8 things about property investment before it’s too late

One day in the future, our income stops. Are we ready? I am not so sure if I am ready but here are all the things which I have been doing. The first thing was, I started with renting. I rented homes for at least 5 years after graduating and working in Penang before I purchased my first property when I was 26. Here’s the journey.

#1 – I started with renting (to save…)

When I was a lot younger (I am 44 this year), I started my career in Penang. I rented rooms for 2 years, then I upgraded to renting one whole apartment for another 2 years. Then, I wanted to get married and suddenly I was told that it is BEST that I own a place versus renting a place since I would need to give a comfortable home sweet home to my wife and perhaps babies in the near future. In 2003, I bought my first property which was a 730 sq ft apartment in Relau.

During those years of renting, the most important thing on my mind was to rent as low as possible. Instead of one whole house, I rented a room. Instead of a master-room, I rented a small room or an extra room which was carved from the living hall. Instead of expensive areas, I rented in older neighbourhoods, older landed properties. Yes, I saved money doing it.

#2 – Small can also be home sweet home

First property I bought was a small one. Though it was a small unit in comparison to my current home but it was really a home sweet home and we owned that unit for many more years even after we moved out before eventually selling it and earning a positive RM98,000 over the original price we bought. Imagine if we did not buy that unit but had rented even after gotten married…

Not only would this RM98,000 profit disappear but we would have also spent an extra RM57,800 in total rental for 8 years. (RM600 rental per month for 8 years). In other words, we would have lost / lost the opportunity of RM57,800 + RM100,000 = RM157,800. How many of us could save RM157,800 within 8 years?

#3 – think I will still be working for the next 16 years

I do have intention to stop working and start holidaying while I could still walk around easily. Is it easy to do? At the moment, I guess the most important thing is to earn more, save enough and invest continuously.

As for the decision to eventually stop working, it’s not an easy choice. Too early and we may not have saved enough money to travel. When we get too old, we may feel easily tired when we travel.

However, it’s super important to understand that when I stop working 16 years later, I intend to also stop paying for any property too. By then, I should have settled all my home loans and perhaps could start enjoying continuous rental incomes instead.

#4 – Rental does not stop even our salary stop
s

The funny thing about the debate of renting vs buying, which is better is this. The renting side says that it’s not clever to rent since one could pay a much lower number and stay at a much better place versus paying a much higher mortgage and having to accept buying a lesser desired place because of budget concerns. By the way, this argument is correct yeah. It is true that rental may just be lower than the home loan monthly repayments.

The little difference is this. Whatever we pay for the home loan, a certain percentage belongs to us. Only some portions are interest and that belongs to the bank. As for rental, 100% of what we pay belongs to the owner. What happens at the end of 30 years is that the home we were paying for on a monthly basis is now ours.

That rental property which we have also paid for the last 30 years? It is no longer ours. What happens for the next 20 years after our salary stops? Rental continues. Just need to look a little further ahead and remember this.

#5 – Property investment can hedge against inflation

Buy a good property which we like and chances are many other people may also love that property in the future. The cost of building a home would continue to increase. The salary of the construction people will continue to increase. In fact the land cost will also always be going up as well. The cost of cement has always been increasing.

This is why property prices in future is usually higher than the property price today. This is also why properties are built smaller to make it affordable. Now, imagine what happened to the earlier, bigger units? Yes, the price would move up since the newer, smaller properties are priced at their level earlier. Briefly, with a property, we are hedging against all these potential increase (inflation).

#6 –
Property investment is really an investment

Buy RM50,000 worth of shares and our returns would be based on RM50,000 we invested. 5% returns on our shares per year means RM50,000 x 5% = RM2,500. Looks like pretty okay. Of course for the ones who’s very good with stock investment, they could earn many times more. Just a question of whether everyone is great with the stock market. If you are, please go ahead yeah.

Pay RM50,000 for a property and this is usually a downpayment for a RM500,000 home. Well, if we use just half of the 5% as property price increase percentage, the calculation looks like this:

RM500,000 x 2.5% = RM12,500.

This is 5x higher than the stock investment we have above. This is why as soon as we look at Return On Investment (ROI), it is very clear that property investment deserves more of our time to do sufficient due diligence.

This is why property investment is really an investment. There is a quote which says that most of the people in the world who became a millionaire did do through real estate. I agree fully.

#7 – That day when our income stops

If we have one fully-paid property, it’s possible to rent it out for continuous rental. The rental should be enough to cover meals every month.

If we have two properties, we could sell one to get money to go travel and sell another one to keep in the bank as extra funds.

If we have three properties, then one could be for own stay, one for rental and the last one could be sold. The money we get, we can go travel.

Unfortunately, relying on the government of the day may not be the best choice. No matter who the government is. Always have something which we could control versus one where we have zero control over.

#8 – Landlord vs Tenant? (one is property investment, the other is just helping…)

By the way, tenant is very powerful today. The market is slow, the choices are aplenty and homeowners are competing against one another. Many landlords do not have much choice but to agree to what the tenant wanted.

Just remember that everything is a cycle. One day, the landlord will have the upper hand again. Most of the time, landlords would win. That’s why they are known as a lord…

Conclusion

Renting looks cheaper in the short term. So, no need property investment? However, stretched till retirement and beyond, renting will look like a wrong decision and by then it would have been too late.

At least today you have read this article, so perhaps it’s time you call that sales person and arrange for a viewing yeah. Buying decision is not an easy one but it always start with due diligence and due diligence always start with a viewing.

The more we view, the more we learn and the better we get when it comes to choosing a good property to buy. Stop renting… when you could afford it. Take care.

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Property Investment: Best Time, Worst Time, Sometime

Property Investment: Best Time, Worst Time, Some Time

Too many people continue to ask me when is the best time to buy a property. I actually do not know because it really depend on that property you are buying yeah. Timing as they say is important for any investment. I agree too. Thus, today, let’s look at some of those time when people were worried to invest and for those who did, they reaped the rewards when the market rebounded.

1998: Best Time or Worst Time?

If someone were to start investing during the worst time, say the 1998 ASEAN financial crisis, this person would have gained tremendously whether she bought into the stock market (some counter which is earning profits), property (prices in 1998 vs today?) or even the unit trust. 1998 till today is around 23 years.

For property, her investment would have easily tripled or more. For the stock market, it could have been even more but the stock market was super scary at that time. Was that the worst time then? To the one who invested, it was the best time.

