Wednesday, 13 January 2021

Big Decision: Property or Not

I mentioned in Sep20 that I'm interested to purchase another property for investment. I'm not just simply talking only, it's for real.

I thought I will not invest in another property again after my last purchase in 2012 but now the HOC announced in Jun20 has encouraged me to look for one.

The main reason is the removal of the 70% financing cap for a third home loan during the HOC period.

I've been out of property investment for quite a long time, and I'm not up-to-date regarding recent projects and price trend. 

After doing some research and attending some webinars about property investment, finally I made a decision to purchase a unit in Klang Valley.

However, one day before I was supposed to place my booking, I realized that I'm NOT entitled to 90% loan for a third residential property!

It seems like this 90% loan "offer" only applies to development projects launched before Jun20... I didn't read this from any news report...

So, it's a much bigger decision to make: to proceed with the booking or to give up.

If I can get 90% loan, I don't need to sell my shares in stock market to pay for the down payment.

If I can only get 70%, I have to sell quite a big portion of my shares to settle the 30%. My stock portfolio value will be like going back to the beginning of 2020 and this will significantly affect my plan to grow my stock portfolio value.

Furthermore, stock market is widely expected to do well in this "recovery year of 2021". 

The most important factor that gives me a hope to return to property investment is the removal of 70% loan cap, but now it's no more there.

I don't bother to look at property if there is no 90% loan for me in the first place.

Should I continue to buy the property which might "damage" my stock market investment plan?

From investing point of view, it's certainly not wise to take out so much cash to purchase a property. It does not make sense doing this.

We can put this cash in the stock market which might generate better return in a much shorter period of time.

Nevertheless, finally I still decided to go ahead with my booking.

The main reason is that I like this project so much that I'm even planning for own stay in the future if there is a chance. 

The second reason is that I think this project is undervalued and has a high chance for good capital gain in the next 5-10 years. It's like an opportunity in a lifetime which is only available during this Covid19 pandemic.

The third reason is the HOC which can save me almost 10%, together with low interest environment, free stamp duties & legal fees, even though there is no 90% loan margin for me.

It's really a big decision and hopefully I won't regret it in the future.


  1. I do not know what property that is and therefore can't really comment if that is a good decision. But, in term of stock investment fund, there is an option..
    I do not talk about this to everyone because the "option" is a double-edged sword. It can have both favorable and unfavorable consequences, depending on the person who operate that sword. Yes, i am talking about share margin financing which provide "leverage" to stock investment fund.

    I know, i know, this option is "bad", it is risky, it is invest beyond a person's means. Warren Buffet strongly against the idea of "using borrowed money to invest". I never argue with people who have the negative idea about share margin financing bcos they have good points.
    But, what if we think about this question: why nobody would say it is wrong to get 90% loan and pay only 10% with the money we have to buy a property? The leverage in this case is 90:10, which is much higher than share margin financing can offer.

    U should have known about this idea long before i bring it out. It's just a reminder that this option exists after i learn about your dilemma. I dare to mention only to person who i think can handle this double-edged sword well and can lead to favorable consequence.
    Lastly, I would think share margin financing is very useful when bear visits. If a person uses the leverage during bull run thinking to maximize his return, disaster awaits him.

    1. Actually I still do not fully understand how share margin works, and I deliberately don't want to understand it as I think it's not for me. Having peace of mind is important to me at this stage. However, I can't rule out using it in the future. Stock market is very volatile compared to property market, so borrowing money to invest in property is less risky. You're using margin to invest?

    2. I do have a share margin financing account, and i use it when needed.

  2. Hi bursa dummy,

    Please share the project with me, can?

    My email:

    Thank you.

    1. Sure, may be I'll write about it after my purchase is confirmed.

  3. There is actually another option to make sure u can buy the 3rd property without sacrificing the funds in your stock portfolio. There is re-finance your 2nd property (i know, i know, it is again unconventional :p)
    In that case, u pay the interest/principle for the 70% loan of the 3rd property + the re-finance's interest/principle of your 2nd property. U can make the total amount of the interest/principle u are to pay to be almost the same level as what u initially planned to pay for the 90% loan of the 3rd property.
    The option above of course will involve the admin and processing fees for the re-financing loan. This is the cost to pay.
    U have gifting in picking stock, and as u said, this year 2021 should be a "recovery year". Thus, reducing the stock holdings now could be a waste, and the "waste" amount may (or may not) be higher than the capital appreciation of the 3rd property..
    We are now in low interest environment and this situation could last for years. Thus, this is about using the low interest & other people's money to look for higher yield return. It is kind of aggressive but strategically aggressive.

    1. About refinancing, I also think of it before, which is to take out more cash to invest in stock market. However, I'm still hesitate to do refinancing as I don't like the feeling of having to pay more monthly to banks and jeopardize the cash flow of my property investment. At this stage I'm trying to settle the loan for own-stay property sooner so that I'll have less expense if I retire early. I know that getting out more cash might be better if my stock investment gives me better return but I just can't guarantee that.

      The other option is to sell other property so that I can get 90% loan but obviously it's too late now. I'm also not very keen to sell at current soft property market.

  4. If u are to take another loan, i suggest flexi-loan. And, if u have extra money in future, i suggest not to settle the whole amount of loan, but make extra advance payment till u leave the loan to very min amount in your flexi-housing loan. In this way, u can pay only very min interest and at the same time having the flexibility to withdraw and use the fund from your flexi-housing loan.
    I would like to share with u that i do not have a single FD (fixed deposit) account since many many years ago. My flex-housing loan accounts act like my FD accounts, I put in advance payment when i have additional cash, i withdraw from them when i need cash. The advance payment i put in can save me ~4% interest rate compared against merely ~2+% FD rate now.

    1. I also don't have FD and I never have one :) I'm just going for semi-flexi. I view my unit trust as my emergency fund, if I have spare cash, all will go into stock investment account.

  5. The above are merely my sharing and my opinions. I do not share with someone i do not practice myself or something that led to unfavorable consequences. The strategies work well for me so far.. but that does not mean will also work well in future, which is always full of uncertainty
    In other word, I may be wrong.

    1. I really appreciate your sharing and opinions. Previously I always think that I'm a high risk investor, as I almost place all my spare cash in stock market, and I can use up more than 70% of my monthly income to repay property & car loan (I'm not that highly paid). However actually I'm not, I'm scared of margin financing, refinancing etc as you can see. I'm just living in my comfort zone.

    2. There is no right and wrong, it all depends on one's risk profile.

      On investment, my risk profile is high (if not very high). I dare because i think the risk i take is a "calculated risk".
      On the other hand, i do not gamble; i have not bet a single cent on any sort of gamble for many many years liao. I am okay to buy a significant amount of stocks in one day without blinking my eyes; BUT, my heart will pound with great fear if u ask me to place RM100 bet in casino. This is because i cannot calculate the outcome of a gamble and i would be taking an "un-calculated risk" if i gamble. That is the difference.