Why You Should Probably Forget About Buying A Home

Fatim Akisha at GoodPlaceHQ

The last 15 months in my life have been quite eventful to say the very least; I’ve never learned so much in such a short span of time except for the four years I spent at college some donkey years ago. As I would freely admit to anyone, I started as an outsider looking in, and with the help of a few wise men I was able to quickly learn the inner workings of this industry. I guess my “newbie” status has been an advantage because I didn’t what the industry “sacred cows” were, and as such, I could question about almost everything without having to worry about offending anyone’s sensibilities. 🙂

Now looking back, it does somewhat embarrasses me to realize that most of my initial assumptions about buying and selling property have been very wrong. If you have been reading GoodPlace for some time, you would have stumbled upon some of the things we talk about which seemingly go against the commonly held beliefs of property investors in Malaysia. Here are some of them below –

Buying & Selling Property – Myth & Reality

MythRealityReference
Diversification is a good thing.It's stupid to diversify before you make enough.Click here
Learning about property from books and seminars is a good thing.Guru worship is the surest and quickest way to dismal failure.Click here
Be a generalist, and go to where the monies are.You need to focus on a niche, and absolutely kill it before you move on.Click here
You can do this all on your own.Building a team or getting partners to help you is essential if you want to grow.Click here
Trust your gut.Your "gut" sucks.Click here
You have got to go where the money is.If you're in this merely for the money then you're doing it wrong.Click here
It's impossible to time your market.You can time the market if you know how.Click here
Any agent should be happy to take up your case.Your agent probably hates you. 😉Click here
Property price is a function of supply and demand.Property price is a function of supply, demand, and the fickle emotions of the buyer and the seller.Click here
You can get Mont Kiara for RM500K.You've been misled by fake ads.Click here
Khai Yin can tell you where all the 10% rental yield and 20% year on year capital appreciation properties are.Khai Yin won't do your homework for you.🙂

Of course, in true GoodPlace tradition, I’m leaving the biggest “myth” last. 🙂 If you haven’t guessed yet from the title of today’s article, it’s about the biggest underlying assumptions of all…

Do You Really NEED To Own A Home?

It’s almost disturbing to me that home ownership in Malaysia has somewhat become a religion.

High expectations dad!

Indeed, you almost never hear anyone telling you that buying a home is a wrong thing to do – that would almost be sacrilegious. And so I am going to stick my neck out today and say this –

Buying a home is not for everyone.

It really isn’t. And let me tell you why.

The whole system is designed to meet the needs of industrialism

I know that’s a mouthful, but stick with me for a moment.

It all started with the industrial revolution circa 1760 when the average population and income levels exhibiting significant growth following the transition from production by hand to the utilization of machines.

This unprecedented growth was achievable as long as two components were in place: (1) machines, and (2) employees to operate those machines. Business owners want employees to work for them as long as possible, and as such, availability of choices to employees was a detrimental thing to their businesses.

One way business owners would severely “limit” the possibility of employees leaving their jobs was to provide housing. Many factories and farms at that time provided housing for their workers, and they charged a rent which was then deducted from their workers’ salaries each month. This way, workers are “shackled” down because often they would get in debt with their employers.

Brownie points if you know this song

Brownie points if you know this song

Now fast forward a couple of hundred of years. As that cliché goes, the more things change, the more things stay the same. In present, businesses are still built on the same premise as they were for hundreds of years since the industrial revolution. You still need machines, and employees to work those machines.

Availability of choices for employees is still bad for corporations. In this modern day and age, how do you tie employees down? Simple – burden them with debt… preferably debt that will take them decades to pay off. And what kind of debt would that be? You guessed it – home loans. And so employees are encouraged to own homes.

And so here’s the catch: when you’re straddled with debt, you can’t break free. You may hop from job to job, but you’ll remain an employee as long as you’ve got monthly bills to pay, and these bills will only grow as you continue to “upgrade” your lifestyle and move to a bigger home.

Do you now see how it all works? It’s a vicious circle designed to keep you trapped within the system… so that you’ll remain a cog in the machinery for your entire working life.

Every aspect of the society today (Malaysia and elsewhere) is designed to serve (and advance) the cause of industrialism.

