fits your budget and you like it, go ahead!”
Unfortunately for the many who believe in this mantra, this is not often the case as many property owners have found out. Below are just two such examples:
Scenario 1: Cemetery-Facing Home
Mike and Harrieta* bought a condominium a few years ago in an upscale area of Damansara. The unit they chose overlooked a cemetery, but as they did not mind it they went ahead with the purchase. They indeed loved their home, and stayed there for several years.
Further down the line, Mike and Harrieta wanted to refinance their home to get some of their well earned equity. Unfortunately upon approaching a few banks, they found out that all of them, including their own banker, did not want to help refinance the unit due to its proximity to the cemetery.
This is just the first story, which brings us to our next.
Scenario 2: T-Junction Facing House
A while ago, Jimmy and Mary* were very keen in purchasing a house in TTDI. They searched high and low, but everything was over their budget. But after much perseverance, they finally found one that matched their budget. Extremely pleased with their find, they even splashed RM300,000 on major renovations, and lived a few years in their house of dreams.
But all good things must come to an end, and one day Jimmy got a very attractive offer overseas which required him to bring his family along with him for an indefinite period of time. They hence decided to sell their home, and figured that it would be extremely easy especially with all their very tasteful renovations.
Alas, their hopes were dashed when potential buyers did not even want to pay the market price for their homes, let alone their premium price, when they put it on the market. If you are wondering why are T-junctions a no-no for Malaysian homes, read on here.
This brings us back to our original question. Should you regard your home as an investment? Although many people say no, and even though it is by no means definite, the answer is yes; you should regard your home as an investment. The reason behind this is that, even though you might be staying there for a space of time, it might become an investment in the later years via refinancing if not outright selling it.
Here are another couple of reasons why you should view your home as an investment:
a. When you buy a home on a sound loan, you can reap the advantages of it in the later years. For example, Robert bought a home in the Damansara Jaya area in 2007 - and is still staying there to this day - but has refinanced his home several times already as its value increased.
His house has tripled in price since, and every time he refinanced his home he has gained additional cash to pour back into his property investment portfolio. He has used it as a ‘refinancing engine’ for a good many years now, but advises caution when refinancing - and to only do it as a way to generate a higher rate of return.
b. If you buy a home below market value (BMV) but obtain a full loan based on how much the property is worth from the bank, you will gain instantaneously. For example, if you buy a BMV property for RM500,000 but obtain a loan of RM700,000 for the home based on the bank valuation, you will gain an instant RM200,000 worth of net gain.
c. If you buy a home based on what the market likes and the market criteria, it will make it easier for you when selling your home in the future. Take for example high tension wires, cemeteries, water recycling plants and so forth. If you buy a home taking all that the market will take into consideration, you will be able to sell your home easily if you suddenly need to. Not only that, but you will also get a better price because your home will be in demand.
So the moral of the story is: Choose your home wisely. Just because you are buying a property as a home, you should also buy it based on market preferences - just in case you need to sell your home in the future, and want to reap the most of your property’s value.
*Names changed to protect privacy