2008 – 2013: Best Time or Worst Time?

If someone were to start property investment during the booming years and she happened to buy towards the end of the booming years, then this person may need to have the power to hold. This is because after 2013, the property prices have not been the same as the 5 years before 2013. This meant that investing during good times, does not necessarily give good returns. Okay, unless that someone managed to invest into some undervalued properties even during good times.

Stay focus, perhaps?

Actually, no matter what is the time, property investment over 20 years for example, the total number is always up. So, perhaps we can do three things instead?

#1 – Look for Opportunities

For people who have not bought a property, the best time may yet to come—hopefully, it will be one day soon. For now, they are still waiting. A senior management of a top developer in Malaysia once told me that the best time was 20 years ago; the second best time may just be today.

For seasoned property investors, the best time is when they find a distressed seller selling below market value. It may also be a property they found in an auction where there are no other bidders and the property is 20 percent below the market price! These seasoned property investors almost always keep their eyes and ears open for any potential opportunity.

#2 – If we are over-stretching ourselves to buy, that’s not clever ANYTIME

When is the worst time to buy a property? For a first-time home buyer, the worst time may be during some crisis right after they bought their first property. During a crisis, the prevailing sentiment is negative and they may find out that the property they paid for RM400,000 just a few months ago is now in the market for only RM360,000 or lower.

This is why if we did not over-stretch ourselves, we should be able to hold if indeed there were unforeseen circumstances. Recovery will come soon after. Past crises have shown that recovery is a certainty here in Malaysia. From the 1980s to the 2008 US subprime mortgage crisis, nothing has bothered our property market for more than a year or two.

#3 – Missed opportunities? Look for the next one yeah

For a property investor, the worst time is when they could have bought but did not. I still remember the time I bought my first condo in Penang. The size was 1,258 sq ft and the price was RM247,000. After buying that one, I booked another unit for RM256,000. However, in the end I did not proceed. This unit, I sold at RM640,000 8 years later. If ONLY I bought the other unit too… right?

Then, there was this condo purchase in Kelana Jaya. The year was 2007. The units were over 1,000 sf and most units were below RM200,000. I bought just one for RM183,000 and wanted to buy another unit at RM192,000. After negotiating, I could not get the price I wanted and the transaction did not happen. Fast-forward just a few years later I sold my unit for RM460,000. If only I proceeded with the second unit…, right? It’s okay, next one please.

Not so awesome is this: Maybe Sometime …

I have friends who tell me that they will be buying a property “some ” in the future. When asked when, the answer will always be vague, and the “sometime” never turns into the first time. If we look at advanced property markets in the world today, the fact remains that without a property to our name when we retire, it will be a tough time. Property may just be the ticket out of poverty in many countries.

In Silicon Valley, for example, the monthly salary of a security officer is US$2,400 but he would struggle every month because of property. The typical rental for a one-room place is US$2,400. He could share a room with others, but I am worried for him when he gets old or when he has a family.

Remember, when we retire, our income stops and it’s going to be a struggle paying for rental every month. However, if we turn that “sometime” into “the first time”, the property would have been completely paid for at the end of 30 years.

By the way, a RM200,000 property at just 2% increase per year will still become RM500,000 at the end of 30 years. It’s very true that inflation would have eaten a lot of the RM300,000 increase in value, but I want to also remind everyone that not many Malaysians could save RM500,000 in their bank when they retire. So, better do it with a property…

Be Ready for the time

The best time to buy is when we are ready to buy. The worst time is when we have spent everything we have every month and then we find a property we’d love to buy but have to abandon the idea because we just could not afford it. Please discard the “sometime” thought and focus on making that first-time property purchase a success. Be ready for the time, when the time comes.

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Property Investment? Buy ‘Beranang’! Where is that?!

Two years ago, a close friend asked if she should buy Beranang since SP Setia has started to buy land in Beranang. That was the first time I heard of Beranang. Recently, it was reported that Eco World is planning a RM3.5 Billion project in Beranang with the purchase of a piece of 492 acre land for RM225 million. Where exactly in Beranang? How about Ulu Langat, does it now sound more familiar? Anyway, a search in Wiki tells us that there are only a population of 3,000 in the town of Beranang. I have zero idea how real this number is but one of these days I should drive to Beranang. The map of Beranang, courtesy of Google Map shows where Beranang is. It is between the towns of Semenyih and Broga. Semenyih is more famous. This is where the Nottingham University is.

Personally, if you are a very strong supporter of these developers, you can proceed to buy and then, wait. However, if you are thinking of buying because you felt that the potential for capital appreciation is huge, I am not so sure about that. I seriously think capital appreciation of buying even places like Damansara Damai or Sungai Buloh may be better or at worse, more or less the same appreciation plus, you get to rent out if you could not sell at the price that you want. In fact, these two places are nothing more than 20km away from KLCC and everyone whom I met already tells me that the distance may kill them.

In terms of distance from KLCC, it is around 53km. This meant that if you stay there, you can only reach your working place in around 55 minutes as long as you leave your house at 6am latest. I think for those who really want a huge property for a smaller mortgage, as well as the fresh air and nature, Beranang may just be your sweet home. Other than this one important reason of a home sweet home, I would not be recommending this anytime soon. For those who are very sure, I think it is okay. Buying properties from these reputable developers meant that the potential to lose money is typically low.

written on 14th July 2014

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Property investment? Buying and renting is a good long-term strategy.

This article first appeared in Malaysia’s leading property portal PropertyGuru.com.my’s property newsletter, July 2015.

Just the other day over lunch a colleague was discussing with me about renting strategies. He asked if we should still buy a property to rent out if the rental could barely cover the mortgage and the maintenance charges. From an investment point of view, my answer is a yes. Of course, if we have to keep paying for the ‘losses’ every month, it is not recommended. Let me share why and how.

Why? Let’s look at a bigger picture first. Greater KL / Klang Valley’s property market continues to be vibrant because urbanization in Malaysia continues to happen. According to Economic Transformation Plan (ETP), Greater Kuala Lumpur is envisioned to have a total population of 10 Million by 2020. Today, Greater Kuala Lumpur has an estimated total population of around 7 million. Based on a ratio of 4 to one home, this meant that just from the new population of another 3 million, another 275,000 homes are needed. We have yet to calculate the demand from the existing population, many of whom has yet to own a place of their own. Consider just 50 percent of this new population has to rent for the first few years. Let’s proceed, shall we?

