As a fresh grad, should you buy a property or car first?
A trending topic & the textbook answer that most “financial experts” suggest you do is to buy a property first.
But as a Millennial who did buy properties first, I would want to challenge that dogma & give my opinions on why I think that advice sucks for Millennials & Gen Zs.
But first, let’s visit the logic behind why people tell you to buy a property first:
Why People Tell You to Buy a Property First
You’ll hear this advice mainly from the previous generation. As in their days, they can make handsome properties by buying a property and selling it off after a few years.
Also, a car is a liability. Its value will only decrease over time & the maintenance & upkeep will drain your wallet, which is fair reasoning to avoid owning a car at all costs.
Most people giving you this advice are either:
- The older generation
- Someone trying to sell your a property
- Property seminar guru trying to sell you their course.
Why Telling Fresh Grads to Buy Property is Silly
Fresh grads can buy a property over a car only if they live in an ideal world. What that means is:
- Their first job pays them above average.
- They can live rent-free with their parents while saving money for the downpayment.
- Their family is well off & they don’t have to support them.
- They probably live & work close to a train station.
- Or their parents help pay for a car for them.
I would say that 95% of the population would not have the above luxury.
Here are some follow-up arguments why it’s ill-advised to tell fresh grads to buy property first:
Expensive Property Prices & No Credit Score
How much is the average property price nowadays? Back in your parent’s youth, they could buy a property for RM80,000 & start a family.
Nowadays, if you want to buy somewhere decent, you’ll be looking for at least RM400,000 in Klang Valley, that’s hopefully not too far from where you work.
Your starting salary is about the same as 20 years ago, thanks to the non-existence of labor laws in Malaysia.
So, if you want to apply for a mortgage for an RM400,000 property, you’ll face the inevitable problem of:
- You can’t save enough for the 10% downpayment + lawyer fees
- The banks will reject you because you don’t have any credit records.
No bank will lend you a massive mortgage without a good credit report.
You need time & discipline to build up your credit score to make the banks feel comfortable to lend you money for a mortgage.
You can build a credit report with baby steps, like using & paying off your credit card in full. Here’s how I picked my free credit card.
Being a Property Owner Sucks in Real Life
There will be a time when you will consider renting out your property for a profit.
Unfortunately, your rental most likely can’t cover your mortgage due to the expensive property prices nowadays.
Not to mention that dealing with tenants is not always a pleasant experience. Some won’t pay on time, damage your property & will emotionally drain you over time.
Here’s what I had to deal with when one of my tenants moved out.
But here’s the cherry on top of the cake:
Property Prices Don’t Always Go Up
You heard that right.
The town planners are allowing developers to build too many properties, resulting in an abundance of supply.
Desperate landlords have to lower their rentals until they can get a tenant.
When your rental can’t cover your mortgage, you are at a negative cash flow each month.
For example, I have 2 properties & even with both of them are rented out. As a result, I have a negative cash flow of RM800 each month.
I could’ve done so many things with that money 🙁
What Should Fresh Grads Focus On?
Dang, Helmi… These are some legit points.
So as a fresh grad, are you confused as hell?
Who should you listen to then?
IMO, as a fresh grad, you should focus on finding your purpose in life.
You don’t want to be one of those guys that shows up to work & goes on holiday for 2 weeks in a year.
What’s the point in life?
Find your purpose, your why.
Job industries are rapidly changing. Explore around, and try different things.
It could be a different career or moving to another city or country.
If you buy a car or a house, you’re anchored & attached. As a result, it will be harder for you to explore your purpose.
When Should you Buy a Property then?
I bought 2 properties & now suffering to repay my mortgages, find a tenant & pay for all the upkeep.
It only looks cool on paper & when you’re bragging to other people that I have two properties without any real monetary gains.
So why rush to buy a property?
If I could turn back time, I would only buy a 3 bedroom apartment or house once I am ready to settle down & start a family.
In the meantime, make & save as much money as possible & enjoy yourself.
Go travel the world & see what else is out there.
This is my opinion on this matter from the information that I have gone through.
Let me know in the comments what you think. Do you agree or disagree?