Property - An Asset or Expense?

In accounting/bookkeeping language, both Asset and Expense are Debit Balance item.

If you owned a property worth RM500,000 - do you really own an asset or an expense?

Actually, both are right since both are Debit Balance. Sound confusing....

Suppose, the ideal ROI for you is 5% (using EPF last 10 years as benchmark), the cost of using the property (as if you are renting it) is RM500,000 x 5% = RM25,000 per year or RM2,083 per month. On top of that, you still need to pay insurance, quit rent and assessment as well as the maintenance.

Can we expect another round of big appreciation like what happened is the past 10-20 years in next 10 to 20 years? Hard to predict.

Malaysia is well known of having slowing population growth especially amongst the Chinese. Can you predict the future supply and demand?

More residential properties will be purchased for investment purposes rather than primary place of shelter. Look at China, supply in certain cities is more than demand for next decade or more.

So, it is not surprising that many old folks with empty nest (no more children staying together with them) will opt to sell the big house and move to lower cost of living places or smaller house. Keep the money for retirement as the "cost of owning an expensive house" is high as per above illustration.

Lastly, property is still an ideal investment but not the perfect and sure-make-money investment. I will still buy another but with careful planning to avoid property-rich-cash-poor trap.

Buy Term Life, Invest The Difference

Many research indicates to “Buy term and invest the difference” which is what I plan on doing. But I’m still curious, if the wiser choice is to buy term, then:

Who actually buys whole life? Why?


Reply from someone, very interesting.

A rule of thumb:

When you select TERM insurance, you are RENTING the coverage.

When select a whole life policy, your are BUYING the coverage.

You have to decide what type of coverage is right for you.

Keep in mind that TERM rates increase annually or in increments (5 year, 10 year, 20 year, 30 year) and at some point, the rates will be higher than you will want to pay…so, you go without it.

Most folks get the idea of “I’ll buy term and invest the difference” yet they fail to “invest the difference” and as they get older, with the increase in the term insurance, they have LESS to invest.

With whole life insurance, the payments will stay the same for the entire period. Not a bad deal for youth as it keeps the cost of life insurance low, and protects their “insurability” in the future.

Good luck and I hope this helps.

Click here for a case study using my own age and expectation, comparing Term and Investment-Link Product.

There is no one fixed rule for everyone, else all financial advisors and consultant will be redundant.