How? Understand how much you can afford as monthly mortgage payment IF you are unable to get a tenant almost immediately. Budget wisely because this is a long term investment and most of the time, the income is not likely to be giving a positive return within the first 12 months. Check property portals like propertyguru.com.my to know the typical rental for a certain area. Once you have identified a few areas of interest, then search under properties for sale to find a bargain. A slow market is better than a hot one for price negotiations. Today, the market is slow.

It would be good to have a Microsoft Excel file to help guide you objectively. Once you have viewed and listed down a few, you would be able to make a more systematic decision. You may still be wrong but this is better than deciding based on emotion. Here’s a simple example to start:

Once you found one unit within your budget and expectations, determine your type of tenant. Would you like to rent out an empty unit or a fully furnished one? My personal advice would be to rent out a fully furnished unit. The reason is because this type of property is lesser in the market. It carries a premium as well over the empty units. Furnishing a unit is likely to be just RM5,000 or lower. Look for discounts especially during warehouse clearance sales etc. Just search online and you can find many of such sales in Greater KL. If you have lots of time, then classifieds sites for second-hand furniture may also be possible. A few years ago, I managed to buy a second-hand two-door fridge for RM550. This fridge is still working well today. The extra premium from the rental would easily cover your cost of furnishing the unit within 18 months. Think long-term.

Another choice may be students. For this market, a bare unit with fans and sufficient lights should be sufficient. The students would definitely be buying their own study desk, a bed and other must haves. To entice them, include a washing machine and broadband subscription. For this market, it is more price-sensitive and thus it would be easier to rent out semester after semester if you do have something extra for them. For this market, you would need more time to manage it but because you can maximize the unit by renting out room by room, it is still worth it.

Looking for a tenant is easy these days. Think online. If you are confident, you can definitely do it all by yourself too. It is however good to engage an agent so that everything is in order. Thus far, I have always been engaging agents to help me because I do not have the flexibility of time. I may not be free to always bring potential tenants to view the unit. When you engage a good agent, they would soon become friends. You may even get to know some good deals from them too.

Coming back to why I would proceed even if the rental return is negligible or even very slightly negative, it’s simple. Property prices in certain areas have been increasing so much that the rental returns in these areas would definitely be negative today. However, the appreciation for these units may still continue because buyers are very funny. We LOVE to buy where everyone LOVES to buy. Oh yeah, in numbers it is still worthwhile.

Assuming your rental barely covers your rental and your property is RM450,000. If the property price increases by just 2 percent per year, what would be potential capital gain at the end of 5 years? Well, RM450,000 x 2% = RM9,000 per year. This is extra RM750 per month and 5 years later, it’s at least RM45,000 potential capital gain. The average property price increase has always been above 2 percent. Search online for information or buy Ho Chin Soon’s books. Of course, the above assumes no unforeseen circumstances happen. If we want to save instead, how many of us can safely say that we can save RM750 per month easily.

There are definitely lots of horror stories about tenants who refused to pay and refused to leave. However, I can safely tell you that after having been a landlord for more than 10 years, these can be minimized to minimum. My aim is always tenants who love hassle free fully furnished units instead of those who bargained hard even for a reduction of RM50. When we do not cut corners in furnishing the unit attentively, there is little need to cut the rental. Build up your rental portfolio slowly and you would notice that soon, your rental returns would be positive. Come on, rental would always increase year after year BUT the price you paid for your property many years ago remains the same years later. Be a good landlord to your tenants. They will make you rich. Happy buying and renting.

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Property investment: Climate change will affect valuation

When I was small (yea, that was a long time ago), maybe around 5-6 years old, I remember every year, my late grandmother and grandfather’s home in Teluk Intan would be flooded. They would be  moving items to higher areas in the home while I would be asked to sit and do not move on top of the dinner table. Their home was just beside Sungai Perak.

My own home in Teluk Intan which is still owned by my parents today could also be flooded every year. The price of the semi-detached home has increased but I think it’s following the typical inflation rate . I like that home and I told my parents if they ever wanted to sell the place, I would like to take over it. Perhaps turning it into an AirBnB place? We shall see, no rush at the moment.

Now, we look at an advanced property market and what happened when climate changes and wild weather happens.

Article in nst.com.my
    RBA economists Kellie Bellrose, David Norman and Michelle Royters said in a research paper that some property in parts of Australia exposed to climate change and wild weather could experience valuation declines and this will  leave lenders with less protection in the event of a default.

They wrote, “Climate change creates risks for the Australian financial system that will rise over time to become substantial if they are not properly managed.”

“If current values do not fully reflect the longer-term risks of climate change, housing prices could decline, leaving banks with less protection than expected against borrower default.”
Article in nst.com.my

What is less protection in the event of a default?

Banks lend to borrowers who buy properties. If borrowers could not pay, then bank will take back the property and auction if off to pay for the amount of default. If the bank could only sell the property for lower than the amount which was owed, the bank will lose money with every default. Now imagine if 50% of all your loans were to home purchase and 10% of these loans defaulted… This is what is meant by less protection in the event of a default.

Learning from this research for property investment by RBA?

Properties we buy, we have to do enough due diligence on whether flood occurs on a yearly basis… whether there has been way too many cases of water shortages… and even if there has been landslides or any other natural calamity which would continue to affect the property we bought.

If it’s for our home and it’s like 2 minutes away from our parents’ home (and we go there for dinner every evening), then we have no choice but to still buy it. However, if it’s for property investment, then it may be wiser to check out and then to calculate this into the property price as well.

Remember, if there are other choices nearby, then your property price will be subdued no matter what happens because no one wants to buy a home which gets flooded every year without fail. It will increase with the inflation but it may still be below market valuation. Happy evaluating diligently when it is a property investment.

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Property Investment? – Focus is key

A friend said, she will start to buy properties soon. That was few months ago, she has yet to start though she kept telling me that she saw so many advertisements etc. I think the reason why she has yet to start is simple. She has yet to understand what she really wanted to achieve, thus eventhough she has the money, she does not know if she should really start. Have you started and now a little lost due to the many new advertisements that you see everyday, each touting itself to be the best investment you can make? To be honest, if you have signed up for any Facebook pages on property investments, you are bombarded with new projects and they all seem worthwhile! No worries, you should still sign up for all these resources so that you have sufficient choices. Below would be to tell you, Focus is Key.

