Tip 30: Buying houses/properties

I once read a Malaysian investment article to encourage families to consider buying a house/property with every 1 child they have or plan to have. That article commends the investment value of properties to be inflation proof and a good long term income generation (rental income) until you need the funds for children's education. The article further proposes families to consider hedging foreign currencies by buying a property overseas when a particular foreign currency value is fair for a particular country that you think you would want your children to be studying at. For instance, if you think Australian or British education is of good quality, you buy a property in those countries when you see a bargain and rent it out till you need the funds for your children's education in UK Pounds or AUD, then sell it or use it as a home for your child during their education to save rental expense. These are certainly huge commitments and many of us do not have such huge savings or the guts to bear such huge risk or the ability to strain our bodies to afford such huge commitments. There are certainly other investment tools out there shared briefly at tip 27, but lets talk briefly about buying properties and the factors to consider.

Gone are the days when property or land prices are of little value at the initial stages of capitalism after WWII. Since then, land prices have steadily climbed including the cost of materials and the labour cost for property construction as well as higher expectation of property construction quality and even the state of security and facilities in or around the property. Also, with availability of loan from banks, the growing affluence of the working class and entrepreneurs, the increasing number of property investment companies acquiring properties, the demand for property is ever increasing that daddy faces the pressure to own 1 or more properties to maintain his self esteem and his role as breadwinner of the family. Should daddy then succumb to pressure to increase his commitments for property ownership? This is a financial question that daddy needs to ask and carefully evaluate long term viability of maintaining a family. Daddy no longer is a single bachelor with short term goals but need to think over a longer term plateau of income and cost management. This question becomes poignant especially when daddies and mummies stay in their own homes and not under one roof with many relatives like in centuries past. In retrospection, I think the question to buy a property ultimately rest in 3 factors - the affordability and ability to consistently pay the cost of borrowing for the property, the ability to withhold selling the property unless its value rises or till rental cost/income of that property would have covered the cost of purchasing the property, and the consideration of how long you are commited to manage and maintain that property? Surely seems like a lot of work. And that is just the feasibility question to start the buying process. The next question arises on which property is a good investment boils down to 4 factors - location, price versus rental income to be received/rental expense saved, quality of building, and neighbours. Daddy's job is sure not easy.

After considering the options above, I decided to buy a small apartment in Tokyo mainly to save on rental expense and have a property in central Tokyo should my children want to stay in Japan in the future. While some actually say that Japan has the cheapest properties in the world by definition cheapest quality buildings, I am happy that it's cheaper than the rental expense I would have to pay and I can make profits when I rent it out if I do not stay in the property. I considered a central location in Tokyo to ensure I would get rental income easily should I leave Japan and decide to rent out the apartment. Also, as I was unsure how long I would be in Japan, I decided my family would make do with a small space albeit a very safe place for children with a nice classy neighbourhood around. It turned out the monthly mortgage I pay every month for 15 years to the bank is less than a rental expense I would pay for the same abode, so I get to save a little each month for further investments. This is also due to the very low interest rates in Japan of 2% (BLR 0.5%). Now, I am facing the difficult question of whether to buy a second bigger place in Tokyo and rent the current one out, but is deciding this very slowly as it really depends on how long I stay in Japan. Should such heavy commitments be made anyway? Whats the balance between contentment and getting a better lifestyle? Tough question. But indeed, I felt that before I bought my first home, yet now daddy is tougher in the inside and wiser in his management of things to get done and the necessary relationships to enable such transactions.