Schools and universities are an obvious example. They are set up to produce obedient workers who are good at following instructions pulling levers at factories, not original thinkers or people who would question the status quo. That’s also why vocational subjects like engineering and accounting are vastly popular (by design) compared to subjects like philosophy or entrepreneurship.

(BTW check out this cartoon strip from Zen Pencils which is highly relevant to what we’re talking here – click this).

Now I don’t want to sound like a Marxist nut job, and indeed, I am quite possibly the biggest flag-waving free market capitalism fan boy on this side of the world. After all, I am a business owner myself, and I can’t be a hypocrite.

But we are not here today to talk politics. What I think is important for home buyers is to (1) understand why things are what they are today, and (2) not to be afraid to question even the most commonly accepted beliefs. Following this, they should be making decisions based on their own rational thinking rather than blindly following societal norms.

How Debt And Money Chasing Changes Everything

I had gone to see Mark again in Singapore two weeks ago and his advice to me about GoodPlace was Zen-like simple – just build a good product. Build something good. Just do good. Be good.

I told this little anecdote to Eddy (a close friend who is also working on a startup) and he laughed it off, “It’s easy for him to say that lah, Khai Yin. I can also do good if I have got millions stacked in the bank!”

I merely sighed at Eddy’s remark because he obviously didn’t get it. Mark’s advice was not about doing good things only when you in good shape financially. It was about NOT SELLING OUT even when you’re at the lowest ebb of your entrepreneurial life. And that level-mindedness, never-say-die and putting-your-feet-firmly-on-the-ground attitude, my friends, is what separates the men from the boys.

I thank my lucky stars every day that I have a business with super low overhead (after all GoodPlace is just me, a rented office in Puchong, and a crummy laptop). Without money worries I can concentrate on writing better articles, meet more agents and process more home buyer requests. You know, all the good stuff.

On the other hand, the fact of the matter is that there’s really no shortage of property sites out there today, and the casual observer would note that there’s no need for another site like GoodPlace to exist at all.

GoodPlace.my

Does Malaysia need yet another property portal?

However, while there’s perhaps way too many property portals in Malaysia today, many of them have ceased to be useful to the home buyer. The “turning point” of these businesses, I noticed, are remarkably similar – they usually start their fall from grace once they sell equity and/or take up debt in order to scale up. Indeed, the idealism of doing good had been lost on them once they started to (in Mark’s words) “sleep with the devil“.

Devil GoodPlace.my

If you’re a startup entrepreneur then this will be familiar to you: when you’ve got investors and bankers on your tail, you’re forced to do their bidding instead of focusing on building something useful for the user (in my case, home buyers). You’ll come to understand (like me) that “doing good” might not be as high on your banker’s and investor’s agenda as “making money“.

In fact, just last week I had turned away large gobs of moolah (read: nearly seven figures) from a foreign investor – for which I  would have to surrender a good chunk of GoodPlace (about 45%). The money was indeed attractive, but  I knew that if I took his money, I’ll be forced to do things with GoodPlace which usually would be simply too “out of character” for me to do. I would in most likelihood be pressured to “turn in the numbers” and compelled to do things like –

  • Becoming a “guru” and start hustling ebooks, DVD programs and and seminar tickets to make quick money
  • Installing annoying banners and intrusive popups at the site in order to sell “eyeballs” (I hate that word) to advertisers
  • Selling contact details of GoodPlace Digest readers to developers, agencies and (shudder) property gurus
  • Blasting out “electronic brochures” (read: spam) to GoodPlace Digest readers
  • Publishing (paid) property reviews with vomit-inducing marketing-speak like “lush greenery“, “exotic surroundings“, “superior accessibility” , “tasteful decor” and “luxurious six-star amenities“.

Now how does all this tie back to our earlier point about not buying properties?

You see, when you’re straddled with debt (home loans or other kinds), you’ll always be in money chasing mode. You’ll be stuck doing things that you probably wouldn’t do if you’re not beholden to that monthly pay check. Once you’ve paid off that loan you’ll realize that time has passed you by… because you’ll wake up looking at the mirror finding yourself at the ripe old age of 70.

If that doesn’t worry you, then I worry for you.