Clear Goal.
 What is your final goal in property investment? To have a second income? (not clear enough) To have 10 properties by 40? (good enough) To buy 3 properties in 5 years? (clear). Write down a goal that you want. It can be something which you think a little far fetched or can be something that is easily achievable. Write it down. If you achieve it, write a new one. A clear goal is needed because the fact is, our resources are limited but our wants are infinite. Follow what you have set out in the first place and ONLY change if the situation really warrants it. The first goal I ever written down was 10 properties by 42 years old.

Get a partner.
 If your wife shares the same goal, great. If your wife does not, it is ok, get to know people who share the same goal. Share. This allow you to continue to be strong in your pursuit and have another point of view. I can not tell you how important is this and how many times I have gained through sharing with my wife and she said something which I forgotten to evaluate. Men… sometimes we are just too rushed in everything we do. If we do it alone, chances are we may be bogged down by something else, no time, lazy etc. A partner will keep you in check.

Actions to hit the milestones
. Remember I said my first goal was 10 properties by 42? At the time of saying that, I had 15 years till 42. Thus, on average I should buy one new property every 1.5 years.  Put down actions to hit these. For example, attend 10 different previews every 6 months. Read through online property sites, FB sites such as Property Talk and Lifestyle Malaysia (PLTM) and on and off take a look at newspapers. I said on and off because whatever you see on newspaper is already online and with much more information compared to just the one page that you see on paper.

Note: Knowledge is needed for you to be able to think straight. Experience will come after you have understood and are able to analyse all the knowledge that you have. Success comes when you combine your knowledge and experience for a good decision. It may not be the best decision. It just needs to be a good decision. We are not trying to strike a lottery. We are looking to complete our first marathon.

Repeat the steps.
 After a while, you realised that your first goal may need some adjusting. Perfectly fine. Readjust them after talking to your partner and continue your journey. If property investment is easy, everyone would be doing it and you would have no chance. FYI, even in Australia, despite them being much more advanced investors, only 6% of all Australians have a property investment today. This tells you that the opportunity remains huge though risks are aplenty too if you took the wrong step.

Happy property investing.

written on 21st March 2014

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The Dynamic Duo: Property Investment and Healthcare Demand

The amazing speed of healthcare demand

My baby boy was born in Parkcity Medical Centre (PMC) in 2015. As I had just come to the Klang Valley then, I asked my colleagues / friends about good gynaecologists. They recommended me many different gynaecologists from many different hospitals but no one said PMC. Anyway, I went to PMC because I wanted a hospital which is not too far away from my home. Anything about 20 minutes is considered far for me.

In the beginning, when I sent my wife for her regular pregnancy checkups, it was super easy to find a parking spot at PMC. However, 9 months later, when my baby was born, more than half of the car park spots are occupied. I still remember when I sent my son for his regular injections after he was born, it got even harder to find a car park spot. In brief, this is the growth in the need for medical care.

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Many people may have their favourite hospitals but as soon as they have to take 30 minutes to find a car park spot, they will think of another hospital option and once they found a good doctor, they will continue with this good doctor in a hospital they could find a car park spot quicker than that ‘forever-unable-to-find-a-car-park’ hospital. This is why any new hospital would usually be very quickly ‘filled up.’

Demand for healthcare versus supply?

The median age for Malaysia is 30.4 years (DOSM 2021 data). We can go into any supermarket today and take a look at the diaper brands. If you did not notice, the number of brands and diversity are still increasing. It meant that the demand for healthcare from the new babies are still increasing.

At the same time, Malaysia is also already an ageing nation. 7% of our population are 64 years and above. This tells us that the demand for healthcare is growing by leaps and bounds too.

What about supply of new beds in the hospitals? Well, a new hospital cannot be built in 10 months! Whether it’s government or private hospitals does not matter. Usually it takes many years for any new hospital to be approved and for it to be constructed and later for it to become operational. The ‘many’ years here meant that the first time we hear about a new hospital until the day the hospital actually operating will be easily 5 years down the road.

Hospital bed-to-total population (BPR) for Malaysia?

If we have been to our favourite specialist, we would know that appointments must be set in advance. Never try to just walk in because it is not possible these days. This situation is not just in Malaysia but also in many advanced countries. That’s also one main reason why there is a shortage of specialist doctors and this is why medical tourism is growing every year.

Statistically, Malaysia faces a low hospital bed-to-total population ratio (BPR). In other words, the demand for healthcare far exceeds the current availability of hospital beds. According to AmInvestment Bank Berhad (AmInvestment), Malaysia’s BPR stood at 1.98 beds per 1,000 residents in 2019. It is only growing by 1.1% per annum.

Demand for healthcare from non-Malaysians?

It’s not just the demand from Malaysians. To the world of medical tourists, Malaysia is within top 10 destinations for medical tourism in the whole world! (Source: Medical Tourism Magazine). In 2019, over 1.22 million patients travelled to Malaysia for medical treatment. (Source: Statista.com)

Revenue from medical tourism alone is RM1.7 billion. Imagine the spillover and the multiplier effects to the economy. The more spending, the more hiring of medical professionals and these professionals will be spending their salaries in the local economy too. This is why RM1.7 billion will generate many billions of multiplier effects to the economy.

How big is the medical tourism in the world?

Let’s just look at three things. The current size, the forecasted size and also the compounded annual growth rate. All three are super positive.

“The global medical tourism market is projected to grow from $13.98 billion in 2021 to $53.51 billion in 2028 at a CAGR of 21.1% in forecast period, 2021-2028.” Source: Fortunebusinessinsights.com

As a top 10 receiving country for medical tourists, these numbers tells us one very clear thing. Malaysia needs many more hospitals than what is available today.

How could we gain financially from the growth in medical tourism?

Actually, there are many ways. The most direct way may just be to secure all the necessary approvals and build a hospital! Hire a very capable team, make them shareholders of your hospital so that they would do their very best for themselves too. Okay, very few of us could actually do this. Whether it’s financially or even capability and the relevant connections and even know-how, it’s just too hard to do!

The next one is to invest into medical tourism related stocks from the stock market. I think this is one good way since we could get stable dividends moving forward. Please do not expect super high dividends though because hospitals would need continuous investments on equipments and also other expenses too. Let’s not forget that they would also need to continue expanding too.

