How’s this for an idea? Instead of saving money for your kid’s tertiary education someplace else, park that money in an investment property.
I’ve read in a few books talking about this as well, and as far as I’m concern, I’m going to use this strategy sometime in the future.
Basically, what I need to do is buy an investment property and rent it out. You pay the down payment, and let the rental income pay for the loan repayment.
Assuming you bought the property when your child is born, you have, give or take, around 18 years to let your investment “matures” and ready to be cashed out.
All that is needed is for you to be able to pay for the down payment, and to be able to add a bit of hard work as well.
For this to work, I think it is also important to get a positive cash flow property. Negative cash flow property will definitely put a dent to your wallet and put a burden on yourself.
Let’s use some figures:
Property price: RM200,000
Down payment: RM20,000 (10%)
Monthly repayment: RM1,400 (assumption)
Monthly rental income: RM1,500 (assumption)
Let’s assume that it is indeed a positive cash flow property (thus meaning loan repayment is covered), and the property price will grow by 4% each year compounded for 18 years, the RM200,00 property will grow to around RM405,000. Not bad huh? Remember, your initial outlay was just the down payment of RM20,000.
Note: This strategy does need quite a lot of hard work and research. It is not as simple as it sounds. If it was easy, everybody would have done it. Also, the field of property investing has its own sets of problems. Nevertheless, it is still a valid strategy.
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Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.
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