In times like these with developments shooting up everywhere you look, a lot of investors in Malaysia tend to fall victim to the Attractive Property Package Trap. What exactly is this you might ask? It’s those sweet, sweet deals that the developers offer you on your new property purchase. You know, those large cashbacks, 0% down payment deals? It’s no wonder so many fall for it. Being told you can own a brand new piece of property while having to pay absolutely nothing and instead get a nice wad of cold hard cash, is extremely tempting even for savvy investors.
Making sure that you are aware that such a Property Package Trap exists, gives you the power to avoid it – this is done by doing your own research. What happens a lot of the time is investors get lured in by friends who happen to be property agents telling them of the next big upcoming project. These new projects are normally in newly developing areas and are highly dense developments, that come with the promise of huge capital gains in the future. It’s especially important to double down on your fact checking of what you’ve been told by these agents and delve deep into all the information on the location. You should ask the agent all the important questions and then take your time to go over all the important considerations and figure out how you will cope with your property loan repayments.
A lot of the time the agents will tell you, “Don’t worry Bro, the cashback will help you cover 10 months’ worth of rent should you be unable to secure a tenant soon.” This hardly makes any sense if you take a step back and let the words resonate with you for a bit. The hot offer that they’ve just told you about that will allow you to get your hands on a large bunch of cash is going to be used for… your loan repayments? And what happens after the 10 months? You bleed like a freshly slaughtered goat, competing with a thousand other tenants in the same situation. When they say something like this, it should set off alarm bells in your head. Why won’t you be able to find a tenant easily? This says something about the development as a whole. It might not actually be as desirable as they are making it out to be.
You might argue and say that it’s just in case you can’t secure a tenant, there’s more risk for other properties that don’t have any cashback. At least with this one, you haven’t sunk any money in for a down payment which you might have had to do for another development. That’s true, but there’s plenty of developments with 0% down payment that don’t have cashback. It will really depend on the project and most importantly the projects location. It really comes down to the numbers and the investor who is purchasing the property.
Projects like these can be better suited for a veteran property investor who has the means to cope with his property loan repayments and wait till the area sees some growth, but more often than not, most of the buyers at projects like these are not veterans. They are first time property buyers who end up bleeding each month, spending their attractive cash back deal to sustain their loan repayments. Do extensive research on sites like iproperty and brickz.my on the rent and recent transacted values of properties at the location as well as making sure to speak to as many agents as possible about various different projects available on the market. Don’t be like them and make sure you don’t ever fall victim to an Attractive Property Package Trap.