The third one is to buy a property nearby hospitals and rent out those units to the medical professionals working there; patients who are recovering, friends and family of patients who are visiting from out of state or overseas. Just need to make sure we also have someone managing the units yeah. I am someone who prefers to just pay and have everything done by the agent / management company. I am not someone who love to clean up after every tenant has left, opening door for every new tenant and even attending to requests is NOT something I love to do.

Photo by Pixabay on
Pexels.com

Rental returns and also potential capital appreciation

By the way, buying a property and renting it out would gain not just the rental returns but also the potential capital appreciation too. As room rentals continue to go up over the years, the property price would also be increasing too. As a long term investment, property remains one of the very best and it’s something real too.

Happy deciding!

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Property investment? 212 apartments sold with over 4,000 bidders for every unit? Wow.

Property investment? 212 apartments with over 4,000 bidders?

When the supply remains low versus the potential number of demand, then the price will be strong. In a property market such as Hong Kong, demand outstrips supply (long story why it’s not easy for them to become like Singapore’s HDB today and moving forward) and looking at one recent weekend, this remains the same situation today.

Article in SCMP.com
  Hong Kong’s buoyant home market continued to strengthen, as buyers bought 88 per cent of the 455 flats on offer at three projects in one of the biggest sales weekends this year, putting the city on track to post a record September in sales.

Sun Hung Kai Properties, Hong Kong’s largest developer by capitalisation sold selling all 212 apartments on offer, with 4,062 bidders vying for every available flat. The prices ranged from studio units, going up to three-bedroom apartments priced between HK$4.5 million and HK$10.04 million (US$1.03 million), or between HK$13,842 (RM7,362) and HK$19,300 (RM10364) per square foot after discounts of 17.5 per cent.

Not all projects sold well though. Upper Riverbank at the former Kai Tak airport site, where Longfor Group and KWG Group was building only managed to find buyers for five of the 55 units on offer.

“Strong buying interest made the flats an easy sale,” said Sammy Po Siu-ming, chief executive of Midland Realty’s residential department. “Optimism in the city’s property market helps developers sell nearly all the new flats hitting the market this month.” Please do read the full article here with a lot more details.
Article in SCMP.com

When prices have gone up, discounts are offered to attract buyers

It’s not just in Hong Kong yeah. When prices are seen to be just too high, then developers will offer discounts. If the buyers felt that this is good enough versus the current market prices, then the developers will be able to sell the units. It’s a win-win situation. Buyers are able to get a unit with a discount and developers continue to be able to sell them versus having all the units unsold.

Of course when markets are red-hot (maybe even towards speculative), then discounts may not be that necessary. That’s the time when the government needs to step in to stop it from getting out of hands. Perhaps it’s a fortunate thing that the market is definitely more subdued here in Malaysia. Just keep looking for good value and never settle just because of heavy discounts. That’s not the most important thing for property investment. Take care.

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Property Investment quotes I love. 8 quotes from famous people.

Let’s talk about property investment… famous quotes today.

As someone who loves property investment, everyone would think I think of property investment as number 1 but I need to also say that I am also a serious unit trust investor too. 90% of my funds are presenting under the aggressive category. I am a Public Mutual Gold member since many years back and I intend to keep this status too.

I have lots of interest with the stock market and continues to receive dividend payments every quarter too. However, my investments are all boring yeah, most of the time, it’s buy and forget. Today, let’s talk about one point which I think property investment is number 1. This point would be all the quotes. There are so many so profoundly true quotes yeah. My comments at the end of all these really awesome quotes. Happy reading.

#1 –
“The wise young man or wage earner of today invests his money in real estate.”

-Andrew Carnegie

#2 –
“Buy land, they’re not making it anymore.”
 -Mark Twain

#3 –
“The best investment on earth is earth.”
 -Louis Glickman

#4 – “Landlords grow rich in their sleep without working…”

-John Stuart Mill

#5 – “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”
 -Franklin D. Roosevelt

#6 – “We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”
 -Warren Buffett

#7 –
“The best time to buy a house is always five years ago”
 -Ray Brown

#8 – “Don’t wait to buy real estate, Buy real estate and wait” – T. Harv Eker

My personal quote after 18 years of property investment journey?

“Everyone needs a roof over their head whether they rent or buy” – Charles Tan

This is why every time someone tells me that it’s better to rent and not buy, I would remind them that if they need to rent, they still need a home which they could rent. Someone has to have a place for these people to rent from.

If they remind me that the difference in rental versus monthly mortgage could be hundreds of ringgit, then I will remind them that as expensive as buying a home could be, it is ONLY for the period of the loan. Rental is meanwhile a never-ending journey this generation and next and next…

Please do share with me your favourite property investment quotes yeah. I would love to include it into future articles too. Thank you and take care.

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Personal Finance 101: Property Investment is no longer necessary

Every investment can be a great investment

Someone shared that investing into the stock market is easy. He showed many success stories. Someone shared that his crypto-currency is starting to show positive signs again. Someone shared that when it comes to the current situation, it’s best to rent because we could save more money versus buying a property. Renting may be RM2,000 but paying repayment for the same property could be 50 percent higher, or at least 20 or 30 percent higher. Everyone has their say because they may have achieved something positive and thus they are sharing what they know. I just like to ask three easy to answer questions.

#1 – Can we rent without someone actually owning a property?

Okay, the answer to this is, ‘of course we could rent a place without someone actually owning a property.’  In some countries, the government would take over some old buildings, refurbish it and then rent out the units or the rooms to the people who needs them. The government may even choose to build homes and then rent out those units to the needy. So, it’s true. We could rent without some individual owning the property. However, some organisation has to own the property and the property has to be there and ready. Else, no one could rent it to us, even if we want to rent a property. Briefly, a property is needed and someone or some organisation or the government of the day needs to own the property in order to rent to us.

#2 – Can we stop paying rent?

Again, the answer is Yes! I never needed to pay rent all those years I stayed at my parent’s house. It was free when I stayed for 10 years in their Teluk Intan home. It’s free when I stayed in their house in Ipoh and it’s still free today everytime I needed to stay overnight when I go back too Ipoh. Yes, it’s free, free and free! Well, when my sister stayed with me as a student, it was FREE too. However when my sister started working, she insisted on paying some rental to cover the electricity etc. When my brother-in-law stayed with me when he started working, he paid rental too. Both of them stopped paying rental when they moved out and started paying for a property of their own. Briefly, it’s really possible to stop paying rental. It’s when we started paying for our own property, then we stop paying rental.