But Khai Yin, surely there’s an exception for everything…

Why, yes, of course. In the spirit of full disclosure, I am a home owner myself – but before you call me out as a hypocrite, consider my circumstances –

  • A significantly low % of my topline income goes to servicing my home loans. You won’t believe how low it is.
  • I borrow as little as I can. I think 90% LTV is heretical.
  • My debt are only for properties. I don’t have a car loan. I have fully paid off my 13 year old Waja. Which I still drive.
  • My income comes from my own business, which means that I control how much I pay myself.
  • All my earnings get ploughed back into my business. My liquidity is high.

Now contrast this to the typical Malaysian home owner –

  • Up to 50-60% of net income goes to servicing loans.
  • 90% LTV loans are the norm.
  • Car loans on top of home loans. And to some, add personal and credit card loans to that list.
  • 100% of income comes from day job. Cough.
  • Not much liquidity – maybe cash to last three to six months if one gets fired.

Now don’t get wrong: I’m not saying that you’ll need to have your own business and drive a beat up Waja like me before you buy your own place. But if you’re going into heavy debt which burdens you until you’re old and grey just because you want to own property then you’re making a mistake, a huge mistake.

About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

Comments

  1. well said, can i marry you? ^^ lol

  2. well said, can i marry you? ^^ lol

  3. Jordan Tan says:

    Last thing I remember, I was running for the door,
    I had to find the passage back to the place I was before,
    “Relax, ” said the night man, “We are programmed to receive….

    Please place the brownie [points] in my cookie jar.

  4. Hi Khai Yin,

    Over the past few days I’ve wandered down your blog and read your earlier articles. I like very much what I have seen. And I notice also that there are some international readers in your blog. They probably share my envy when you talk about property ranging from RM300,000+.

    I was wondering (with no small amount of self-interest) if you could one day soon find the time to write a piece dedicated to the foreign investor. Maybe things to look out for…
    – Obviously, restrictions and laws, minimum purchasing sums (now as high as RM2mill in Selangor)
    – Any other things we have to look out for which Malaysians don’t
    – Any advantages we have over Malaysians?
    – Should our strategy be different from locals in terms of types of property purchased? Should we aim for different areas?
    – How do locals see us? As bringing in much needed investment or simply pushing up prices
    – Any procedures which can make things easier for us? Eg. Malaysia My 2nd Home Scheme?
    – Will Goodplace one day have a section for foreigners..

    Just an idea….

    • Probably won’t have a section just for “foreigners”, unfortunately. Also, you’ll be hard pressed to have an edge over locals, because property by its very nature is an industry which is typically well regulated with “protectionistic” policies, Malaysia or anywhere else.

  5. Justine Jiew says:

    KY

    This article is not only refreshing but also very articulate, bald and cheeky (“ABC”). It is certainly a welcome change from all the self professed property guru who preached the “buy, buy, buy” mantra.

    Well done and keep up the good work!!!

    JJ

  6. Well articulated Khai Yin.

  7. Funny this article should come out today. I was just telling someone that they could get a nice 24×75 home, near an upcoming LRT station in a mature neighborhood for a mere RM1300 per month. The catch? They’d have to rent which is a fantastic option for someone in their shoes – young and getting started with their career.

    Why did I suggest renting over buying? Well it’s because that same house would have cost RM3500 per month if they paid a mortgage. Not to mention the down payment and all the costs.

  8. Wilson Poh says:

    A good read! Many thanks, Khai Yin!

  9. Hi Khai Yin.You are really following the Zen way.These is what we call success to significance.In these materialistic world hardy you can find people who stick principles.

  10. Dear KY

    Shocking to hear you say about not buying property. Property Investment is on the contrary will free us from the bondage of slavery to the Landlords. It is not for your generations alone but for your future generations as well.

    In this climate of low interest rate, much liquidity and high inflation, we should be locking the current price of homeownership to hedge against ever increasing property prices in the future. Yes, the cost will be the long tenure of mortgage but low interest rate offsets it. Compare property to all other forms of investment including business entrepreneurship, property investment is actually no brainer, probably the wisest and simplest. A home can be enjoyed by staying in it while appreciating in capital gains. Instead of paying rentals, the rent is used as your mortgage payments.

    It may be difficult in the initial few years with much belt-tightening, salary increases will ease the burden after some years in servicing the mortgages. If one starts young, you could even paid off fully by the time one reaches at the peak of one’s career of somewhere 45 to 50 years old. Even if one factors in the upgrading to a bigger house, the step-up from selling the previous house would alleviate much hardship in terms of lower mortgage or smaller loans.

