From Nick, a viewer who wrote in by email
Nick is 26, a dentist earning about RM20,000 a month, with RM100,000 in cash and RM100,000 in stocks. He has just bought a subsale three-bedroom condo in Shah Alam near his clinic for RM490,000, with his parents helping on the deposit. The instalment is RM2,000, maintenance RM330, and similar units rent for about RM2,200. He plans to rent a landed house nearby for RM1,600. His future in-laws think the couple should have bought their own home first.
Is it better to buy a home first and invest later? And how should he explain his plan to in-laws who think he is being too aggressive?
“I support your move.”
Invest first and keep renting your home. Use your strongest borrowing years and your cheapest loans on property that tenants help pay for, and buy the family home later.
Why
The 90% loans are worth using early
Buyers get two residential loans at a 90% margin; from the third, it drops to 70%. Nick's unit needed about 17% upfront including stamp duty and legal fees, roughly RM85,000. As a third property it would need at least RM150,000. Spending a 90% loan on a home uses up one of the two cheap slots and much of his borrowing capacity.
A home tends to become a big commitment
On RM20,000 a month, the bank would happily lend Nick enough for a RM1 million landed house at around RM4,000 a month. After that come children, a bigger car and insurance. Buying the home first often leaves nothing for investing.
Judge it over 20 years, not in month one
Property is a long game. The aim of the first years is simply for the rent to roughly cover the instalment while the loan is paid down and the property gains value. A small monthly shortfall is the cost of holding, not a sign of failure. Compare who is wealthier in 15 to 30 years, not after the first year.
Renting keeps the couple flexible
A landed house renting at RM1,600 might cost RM800,000 to RM1 million to buy, at roughly RM4,000 a month. Renting costs far less, lets the couple move as their careers change, and spares them maintaining rooms they do not use yet.
What to do
- Once the first tenancy has run smoothly for about six months, start looking for the next investment.
- Buy the family home later. Sean suggests putting it in the spouse's name, as he did, with extra life insurance so the loan is covered if anything happens to the main earner.
- Hand the day-to-day work to a property management company so investing does not eat into your career.
- Keep lifestyle spending low; spend on watches, cars and gadgets only from investment returns, not salary.
- With family, listen for the worry behind the objection, but take investment advice from people already living the outcome you want.
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 #254 | FIRST PROPERTY MUST BE A HOME?
Sources & Verification Data
Summarised from Sean's full English captions for Asking Sean #254. The quoted answer is verbatim; everything else is paraphrased. Loan margins and prices are as Sean stated them in June 2024.
