💡 Property investment tips: How to distinguish between investment properties and self-occupied properties?

The editor will help you analyze the different purposes of buying a property to avoid buying the wrong one and regretting it for the rest of your life!

The Hong Kong property market has always been a national hot topic. Whether you're listening to chatter in a tea restaurant or chatting with office workers at lunchtime, questions like "When will property prices rise?" and "Where is the best time to buy?" However, property purchases can be categorized into two main areas: investment and personal residence .

While both appear to involve buying a single-family home, the considerations, selection criteria, and risk management involved are completely different. If you don't understand these factors, you could easily end up buying the wrong property. Whether you end up living in a home uncomfortably or experiencing a suboptimal return on investment, you'll regret it immensely.

Today, I'll share with you how to distinguish between investment properties and residential properties, as well as practical tips to help you find the best option for you.

1️⃣ Considerations for self-occupied housing🏡

Convenience of life

• Transportation : Close to the subway station and bus stop, convenient for going to work and school.
• Supporting facilities: supermarkets, shopping malls, markets, hospitals, schools, convenient living.
• Community environment🌳 : Quiet, safe, green and comfortable to live in.

Space and comfort

• The size of the property should be in line with the needs of the family (the needs of a single person and a family of four are completely different).
• If the building is too old, there may be maintenance issues, so you need to prepare for expenses.

Psychological safety

• A home for self-use is not only an asset, it is also a home.
• Many people would rather buy a more expensive house and choose a place where they can live comfortably.

👉 Editor's tip: When buying a property for your own use, don't blindly pursue appreciation potential, because the most important thing is to live happily there.

2️⃣ Factors to consider when investing in a property💰

rental yield

• Rental return rate = annual rent ÷ property price × 100%.
• The average rate of return in Hong Kong is about 2% to 3%. If it is higher than the average, it is considered attractive.

appreciation potential

• When investing in a property, you should consider the location’s development, such as new railway lines and redevelopment plans.
• Emerging areas sometimes have greater appreciation potential than traditional areas.

Liquidity

• The unit should be easy to rent out and resell.
• Smaller units are usually more popular with tenants and have high liquidity.

👉 Editor's note: When investing in a property, you don't need to be "comfortable to live in", but rather "right-sizing" is important.

3️⃣ Ownership vs Investment: Key Differences 🔍

Different goals

• Owner-occupied property: Focus on quality of life.
• Investment building: focus on financial returns.

Location selection

• For self-residence: Choose an area you like, close to relatives, friends and company.
• Investment: Choose areas with high tenant demand, such as near universities and commercial areas.

Building Type

• For self-use: May consider larger units with nice views.
• Investment: Small units, high utility rate, new building, easy to rent out.

psychological gap

• Living in it yourself: If you live in an uncomfortable place, you will be dissatisfied every day.
• Investment: The numbers are good, it doesn’t matter if you live in a bad place, because you don’t live there yourself.

👉 Editor's analysis: The biggest trap is trying to kill two birds with one stone: wanting to live in a property while also investing. Often, the result is a loss of both.

4️⃣ Common myths and misunderstandings 🚫

Myth 1: Residential properties have no investment value

No! Many large housing estates or areas with prestigious schools offer comfortable living and potential for appreciation.

Myth 2: Investing in a property requires a detailed unit

While smaller units offer higher returns, that doesn't mean there's no market for larger units. For example, expatriate families and professionals often prefer larger units.

Myth 3: Buying a property as soon as possible

Many people are afraid of not being able to keep up with property prices, so they rush into buying. However, if you're not financially prepared, you could end up in a homeownership trap.

👉 Editor's note: Don't let market forces influence you; make decisions based on your actual needs and financial capabilities.

5️⃣ Practical Tips📋

Tip 1: Set your goal first, then choose a building

• If you live there yourself: Make a list of your living needs (transportation, school network, space).
• If it is an investment: calculate the rate of return and examine the rental demand.

Tip 2: Separate your wallets

• Don't mix living expenses with investment funds.
• When investing in a property, you should have extra reserves to avoid affecting your daily life.

Key Point 3: Long-Term Thinking

• For self-use: If you live there for more than ten years, you don’t need to worry too much about short-term fluctuations.
• Investment: Be prepared for periods of vacancy and price fluctuations, and hold on for the long term to see returns.

👉 Editor's advice: Before buying a property, it's best to do a "simulation test" to simulate both self-use and investment scenarios to see which one better suits your life plan.

6️⃣ Real case sharing👤

Ah Qiang, 35, earns HK$50,000 and originally planned to buy a single-family home. He ended up choosing a large housing estate in Kowloon Tong, where prices are high, and used his savings for the down payment. While the home is comfortable, the mortgage payments are stressful, and with his finances tied up, he's unable to invest.

Meanwhile, Ah Man, 32, earning $30,000, chose a small, first-floor unit in Tsuen Wan, primarily for renting out, with a 3% monthly return. He continued to rent a small unit in the city, and despite his tight budget, he successfully upgraded after a few years when his investment unit appreciated in value and bought a new home.

👉 These two examples remind us: Before buying a property, we must clearly define our goals and not let them become blurred, otherwise we will easily regret it.

7️⃣ Editor’s Summary✨

To distinguish between investment properties and self-occupied properties, the key points are:

• Self-occupied housing: designed for your own life, emphasizing comfort and security.
• Investment property: For return calculation, focus on rent and appreciation potential.
• Don't be greedy and try to have it both ways, as this will often result in neither side being satisfied.
• Financial planning should be clear to avoid affecting the quality of life.

🙋♀️ Editor's message:
The real estate market is a long-term journey, not a short sprint. Be clear about your purpose for buying a property before making a decision. Buying the right property can ultimately lead to a secure home or a happy income.