    Comparing someone who rents his home instead of purchasing one, it would be very difficult for him to keep up with inflation. When he retires, he will be homeless and to continue to pay rent without an income would be almost impossible. He has to continue to work in his old age instead. So here, who is the slave in life?

    Whereas, one who purchases a home in his younger days, can downgrade and realize his cash for his retirement after decades of servicing his mortgage when his home would appreciate many folds.

    Yes, property investment may be fraud with risk such as high interest rates in future and depreciation etc, it is still the safest as against putting your cash in banks with its ultra low returns, business enterprises, and stocks and shares.

    Anyway, history has taught us that investing in property for a long term is a sure winner as property is REAL.

  11. Fred,

    One can lock in to the current low interest rate regime by getting a fixed rate loan. Worryingly enough, most new home buyers I know never considered this.

    Just like you should buy bonds when interest rates are high (in the double digits), you should borrow fixed rate when the interest rates are low.

  12. Ling ling says:

    KY, I had always enjoyed reading most of your blogings and truly appreciate your blunt honest opinions & comments! Well, having read this, I perfectly understood your points and agreed that owning or buying homes is definetely NOT for everyboby 😉
    One has to fully analyse his/her very own circumstances ie financial means i.e like you stated LTV; personal and filial commitment, lifestyle habit, life’s purposes ect to decide if is really feasible and better to own or rent. 😉
    Of course, ideally one can afford to buy or own a home or property but that alone should not be the criteria / factor in buying decision simply because it is traditionally and commonly expected. Especially if one has to be so hugely debt laden simply for the sake of owning a property instead of renting! The above article has clearly and aptly explained with good logic.

    • Thank you for the comment, Ling Ling. I hoped nobody would think that I am against home ownership (I am not). To some (most?) people the default route of staying employed while racking up debts to retire at 60+ is perfectly fine. To others, they may make different choices especially if getting out of the rat race is of priority.

      BTW: come around for another visit again, yeah? 🙂

  13. Isn’t this what KY’s dealmatcher is about ? A buyer-side business model. Trust & integrity draws in buyers. Appointed property agents pipeline the supply side. The revenue model can be some variants- from buyer and/or seller…..

  14. Came across this old article from a pingback in your current digest. I could not agree more. If not for the shared disdain for polygamy, I’d join CHien.

    Our asian values constantly emphasise “why line someone else’s pockets when you can contribute towards your own appreciating asset”. I cannot believe how entrenched this perspective is and am floored at how so many buy into this no matter how saddled with debt they become. The other misguided mantra is that investing in property is a sure-fire way to earn the big bucks. How sad. How truly truly sad. That one would enter the somewhat volatile market with little capital to manipulate financing facilities available purely for a quick buck, at the expense of genuine homebuyers, it just makes my blood boil. Yeah, I’m talking about you, slimy investment clubs.

    Oh, and Welcome to the Hotel California…….

  15. Subramaniam says:

    Dear Khai Yin,
    ‘Thank you for sending me your news letters, much appreciated. I have only read few of your article not many a few only. I see its great- its wonderful, very knowledgeable with facts of course. Its also gives me a kind of motivation or some new ideas every time I read a article of yours. I hope you’ll keep-up the good thing you’re doing for years to come, to educate or advice to property buyers.

    Thanks again.

  16. Hi khai yin,
    I partially agree with this article. When I was young, just out of univ I bought a house during my 3rd year of my first employment at the age of 24. I bought early bcos I refuse to rent. I really stretched my financial. I took personal loan for the down payment. On top of that I hv a car loan though it was a used car. From there I hv upgraded twice till my present home (that most likely my final), a semi d 11 yrs ago. Looking back 27 yrs I never regretted that decision. Never in my life I hv 2 housing loans concurrently. I always put back all the profit or rather excesses frm my previous house into the new upgraded one. Ironically after reaching the big dream hse now that kids hv grown up n go to college, soon starting their own life I m thinking to downsize. Perhaps luck was on my side bcoz I bought my first in late 80s and the property price has never come down ever since. My 2 sen is if you have to rent please buy.

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