#3 – Should a landlord stop collecting rental?

Okay, for this question, I hope some landlords reading this would comment below and tell me that if their tenants have been paying  them for the past 30 years, they would stop taking rental from their tenants once their tenant has paid them for 30 years or once their tenant stop having an income.

For me and for my brother-in-law and for friends whom I know, they would continue to take rental from their tenants. No matter for how long. Regardless of whether their tenant has a job or no longer working. They needed the rental because it’s a rental… Definition for rental?

Cambridge Dictionary (click here to read)
says this about renting:
a fixed amount of money that you pay regularly for the use of a room, house, car, television, etc. that someone else owns
.

Briefly, if you do not own that unit / home / place, then paying rental is compulsory if you intend to use it. A landlord would not need to stop collecting rental.

#4 – There are many people who does not own a property at all and they are doing just fine, right?

Yes, you are right. Many super wealthy people does not even remember where are all the properties they own. There are also the ones who has so much savings that it’s enough to pay for rental forever and ever. I am not joking. I really do have many friends who does NOT need to own a property and they could afford to rent until the day they say goodbye. They could even go for holidays as and when they like. Why buy a property for stay when one is not even staying in in often enough and is always travelling and staying in hotels etc?

Briefly, if we need to pay RM2,500 for rental per month and we have the below amount, then forget about buying a property yeah. Continue renting and enjoying lah.

RM2,500 x 12 (months) x 25 (years) = RM750,000.  Actually, this is a very small amount for many of my friends. It’s a huge amount for me but it’s a small amount for many of my friends. This  is why for them, buying a property is really not necessary at all. As for me, if I am the owner of this RM2,500 rental per month unit, I like to say that I need that RM750,000 over 25 years yeah. With RM2,500 per month or RM30,000 per year, it meant that every year, I have money to go travelling too. 😛

Answer these 4 questions and then go ahead and decide whatever you like to do. It’s your life.

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Property Investment is not ‘everything’

A close friend asked me since I love property, do I invest everything I have into property. I told her, no. It is important to understand the limitations and cons of property. When you need sudden cash, property would not be able to provide you with such a flexibility even if you are willing to sell it low. Besides that, property market is just like any other market, there are ups and downs even if on the longer term, the prices do go up. Look at JB, prices were virtually unchanged or even negative for 10 years before the current Iskandar boom. There’s no guarantee that this may not happen again.

Fixed Deposit I told her no matter how confident she is with the property market, we should diversify. A minimum of 6 months worth of our typical salary amount must be in Fixed Deposit. This gives you something real to fall back on if you do need to fall back or got fired for slapping your boss.

Insurance. Next, she must get herself well covered through insurance. If you are only covered for RM100,000, it is time to increase the amount. Go for a minimum of RM300,000 coverage. The higher the better. Touch wood but under circumstances that you are no longer around, insurance gives back something to your loved ones. Medical insurance is also necessary because it protects whatever you have at this moment and it is so cheap to buy compared to the benefits it provides.

Share market. Do not go into share market for the short term. Go into it for the long term. Buy good shares which will appreciate slowly. For example, banking stocks, good plantation companies or even cigarette companies. Come on, you may hate cigarettes but it is impossible for every smoker to stop smoking. Buy bit by bit, keep it for the long term. You will be surprised at how much you have when you look back 5 years later. ‘Sikit-sikit, lama-lama jade bukit’ juga. 🙂    Shares also allows you to get money fast if needed. You only need a few days.

Yes, then you go into property market with your eyes wide open. Read magazines. Read books. Read online articles. Perhaps even FOLLOW kopiandproperty.com. Haha.  My answer is thus, no, I do not agree property is the only type of investment you should do. In fact, far from it. I bought my first property after I have worked for 5 years and I only bought one which I feel I can afford even if the conditions got worse somehow. That’s called risk management.

Conclusion is simple. Property Investment is definitely not ‘everything’.

written on 30 Jan 2014

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Property investment is not just about buying a property yeah

Property investment does not need to be just buying a property yeah. It can also be buying the property developer’s shares from the stock market too. Today, we have an analyst covering a property developer in a local media. This is Mah Sing, the developer with a GDV of RM24.9 billion and 837 hectares of landbank.

Anyway, I do not have shares in Mah Sing Bhd yeah. If you like what the analysts say, then you can find out more and then can decide if it’s worth buying the stocks. Below image is as per google search on 8th August 2021.

Briefly, if you buy at current price, you get a company where the highest price the counter went up to within the past 12 months was RM1.47 and gives you a dividend yield of 2.06%.  Briefly, this is slightly higher than FD rate but at the same time, there’s that potential share price increase too.  Just need to know it can go either way.

Source: google.com

Article in nst.com.my
  Mah Sing Group Bhd has a total remaining gross development value (GDV) of RM24.9 billion sitting on 837 hectares of the land bank across the country.  Mah Sing is targeting new property sales of RM1.6 billion for the financial year 2021 (FY21) with at least eight new launches. Over 90 per cent of the new launches are priced below RM700,000, and 51 per cent below RM500,000.

Rakuten Trade has a “BUY” call on Mah Sing with a target price of RM1.37 based on sum-of-parts valuations, implying price-to-earnings ratio of 21.4x and 13.9x for FY21 and FY22 respectively. The firm said, “Our BUY recommendation is premised on strong sales achieved in the past few quarters, additional contribution from its glove manufacturing business, and attractive dividend yields.” Please do read more about what the analyst say here:
Article in nst.com.my

Happy deciding yeah.

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Property investment:  Low risk = low returns? Think again.

Someone I respected for his expertise in the stock market spoke about property investment to a few young professionals. Frankly, I hope this article can set some records straight because the assertion of property investment being low risk = low returns is incorrect. There are a lot of reasons why the stock market or many other types of investments are better than buying a property. However, to think of property investment as secondary choice to all these other investments because “low risk = low returns” is unfair yeah. Please allow me to explain as simple as I could since the answer which this respected friend gave was also extremely simplified too.

