Most of the people have happy experience about earning the money from the property over the past 10 years. However, not many people have thinked further about the holding power. Why so important for holding power when invest in property?
Assume that you buy a RM600,000 property and you loan RM500,000 with RM 2,500 monthly installment for 30 years.
If the market turns bad and the value of property is RM400,000 while RM100,000 saving in your bank account.
Question : Will you sell the property or hold the property?
If you sell the property, you are safe. It is because the combination of RM400,000 value and RM 100,000 cash will become RM 500,000 to settle the loan.
But, if you hold the property, let's analyze it. Bad market may make you face jobless risk although RM100,000 saving will accompany with you. However, car loan, credit card and daily expenditure such as children, spouse and parents will become your potential pressure.
Even though you had no any loan except this housing loan, your saving RM100,000 can only serve 40 months without eat, drink and interest rate remains unchanged. But, what if 41th month? Housing loan is 360 months need to be served!
Sound like impossible? That's why you need to do your homework how much you can able to loss instead of how much you want to earn first.
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