I bought my first property in 2002, a 700 sqft apartment in Relau, Penang. Three years later, I bought a 1,258 sqft condominium.
When my friend, a senior manager working for a multinational company heard about it, he advised me to be careful. The next crisis is just around the corner.
A financial crisis is predicted every 10 to 12 years. The last one was in 1997 and he read many predictions that it would happen in 2008. He was right, it did happen and for a while everything seemed negative.
However, both my properties did well even during the crisis. I believe the reason was because I bought the properties at a very low price, compared to many other more popular projects or areas. In brief, buying objectively saved my investments, not the timing.
Anyway, the crisis did not last long and when it was over, the world started growing again. There was a property boom in Malaysia, and both prices and the number of transactions started rising. However, the increase in prices became too fast for comfort. As a result, cooling measures had to be implemented.
One day when I met the same friend for dinner in 2010, he told me about his prediction again. He said Penang’s property market was getting way too hot. People were queuing to buy properties like buying fish. He decided to only enter the market when the market drops significantly.
In 2010, the typical prices for my 1,258 sqft condominium was around RM500,000. In other words, it was less than RM400 per sqft. I told him that I believe RM400 per sqft is a safe level and he should just buy one unit and wait it out.
Anyway, I had sold my condominium two years before that at RM645,000. Today, my 1,258 sqft condominium would have fetched between RM600,000 and RM630,000.
Even at RM645,000, that would only come up to RM512 per sqft, a level I considered normal. Even though that is not cheap, it definitely was not as expensive as some of the more popular areas in Penang.
My friend earns much more than me, but he has been staying in the same 700 sqft apartment all this time because he was waiting for the best time to enter and buy. In total, he has waited for over 10 years. I am very sure he has been saving money and investing it elsewhere where it is safer.
Have you ever wondered when is the best time to buy? Personally, I believe the best time to buy is when we are financially ready and have viewed enough units to be objective. How about the second property? For me, it is the same answer.
It is when we have enough down payment for the second unit and we have viewed enough units to be objective. The first property can be rented out fully furnished and the rental would be enough to cover your mortgage payments which would have remained more or less the same every month. Buying the second property would signal the start of our journey into property investment.
After speaking to many fellow property investors, I have four general conclusions for those who intend to invest instead of speculate.
The best time to buy depends on us. (When we are ready financially.)
The second best time to buy was 20 years ago. The best time is now. (In other words, when we are ready financially.)
If there are people who are able to predict when the crisis would come, they would already be so rich that they have no time to predict. I do not know of any economist who has been right in every prediction. (If you know of any, please tell me. I will follow him closely.)
Buying (the right property) and waiting is better than to wait and buy (when the price drops tremendously.)
Assuming we want to buy when the price dropped a lot, do we have a target price? If the answer is, ‘It depends’, then I wish you all the best.
Fellow investors who are still reading this article, I think it is time we start viewing more units in different areas. It is also time to start reading more property news. We can always declare our intention to buy at a later date, say in the next two years.
However, it would be foolish to only start reading property investment news a few days before we buy. By the way, if we bought the wrong property, it does not matter when we bought it. It is still a wrong buy and that would set us back many years. Happy investing.