WHO ARE YOU??? Property Speculator OR Property Investor

I would categorized myself as an INVESTOR. Which one are you?? SPECULATOR or INVESTOR.. Article below will enable you to differentiate who you really are or what are you going to be.

Different between speculator and investor is SPECULATOR makes money only when he/she SELLS an INVESTOR makes money when he/she BUYS.

For example, a speculator buys a RM100K property for RM100K, and hopes to sell at RM120K. An investor buys a RM100K property for RM60K, thus making a "profit" when he buys. He might sell it at RM100K, but usually he sells it at RM90K (leaving "some" profit behind) for the speculator.

In my opinion, I think a property speculator is someone willing to gamble on the unknown in the hopes of making significant gains. A property investor is someone who decides exactly what it is worth (value-wise) and makes a 'safe' property investment in an established place.

Speculators in property have a short time horizon. Most are looking to flip properties & make a fast buck in times when property prices are moving upwards. They typically want to get out within a year or even weeks if possible.

In terms of knowledge, most speculators do not really comb through the property in detail. They have no interest in looking at rental yield, mortgage cost, location, condition, etc, factors most investors are concerned with. As long as they believe a property will move up in price quickly, they will jump into it. In short, most speculators are only looking for a rapid rise in capital appreciation. An investor on the other hand has a longer time frame & spends lots of time reading & researching his/her investments .

Micro & macro economic factors such as:

1) The rental yield & how it compares with comparable units

2) The mortgage cost, whether rental can cover mortgage cost & have some left over for time when units will be vacant.

3) Specific location of the unit, development & its comparison with similar properties. If other nearby projects are slated for development & how that would affect the property in question.

4) Tax issues, use of properties to offset taxes

5) The economy, how the economy will fare in 3, 5 or longer years & how that will affect the property concerned.

6) Only 70% Loan to Value (LTV) for third house and above

In short, an investor wants to maximize all possible returns from the property from all possible angles: from capital appreciation, mortgage payment, cash flow & taxes. Whereas, most speculators are only concerned with fast capital appreciation. Speculators try to anticipate and profit from price changes while investors seek only to acquire property at a reasonable price.

Property Speculator

1. Makes short term gain (30% or more), 3 months to 1 year.

2. Normally, buy at developer price & resell, and make significant profits

Property Investor

1. Using own system, plan well when buying.

2. Looking for rental/passive income.

3. Long term goals: 5-year plan, 10-year plan etc

4. More on buy & hold property as long as it makes significant passive income.

P/S : Most of the input taken from Properties Guru, Milan Doshi

Maximum Loan To Value (LTV) only 70% for 3rd house and above.

I hate to say this but our nightmare finally came out. To those who are interested to purchase their 3rd house or more.. Think twice, check your financial capability and know your limitation. For big pockets and high profile investor.. this is good news for them because less competition for them to gain houses in strategic places. My humble condolence to small time investor like me who need to work hard and save more for that 30% downpayment... It will took years to save RM 60K for downpayment of house valued RM 200K

Below are statement release by Bank Negara for further understanding:

Bank Negara Malaysia wishes to announce with immediate effect the implementation of a maximum loan-to-value (LTV) ratio of 70%, which will be applicable to the third house financing facility taken out by a borrower. Financing facilities for purchase of the first and second homes are not affected and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks based on their internal credit policies. The measure aims to support a stable and sustainable property market, and promote the continued affordability of homes for the general public.

At the national level, residential property prices have increased steadily in tandem with economic development and the rise in income levels. This aggregate growth trend remains largely manageable and has not deviated from the long term trend in residential property prices. In the more recent period, however, specific locations, particularly in and around urban centres, have experienced faster growth, both in the number of transactions and in house prices. This is further supported by an increase in financing provided for multiple unit purchases by a single borrower, suggesting increasing investment activity that is of a speculative nature.

The targeted implementation of the LTV ratio is expected to moderate the excessive investment and speculative activity in the residential property market which has resulted in higher than average price increases in such locations. This has also led to increases in house prices in surrounding locations, thus contributing to the declining overall affordability of homes for genuine house buyers. This measure therefore remains supportive of the objective of encouraging home ownership among Malaysians which continues to be an important national agenda.

 

Introduction of the Financial Capability Programme

 

As part of the continuous efforts to raise the level of financial literacy and to promote sound financial and debt management by Malaysians, Bank Negara Malaysia also wishes to announce the introduction of the Financial Capability Programme. This Programme will be offered by Agensi Kaunseling dan Pengurusan Kredit (AKPK) through its establishments nationwide and will commence from January 2011. The Programme is aimed at equipping individuals with important knowledge for responsible financial decisions by gaining practical understanding and skills in money and debt management. This in turn will contribute towards preserving the sound financial positions of households and ensure that debt accumulation is commensurate with household affordability, including their ability to absorb interest rate adjustments and potential volatility to income and expense levels. Individuals particularly new prospective borrowers and young adults are strongly encouraged to participate in this specially designed programme. The details of the implementation of the Financial Capability Programme will be announced later in December this year.

 

Bank Negara Malaysia

3 November 2010 , http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=2159

© Bank Negara Malaysia, 2010. All rights reserved.