Some take back from Renesial Leong’s talk “Magic of Property Investment”. Although not agree with some points shared. However is a good session to refresh and relearn and to meet people with same interest.

Ways to Invest with as little as RM20,000

1. Refinance your existing property to get more cash
2. Lease with purchase option.
3. Pay 10% down over 12 post dated cheques with saving account interest rate
4. Buy below market value, e.g. from auction.
5. Get cash back (from refinance the property) after repart and upgrade
6. Buy direct from developers for cost absorbed, e.g. early bird discount
7. EPF withdrawal (For Malaysian)
8. Buy vacan units and take early possession (so you can rent it out earlier and take rental deposit for down payment)

Important Pitfalls to Avoid

1. Be wary of free advice
2. Don’t neglect personal/company credit search
3. When viewing properties, don’t get too excited and record your viewing.
4. Do not assume sellers is in financial trouble
5. Never hand payment direct to seller
6. When renting out, do not hand over keys or allow tenant to move in before signing tenancy agreement and collecting full payment.
7. Buy one at a time
8. Don’t buy houses that near place of worship, high tension cable, flood prone areas and highway.
9. It is a learning game. The shortest and cheapest way to learn is from a seminar. Choose your trainer wisely.

Powerful Investment Strategies

1. Buy an investment property first instead of for own use
2. Buy your first property with tenant
3. Buy properties with positive cash flow
4. Buy the best property that you can afford. Better location properties appreciate more and faster. On the same token it will attract better tenants.
5. Buy from motivated sellers
6. Keep all our deals and transaction legal
7. Renovate only if it adds value
8. Be sensitive to changes in the market place
9. Work with a success team
10. Have an exit plan

Simple but meaningful story.

A rich father was sending his son to school.

The boy asked his rich father, “Daddy, which business of yours is the easiest to manage?”

The father think for a while and replied, “Why?”. “Because I would like to have that business”, said the boy.

The father pointed at the person who sit in the little aircon room, collecting toll money for the highway and told his son, “You want to be the person in the room? His job is very easy but is it worth doing it?”

What is your choice?

Investing in auctions or foreclosures properties can be very profitable if we are fully educated on all aspects of auctions. Banks takes over properties from bad debts and sell it in open market to recoup the outstanding loan. Therefore it is possible to acquire property with price much lower than the market value. However there are risks and issues need to be taken care of when purchase property in Auction.

The very first step to get into the Auction game is to find where the game take place and what information you require to kick start your research

Where to find auctions for property

1. Licensed auctioneers’ advertisement (newspaper)
2. Auction notice boards in the lenders’, auctioneer, lawyers’ offices, courthouses, etc
3. Real Estate agent’s office
4. Websites. Some of the websites for property auction in Malaysia as below:

• http://www.leongauctioneer.com
• http://www.auctions.com.my
• http://auctiondata.com.my
• http://auctions.net.my

Proclamation of sales (What information can you expect there?)

1. Address, size and details of the property
2. Lender’s particulars
3. Bank Lawyers
4. Auctioneer contact details
5. Reserve price
6. Date, place and time of the auction
7. Payment of balance purchase price, usually being 90 or 120 days

I read an article regarding renting out properties to expatriates. There are some tips which I found very useful:

Choosing Property

• Properties located near an international school, expatriates work place and established expatriate neighborhoods
• Due to the rising rate of crime, gated communities are more welcome
• Avoid properties at crossroads because it is noisy
• Avoid properties near high-tension wires for health reasons, or near a hillside
• Expatriate tenants have higher expectations on the quality of the property and service of the property management company is very important. The track record of the developer and Management Company is very important in selecting property.

Rental Bracket

You need to be the best in the rental bracket that you targeted. Rental bracket for residential property that target to expatriate are as followed:

• RM3000 to RM5000 for relatively junior expatriates
• RM8000 to RM15000 for middle management
• RM15000 to RM20000 for senior level
• Above RM2000 for CEOs of big corporations.

Timing

Expatriates usually arrive in October because school starts in January and it allows them to settle down before the New Year.

Expatriates preferences

• Single expatriates prefer fully-furnished homes
• Expatriates with families usually have their own loose furniture and require built-ins like air-conditioners, lights, wardrobes, kitchen built-ins and appliances
• Younger expatriates prefer condominiums
• Senior-level expatriates prefer landed property with swimming pool (if budget permits), good kitchen and good sized master bedroom.

Points to take note when showing your property to expatriates

• Neutral look and ensure the place is clean and fittings and appliances are functioning
• Garden should have some basic landscaping, which is inexpensive to provide.

Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) by 50 basis points to 2.00 percent on 24 Feb 2009. The Statutory Reserve Requirement (SRR) is also adjusted downwards from 2 percent to 1 percent effective 1 March 2009 to reduce further the cost of intermediation. (Source: http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=1767). On 26 Feb 2009 Malaysia local banks big brother Maybank announced to reduce BLR by 2nd March. Maybank Islamic Bhd will reduce their BLR too.

This is amazing. BLR was reduced twice within the same quarter.

The Association of Banks in Malaysia (ABM) response with an exercise to reduce loan instalment payments by the first quarter of this year. According to ABM, all commercial banks had agreed to cut loan repayment amounts across the board and retain the original repayment period. Therefore for those whose loan is pegged to the BLR, you will expect to see lower instalments in your repayments. This move of is to allow more disposable income to be in the hands of the public. However, borrowers may choose to maintain their monthly instalment amounts and cut short the loan repayment period. They MUST get in touch with banks to make necessary arrangement.
My two cents: Do not assume the extra amount you put into your loan account will be treated as prepayment to offset your loan principal. In some cases the money will be just park under advance payment account which not earning any interest for you and yet does not reduce your loan interest.

