So you’ve been through three years or more of university and have finally graduated. Even better, you’ve landed your first job and officially have a steady stream of income.
Congratulations! While it’s natural for you to want to spend your money as you see fit, you might be surprised to know that investing into property is feasible – yes, at this early stage of your career, and at this young age.
In fact, it’s better to start early, so you can reap dividends going forward and set yourself up for success and a happy retirement decades from now.
Here are four ways you could look into an investment property, even if you have only just landed your first job.
1. Get a few credit cards
Yes, you read right: apply for two or three credit cards from different banks. But take note – these cards are not meant for indulgence. Rather, they are to build your profile as a creditor, which would be helpful when it comes to future mortgages as the banks can track your debt-repayment behaviour prior to deciding on your loan applications.
Here are some best practices after receiving your cards:
pay all bills on time;curb your spending at 30% of your credit limit at all times;never reveal your credit card and pin numbers;check transactions regularly; andcall your bank immediately if you find unauthorised transactions.2. Refrain from buying a car
This is related to your debt-service ratio (DSR). Say you earn RM2,500 a month and buy a car with an instalment of RM500 a month. This works out to be a DSR of 20%, since the car repayment is 20% of your salary.
It is best to limit your DSR to 30-40%. So, if you spend a big chunk of your salary on a new car, you actually limit your options when it comes to purchasing property.
Now imagine person A and person B, who each makes RM5,000 monthly. Person A services a car instalment of RM1,000 per month, while person B is debt-free.
Assuming that banks limit lending to 60% of one’s monthly income, person B would, therefore, be eligible for RM200,000 more in mortgage loans than person A.
This demonstrates the importance of DSR and its impact on property prices.
3. Invest in upskilling
Today, the biggest issue in buying a property lies in one’s ability to place a 10% down payment. To buy a property worth RM500,000, you would need a down payment of RM50,000.
Practically speaking, it is best to have about RM100,000 in excess cash when you buy property. Of course, in your 20s and earning under RM5,000 a month, this might seem like a pipe dream.
So, one long-term solution would be not just to focus on saving money, but on raising income. And the key to doing this is to find ways to upskill in your vocation.
This means picking up skills, abilities and experience that would expand your present knowhow and minimise skill gaps, so that you are able to dabble in more projects, take on more responsibilities on the job, and earn more money.
Try to tie your work performance to your income, so that what you earn is linked to the amount of value you bring to your clients and your company.
4. Be careful of ‘no-money-down’ deals
Avoid property ads that promote “no-money-down” or cashback deals, as many have bought overvalued properties with these so-called “incentives” only to later find it difficult to sell or rent them out.
Such promotions typically attract those who do not understand property valuation. It is much, much safer – especially if you are a first-time home buyer – to place the 10% down payment on a residential property than to be trapped by one of these deals.
Yes, it would be “slower” to repay your loans, but what is “slow” compared to potentially losing five to six figures over the years, thanks to overpriced purchases?
As with all investments, it is best not to be blinded by what seems too good to be true – take it slow and steady, and you can still win at the property game.
