Friday, February 15, 2008

Your Home- your asset??

Your Home- your asset?

People always think that their homes is their assets. I asked them what makes them think so. A lot of you will reply:" Of courselah, can appreciate in value ma!"

I strongly disagree that. If you are living inside your house now and still paying your home loan/mortage, I am so sorry to tell you that your home becomes the asset for the banks and a liability for yourself!

Therefore, if you are not making any money out of your house and need to pay money to stay inside, it is your liability and not your asset. You only can consider it as an asset once you settle your housing loan!

'How to settle the housing loan? Are you kidding? I am taking a RM 500k or S 300k housing loan?' some people may argue! I think one commonest mistake people make after they get their fisrt job is buying cars and houses too soon!!

Second mistake we make is buying too big car and house that we can't afford. Actually, you are recommended to buy a house that is only 3-4x your annual income. And I can tell you a truth, getting a house with that price will most probably end you up in one on the lousy flat in KL/Penang. And if you are lucky/unlucky to live in Singapore, you most probably can't even find any HDB flat that falls within your budget.

What I suggest you to do,

1) Work 2-3 years first and save up at least 20-30k before hunting your first house.

2) If your head is not so big, never try to show off to buy expensive house ( or show people how big your hat is!)

3) Settle your loan fast, pay extra every month until you settle your loan.

4) Get second cheap property and rent it out, then you only can consider it as your asset ( positive cash flow)!


cheesy said...

Excuse me, let me share my experience here...

I once used to believe that theory, where our house isn't actually an asset but more to liability, but now that I actually got my house sold, I really think IT IS AN ASSET!

You see, I've been paying for my house for around 3 years, R800 a month, including 100 bucks for maintaince fee.

Say, roughly 800x12 months=9600
so 9600x3 years =28800
say, plus minus quit rent cost me around...rm600 (yup, i did check my bill)...

so 28800+600=29400
including misc eg indah water RM200
makes the total up to 29600...

that's how much has become my liability..or so i tot...

the thing is, recently I got my house sold with a profit of Rm30K!

Isn't that just nice?

So, all these years I stayed there for only!How about that? ;-)

All in all, juz a different perspective from me regarding this topic, I would prefer to think as "Your home-your investment.."

P/S: Appologize if the above has hurt anyone's feeling...I'm a newbie in property so indeed I am still learning...

ms fooley said...

I did exactly like what you hv wrote here, purchased 2 bedrooms apartment and 1 studio unit in jb town at the age of 27 & 28 and rent them out to mostly professional tenants.These category of people are normally good pay master & never failed pay on time. It is crucial for newbie investor investigate the selection group of tenants before buying the properties.

I followed few tips I read couple of years back from 'Guru investors' whom quote 'your first house shouldn't be your dream house'.I thought I was walking the right path till PM annouced in early 2011 that bank will only allow to release 70% loan for the 3rd , 4th .. house owner ...URgggh , This upset me the most that they fix new law on the year that I intend to buy my dream house. Where on earth am i suppose to prepare 30% out of my pocket savings immediately?.My dream house price has gone up from 300+ to 491k less than 2 years time...

Now I have to surrender my dream house and search for cheaper landed house which can suit my 30% budget. Still I believe if I can turn back time, the thing I will change in my so long decision , is to buy my dream home as 2nd property and rent it out since I was still single back then ..The 3rd or 4th houses for investment can come later. Once married , can settle down at that 'dream house'...urgh....