See below for the BLR for the major banks in Malaysia (as at 31/01/2009)

Source: http://www.bankinginfo.com.my

Malaysia’s credit card interest rates and penalty are among the lowest in Asia. 12 Feb 2009, ABM chairman Datuk Seri Abdul Hamidy Abdul Hafiz announced it will be gone down further.  The purpose is to motivate credit card holders to DILIGENTLY make at least the monthly minimum payment of 5% of total outstanding balance promptly. It is believed that the reductions of interest rate should enable credit cardholders (who have outstanding balance) to make the minimum payment and thus get out of debt.

In my opinion this change may not help to reduce the country credit card debt. On the other hand this will relatively increase disposable cash on hand. How this cash will be spent? Will it be used to reduce debts? It all depends on individual discipline to reduce their credit card debt.

Click here to find out more about strategy to reduce debt – “Debt elimination strategy: Debt roll-down principle”

Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) by 75 basis points to 2.50 percent at Monetary Policy Committee (MPC) meeting 21 Jan 2009. On the other hand the Statutory Reserve Requirement (SRR) is also reduced from 3.5 to 2 percent, with effective from 1 Feb 2009. This move will reduce banks’ borrowing costs and was aimed at ensuring banks continued to lend money. Reduction in the SRR will inject a certain amount of liquidity into the financial system which allows banks to lend more to finance economic activities. It is believed that banks are likely to lower their base lending rates (BLRs) in the days ahead, which should make loans cheaper and help drive domestic consumption.

This is good news for people who is serving housing loan that based on BLR. It will either reduce the monthly instalment (based on request in most of the cases) or shorten the tenor of the loan. It is a good time for people who plan to get their new house or invest in new property. Of cause it is not easy to get loan from bank nowadays unless you have maintain a consistent good credit portfolio.

See below for the BLR for the major banks in Malaysia (as at 31/01/2009)

Source: http://www.bankinginfo.com.my

There was an incident in the first company staff meeting of this financial year. My managing director asked a question: Who invested in real estate? To my surprise, I am the only one put up my hand. I am not sure if my dearest colleagues are too shy to acknowledge they invested or any other reasons that prevented them from “disclose” this “secret” to others. Until after I met and talked to some people I realised that it could be true that none of my colleague invested in property. I can briefly summarise it into below reasons:

Good Debt and Bad Debt

Some people believed that all debts are bad. Therefore they will do whatever they could to reduce debts. For example, pay off the housing loan as soon as they can as this will save interest.
Some people like to use other peoples’ money. They will maximise the ROI by taking loan. To them debt could be good if the revenue (generated by using the loan) can pay off the interest and yet generate surplus.

Unless you have plenty of cash, you properly need to take loan to purchase property. It will be difficult for those who don’t have much cash and not willing to take loan to own property.

Play to Win or Play Not to Lose

There are differences between people who play to win and people who play not to lose. Some people manage their money in the way that they won’t get broke. Therefore they will only go for low or perhaps medium risk investment. “I will only take loan to buy property when I am able to pay the monthly instalment even there is no tenant occupy the property.” Unless they have very strong cash-flow (such as high salary, business income); they properly will not take loan to buy property for renting out.

Some people manage their investment in order to get rich. “I will take loan to buy the property if I am sure that the rental can cover the loan instalment payment.” They may go for higher risk investment if they know there are opportunities for them to win.

Knowledge and Experience

It takes time and effort to become a successful real estate investor. Real estate investment is just like any other professions. For example, to become a successful software developers you need to have passion with programming; learn the programming skill and practise more. To success in real estate you need to understand the process of real estate investment such as property search, evaluation, purchase process, legal part of the transaction, property management, etc. There is no magic in property investment. Sounds like a tiring process to be a real estate investor.

“The Poor TRY very hard to be rich while The Rich COMMITTED to be Rich”

It takes commitment to success in any sector; there is no exception in real estate investment.

Its’ your Choice

A lot of people want to own many properties but not everyone can fulfil their own dream. Some of the common reasons given are:

“My salary is low and hard to get loan from Bank.”

“I have no money for down payment.”

“I have no time to do research and look for property.”

Therefore I have “NO CHOICE” but cannot own many properties. Again “NO CHOICE” is a choice. If you let the above “excuses” limit your capability then you have “NO CHOICE” and no chance to own lots of properties.

Action, Action and Actions

There are plenty of good properties letting go in lower market price. There are plenty of run down property waiting investors to make over increase its’ price. There are plenty of hungry bankers willing to loan you money at interest rate which is much lower than the published rate. There are plenty of good tenants who choose to rent rather than purchase. All you need is take action and look for them. Success is when opportunities meet preparation.

It is not easy to determine the fair market value of property. This BOOK (Get Rich In Real Estate) provided a formula for determining the fair market value for use in real estate investment for income. The following is a working sheet taken from the book:

It is very important to do some market research before negotiate with the existing property owner and make the offer. Base on the “Economic Clock” I posted previously, the best time to invest in property is coming soon. Equip yourself with knowledge for example read books that similar to “Get Rich in Real Estate”

A friend of mine email me this “Economic Clock” which I find it is quite interesting (and/or maybe useful when deciding what to invest during economy boom or slowdown) . 
 

This economic clock was compiled by The Evening Standard of London from a study of trade cycles over a period of 150 years. It shows how different asset classes fall and rise as the economy moves through booms and busts