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23yrs old, RM18k, buying a new house now, good idea?

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(please read before voting thanks!)
Go for it!
 40%  [ 2 ]
No! Bad idea!
 60%  [ 3 ]
Total Votes : 5

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Joined: 09 Aug 2007
Posts: 1

PostPosted: Thu Aug 09, 2007 10:37 pm    Post subject: 23yrs old, RM18k, buying a new house now, good idea? Reply with quote

Hi everyone

I will turn 23 next month and I've just finished my study. Early this month, I've started working and currently my starting salary is only RM 1800. After 6 months, if i perform well, it will increase to ~RM 2200. I'm also informed that after 3 years I will be eligible for Telekom home loan which has the same interest rate as the government's (4%).

In ideal world, I should wait for the 6 months or even 3 years period then only can I think about buying a new house. However, I'm really interested in buying this double storey terrace by Seri Pajam Sdn Bhd located near Nilai (seripajam.com.my/web/perdana.htm). The 2nd phase only has a few units left. If i wait up for another year, the next phase will cost me RM10k more and the house will take longer to be completed. Furthermore, the interior design is really nice and its quite near to the komuter station.

The main idea is to buy now using Bank Loan and move in as soon as the house is completed (May/June 2008) and rent out the other 3 rooms. If I can get Rm200 for the 2 slightly bigger rooms, and RM 150 for the smaller one, I only have to pay RM (950 - 550) 400 monthly. (I get to use the huge master room yay!).

FYI I don't have a car and not planning to get one anytime soon and that will cut a good couple hundreds off my monthly expenses ~no installment, no toll, no feul and no parking.

And after 3 years, I plan to refinance and apply for Telekom Loan which will take a hundred or so off from my monthly installments which in my estimation would be around RM (800 - 550) 250 only. Not that big of a burden right? Otherwise, I would pay that same amount to rent a room anyway. When I feel that I have high enough salary to pay the monthly installment myself, i will stop renting out the rooms.

What do you guys think? Is this a bad idea? Please advice. Your kindness is very much appreciated.

House price: RM 188k
Tenure: 30 years
Margin of finance: 90%
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Joined: 10 Jul 2007
Posts: 61
Location: Klang Valley

PostPosted: Fri Aug 10, 2007 2:03 am    Post subject: Reply with quote

Dear fizyboy,

I really admire your forward thinking, eagerness and positiveness in life, and I'm sure that if you can keep that kind of mindset you'll succeed in life. However that could also be your downfall as being that young means you lack experience and hence to be in such a big debt at a young age might just turn into a burden that you'll be carrying till old age.

**This is assuming that you're independently buying this house on your own and do not have any parental or relatives to help should anything fall short.**

You already admitted that IDEALLY you should wait at least till your work stabilize before actually thinking of buying a property. You would not know what would happen in the next few months, maybe you find the work not suitable for you or you can't get along with your collegues or your boss, economic downturn, fall sick etc. Then what? Can you survive for the next few months while you trying to look for a new job? Do you go back to your parents for help? Are they able to support you then? I assume you would not want to burden your parents as you'll want to be independent hence buying a house and staying on your own.

Secondly, properties being illiquid means that you can't dispose it off as quickly as say a car. It also comes along with many other additional cost such as utilities bills, taxes, maintenance bills, furnitures, if you do not plan to renovate much as least you'll need to fix on window grilles for security no? Do you have funds prepared for those?

Thirdly, having being employed for only 1 month, I highly doubt any financial institution would be willing to give you a loan. Lets say if they really do grant it, your best option would be to opt for a free moving cost package with low initial interest in the first few yrs and then + or - BLR afterwards with the longest loan tenure possible. However these kinda easy entry package if not managed well could just turn you into a lifelong debt slave to the bank. Did you take into account the impact should BLR go up in the few years? or what if your salary increment is lower than the increase in the monthly instalment say after the initial few years? Bottom line is you could be paying not just 2-3 times your original loan amount at the end of the day but even 4 to 5 times. Learn how to calculate and you'll understand why.

Fourthly, being a landlord is not easy. How sure are you that you'll be able to get tenants? Would you be able to get along with them? Are you ready to take on the responsibility of collecting rent and utilities from them every month? Even having good friends as tenants could turn bad when it comes to the matter of money.

Lastly, don't be discouraged by what I have mentioned above. If you seriously think that this is what you want, then go ahead. Just be fully prepared and talk to your parents of relatives and see what they think and ask them for advice or if they are willing to give you support.

Here's a special financial tip for you. Go apply for a few credit cards as soon as you possible can (normally they require 2-3 months payslip). Once you have them, give yourself 6 months to a year's time and if at the end of the period you have RM 0 outstanding balance, then you've passed the test and is ready to buy a house. You'll even get a distinction A++ if you have a gf or bf during that period of time. Smile
To know more about AIA's Home Loan packages and Mortgage Savings/Protection policies, call 012-3272615 or email tzeyean.aia@gmail.com for more details.
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Joined: 11 Jun 2007
Posts: 594

PostPosted: Mon Aug 20, 2007 3:19 pm    Post subject: Reply with quote


By glancing thru the answer to fizboy, maybe I would like some advice from u...

What would u say if I were to buy two houses in the same year?
Both thru bank loans
Both under-constructions
One for own stay, one for renting out
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