Investing in property can be lucrative, but it requires careful planning and consideration. Based on my experience in the industry, I’ve seen many success stories as well as horror tales of financial loss and even bankruptcy. To avoid pitfalls, you must prepare thoroughly. Here are seven critical factors to consider before investing in property:

1. Objective

• Define Your Goals: Have a clear investment objective. Determine whether you’re looking for short-term gains or long-term investments.
• Rental Strategy: Decide how you plan to rent out the property. Is it for long-term tenants or short-term rentals like Airbnb?
• Return on Investment (ROI): Set a target ROI that aligns with your risk tolerance. Remember, higher risk typically comes with higher returns. Personally, I prefer calculated risks with an average return.

2. Financial Planning

• Affordability: Assess your financial situation meticulously. Don’t overextend yourself by buying properties beyond your affordability level.
• Savings: My rule of thumb is to have at least 12 months of bank installments saved before purchasing a property. This cushion helps avoid financial stress.
• Budgeting: Carefully calculate your income and expenses to ensure you can manage the investment without compromising your financial stability.

3. Bank Loan Eligibility

• Pre-Approval: Understand how much the bank is willing to lend before committing to a purchase. Getting pre-approved for a loan can prevent future disappointments.
• Creditworthiness: Ensure your financial records and credit score are in good shape to qualify for better loan terms. Banks favor prudent borrowers.

4. Demographics

• Population Density: Choose locations with a high population density to ensure demand for your property.
• Target Audience: Consider who your potential renters or buyers will be. A property in a well-populated area is more likely to attract tenants and buyers.

5. Infrastructure

• Accessibility: Ensure the property has good access to roads, public transport, and essential services. Lack of infrastructure can make it difficult to rent or sell the property later.
• Local Development Plans: Check with the local council for any planned infrastructure developments that could enhance the property’s value.

6. Pulling Demand

• Market Demand: Avoid properties in areas with little to no demand. Research the local market and industries to understand who will be your customers.
• Economic Activity: Proximity to thriving industries or business hubs can increase rental and resale value.

7. Future Prospects

• Growth Potential: Investigate the area’s future growth prospects. Look for upcoming developments, planned amenities, and general economic outlook.
• Long-Term Viability: Ensure the location has the potential for long-term growth, making it easier to rent or sell the property in the future.

Investing in property is not just about buying; it’s about making informed decisions based on thorough research and strategic planning. By considering these seven factors, you can mitigate risks and increase your chances of a successful investment.

From the desk of Miichael Yeoh