From CL, a viewer from Penang who wrote in by email
CL is 49, single and a private school teacher earning RM3,800 a month net. CL owns no property and has no loans, holds one credit card with five months of history, and was refused two more. CL has recently inherited RM170,000, and also has RM100,000 in fixed deposits and RM50,000 in EPF Account 2.
Is it sound to buy a cheap walk-up flat in cash with the inheritance to rent out, then buy a second flat to live in?
“I would suggest to not go for a walk up apartment”
Rather than paying cash for a walk-up to rent out, buy an affordable state-scheme home of about RM280,000 to RM350,000 with as large a loan as CL qualifies for, live in it and rent out the other two bedrooms. Keep most of the cash in reserve, and work on earning more.
Why
Age shortens the loan
Most banks lend only until 65 to 70. On a RM300,000 loan at 4%, 35 years means about RM1,328 a month; 15 years means about RM2,219, which needs roughly RM7,000 of net income to qualify.
Owning solves two worries
Landlords are often reluctant to rent to older tenants, and an own home removes that risk. Renting out two rooms covers part of the instalment, and the rent becomes income once the loan is paid.
Walk-ups make poor rentals later
Stairs are hard work in retirement and for families with strollers, so tenants are always the lowest-budget group and rents compete on price. Older walk-ups also bring repair levies and other hidden costs.
Keep cash, borrow cheaply
Spending it all on property leaves nothing for emergencies, and banks won't lend for repairs as readily as for a purchase. In later life, a government reverse mortgage scheme can turn a paid-off home into monthly income.
What to do
- Ask a bank now how much you can borrow on your current income.
- Look at Penang's affordable housing and apply for first-home incentives such as stamp duty waivers.
- Pay the difference between the loan and the price from the inheritance, and keep the rest in fixed deposits or EPF.
- Rent out the spare bedrooms once you move in.
- Add income through tutoring or other side work.
Editorial Note: Summarised from Sean Tan's full episode. The quoted answer is in his own words; the rest is our paraphrase. Figures reflect the recording date, so check current rates and rules before acting on them.
ASKING SEAN #264 | 50 YEARS OLD WITHOUT ANY PROPERTY
Sources & Verification Data
Summarised from Sean's full English captions for Asking Sean #264. The quoted line is verbatim; everything else is paraphrased. Figures are as stated in November 2024. The episode is sponsored by The Makeover Guys, a renovation company.