Property investment is not “low risk = low returns” yeah. Assuming we rent the place we stay in versus paying a mortgage for it, the rental amount after many number of years will be pretty substantial. RM1,000 x 12 x 5 years = RM60,000. I am not sure how many of us love giving RM60,000 as a gift away to some stranger who happens to own the home we rented. Current market is very good for rental because prices have not moved much. Thus, owners have no choice but to rent out their units even when it’s below their monthly mortgages. Plus, we must rent as low as we could instead of renting high and enjoying it now because we will not be able to buy in future.
Here’s an article explaining why.
Coming back to “low risk = low returns” comment.

Let’s understand that Malaysia remains a young country (media age 29) This meant that demand for properties are going to continue. Assuming the growth in property prices is just following the typical inflation rate of 3%, a property will still double in price when we retire. (Yes, financial crisis etc are call calculated inside the average of 3 percent per annum). By the way, actual property price increase for periods of 1990 – 2016 was 6.5%. So, assuming we paid 10% for downpayment of a RM500,000 home, that’s RM50,000. When we retire, the home becomes RM1 million. Using a super simple calculation of RM500,000 (gain in property price) divided by RM50,000 (downpayment) divided by 30 (years). That’s a simple return of 30% per annum.

Low risk = low returns? When it’s said to represent property investment, think again yeah. Note: Property Investment is NOT for everyone because it is so slow….. Stock market is by far faster yeah. By the way, there’s no need to debate which investment is the best. The best investment is simply the one that we are most interested in. Whatever that may be, put our full attention into it, do due diligence and I think the return on investment at the end of the day / year / years will be above average versus those who did nothing. Happy investing and following.

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written on 19 Jan 2019

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Property investment Malaysia, how to start?

Should we invest in Malaysian properties?
Is it safe for a long time more? I

hope so because I did. You did as well? Great. We are on the same boat. Anyway, what about the question of how to invest? How to start? What’s available and what are prices like? There’s one good article here that everyone can refer to. It’s
in mansionglobal.com
 It talks about the affordability (versus many other places), the government’s initiatives (MM2H and even some exemptions) and how to start hunting for one. It says that property sites are great as a starting point (iproperty.com.my and even propertyguru.com.my) and says that it likes
propsocial.my
 the most as it is transparent and has lots of good content.

A very important final statement in the article is this. “Malaysia is slap bang in the middle of South East Asia,” he said. “You can get to 60% of the world’s population within a five-hour radius.”
 (Surely this is a very important point for everyone, not just for property investment but also for other investments too!)

There are also many other resources which is available to property investors, especially for Malaysians. Come on, if foreigners are buying, should we just stand outside the ring? Here’s an article about these resources, free:
Some resources we have access to for our investments

Within the article would be all some of the online resources so that we understand where we are today and where our investments could be in future.

What about advantages to invest in real estate? Here are lots of good reasons by a prominent financial guru in Malaysia, KC Lau.

12 Great Reasons to Invest in Real Estate

Do read more from his popular site.
kclau.com

For those worried about applying for a mortgage, here are some tips on what to do and what not to do to ensure the chances of getting an approval is better. Miichael Yeoh explains.
Housing loan rejection,how to avoid it

Oh yeah, for the properties in prime locations, the ones looking include the Ultra High Net Worth Individuals (UNHWIs) Here’s one latest article about it:
Ultra-high net worth Malaysians loves properties

If these are not enough, then get Google to provide more information. Some other good websites with information are as follows:
www.globalpropertyguide.com

Its latest article talks about the cost of buying a property in Malaysia and the conclusion is that, it’s LOW. For foreigners, there’s this
mm2h.com

All the requirements prior to apply plus all the reasons why are stated too. If it’s applicable, do apply yeah.

For expats coming to Malaysia in the future, here is a good site for you.
www.expatgo.com

Its latest article talks about how to ensure everything is done legally and on the safe side. Get a good real estate lawyer first! I am very sure there are many more useful sites. For readers who wish to help, do comment yeah. Happy reading, understanding and buying. Cheers.

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Property Investment? Some good advice for property buyers from Malaysia Institute of Estate Agents (MIEA) President Chan Ai Cheng

Happy learning from her experience yeah.

The full article in themalaysianreserve.com
. Summary of her sharing as below.

#1 – Purchase must be based on needs and financial capability

#2 – Purchasers could rent first if they are not sure of their job and financial stability

#3 – MIEA does not think property prices will be going down further. Building material cost has gone up.

#4 – “It is our view that it’s an opportune moment to purchase if you have the need and ability to do so. The longer you wait the higher the price will be, then it will be out of reach for many.”

#5 – The Malaysian economy is expected to strengthen between 5.5% and 6.5% as per the Economic Report 2022. “This gives confidence to the market and we foresee that many new purchasers will enter the market as they have waited for two years now, many have saved money for this purpose and most importantly they have a need for a roof over their head.”

#6 – There has never been a good or bad time to purchase a property. It really depends on whether buyer has sufficient funds to lay the initial capital, secure a loan and have the heart and commitment to see through the payments

#7 – Always let data guide your decisions

The full article in themalaysianreserve.com

Property Investment is long-term. It’s also compulsory.

If we over-stretch ourselves financially, we will be taking up a very high risk. I do not think there is a need to take such a high risk just to buy a property. Manage it well by understanding what we could really afford. Once we buy, it’s monthly repayment for the next 360 months or more. Be aware of this.

Renting is perfectly fine. Just do not spend as much as we could afford to buy in the rental we pay. That would mean we will be renting and renting and renting forever. By the way, even if the owner is suffering from negative yield for now, the long term financial prospect for a landlord is going to be brighter versus his / her tenant. This is proven in all advanced property markets thus far.

It’s not easy for property price to go down because owners will not want, banks which technically also owns the property also will not want and even the government will not prefer for that to happen. Even property buyers, they want the property price to go down but as soon as they buy a property they will also not want the price to go down…

Economy will be the one factor determining confidence and also the ability to buy or not to buy in terms of people with salaries because they have a job or higher paying jobs.

Stop believing what non-buyers say. They will always talk about doom and gloom. Do not believe what property sales / developers say. They will always talk about zoom and boom. Frankly, go back to basics. Search out the typical rental to understand if the property price is okay. Search out the last transacted prices to know the actual price versus what people think. As President Chan has said, “Always let data guide your decisions.”

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Property investment is for older folks and not millennials?

SOME people say property investment is no longer attractive like previously. No idea what they meant by previously but it’s okay. As much as they can share, I can also share. For these SOME people, they either have their own agenda (as usual they have their own investment plans to sell you) or they actually do not have property investment(s) and thus do not understand what is property investment.

Anyway, just need to look at the chart below showing you the property price trends for ALL types of properties.

MHPI

Now, let’s listen to some other views too.

Article in thesundaily.my
  Older generation tend to put their money in properties and blue chip stocks while the millennials are not interested. Financial planner Felix Neoh shared that the current property market has made investors think twice before committing due to their reluctance to borrow for investment.

He said, “The risk of investing in properties depends on one’s ability to meet the repayment commitment.”

“It is less risky if you buy to stay at the property. But if it is for investment, the risks (involved) are if the price falls, if you can’t get a tenant at the expected rental value, or if you have income concerns.”

Another financial planner, Ian Wong said, “While stocks are still a good option, not all properties make money. In fact, a bad property purchase ends up severely damaging your finances. There are lot more bad properties nowadays.”

Author of financial book
Enam Angka Menjelang Dua Puluh Lima
, Muhamad Azraei Idros meanwhile shared that high inflation and low salary have made buying property no longer an attractive investment for young people. Please do read the article in full here.
Article in thesundaily.my

Millennials are not interested?

The below shows the total transactions just for half year. The average is probably around 140,000 units per half year. Means all these 140,000 are all OLDER folks? Millennials (born 1981 – 1996) are between the ages of 26 to 41. Does this mean that all the buyers for these units below 9as per the chart) are all either below 26 years old (must have super rich parents maybe?) or above 41 years old? (finally saved enough money to buy?)

Wow… How fascinating indeed if indeed millennials are not interested… with property investment.

If price falls and you cannot get tenant?

This is true… right? Well, it’s the same with many other so-called newer investments too right… If the price of that investment which the millennials love actually falls… does the millennial sell quickly and lose money or does the millennial hold on to it until it comes back? Are there investments out there where after we invest into it, the price never falls and it just keep going up every month, every year and forever? If there is such an attractive investment why do we still need professional financial planners who must explain the risks of investments to the millennials?

Guys ah, investments will always carry risks but with property investment, YOU can do you own due diligence and YOU do not need to just simply rely on others. If you like to buy, then you check if there are people renting that area FIRST. One does not buy first and then only check out potential tenants AFTER. This is property investment.

There are a lot more bad properties nowadays

No idea what people meant when they said bad property. Cannot get tenant means bad property? Price falling means bad property?  Developer ran away halfway is bad property?  Cannot sell quickly is bad property?  Haunted property is bad property?  Overpriced property is bad property?

Just look back at the chart above showing around 140,000 property transactions. Means how many of these 140,000 properties are bad properties since there are a lot more bad properties nowadays? I would love to know since I do not know the actual number of bad properties which was mentioned.

Property investment is COMPULSORY

If all the financial planners are earning above the T20 household incomes per month and they could save / invest the money properly, they can afford to continue renting. Else, they better have at least one property because paying rental forever is a lot of money even if the rental stays the same at RM1,500 per month for the next 30 years.

Meanwhile for all other millennials who are not financial planners, just need to remember that property investment may not be the better or even the best investment but everyone needs a roof over their head. When one gets married, one needs a proper home. When one has a new baby, one needs a bigger home. When one gets a better job offer and needed to move to a new city, one needs a new place to stay. This is why property investment is compulsory.

This is why property investment is definitely not just for the older folks like me. I am 45 this year. So, not considered under the millennial category.

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Property investment is not sure-win. Caution needed, always.

Everyday, when I open my Facebook, there would be a lot of FB marketing stuffs about property investment potentials. From those who are now multi-millionaires from their property investments and wanting to share their tips to people to “some new launching which must not be missed” and all the way to those promising you that some other countries are much better than Malaysia and therefore you must by a property there so that you can move there in future etc. First of all, there is nothing wrong with FB marketing and all these sharing, trainings and even listening sessions. Many have profited and gained from them. However, be reminded again that the actual situation will be different for everybody. There is no such thing as a guarantee. Be reminded also that when it comes to property investments, it is usually slow or not really moving fast.

Property investment is not that different from

holding a blue-chip stock v
ersus a potential upcoming stock.
Buying to wait is better than waiting to buy.
 The former usually has a stable business and provides you a very stable dividend stream while the latter may or may not give you that surge in price that you are looking for. Anyway, let’s remember that ANY investment at all, it is usually ‘per annum’ basis. I repeat ‘per annum’ which is also 12 months basis. Try not to think of any investment as a get-rich-quick scheme because if it is, then stop calling it an investment. It’s just a scheme which may really work well and you become very rich very fast. Too bad for me, I am a slow learner plus a slow saver. I have just a full-time job which meant a fixed salary every month. So, whenever anyone asked me for any hotspot to buy, I just tell them to google for some hot areas and start evaluating all those choices. Buy one that meets all our expectations.

Remember, no developers would

build in a place without connection.
The development will just fail. However, buyers should not blame them squarely for it though. Many times, if we drive to the site and it is very very VERY far from our office and we believe the developer who promised that once MRT starts, everything will be smooth, who is to be blamed? Maybe not even the developer! Maybe it is the sales person who were over-promising as his commission depends on it. An ex-colleague once told me that buying in Malaysia is too dangerous and risky. He lost all his money when he invested in a failed project in a town in Malaysia over 10 years ago. Nearly the whole project was bought by Singaporeans. Frankly, if we are buying a home and nearly all the buyers are investors, we need to be aware that should 50 percent of these investors stop paying their maintenance fees and thinking that they will only pay when they sell their home, then the facilities would start deteriorating and in the end, no one benefits.

Property investors must always be cautious
 and really understand why they buy, what they buy and who they buy from (there are definitely fake developer agents for example..). In terms of when to buy, I think that is a question that you will never get an objective answer. Developers would definitely tell you it is the best time to buy. The

naysayers would tell you the crisis is coming soon.

Those who has NEVER bought before would tell you all the horror stories. Those who bought a few units during the best times and was lucky to sell them off may just give you the wrong advice. Listen more, read more and seriously, your own judgement matters much more than any stranger on the road. Happy starting your journey.

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written on 20 Oct 2017

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Property investment not suitable for retirees. True?

Just read an interesting view about property investment for retirees. It said that property investment in terms of rental is not suitable for retirees. If we assume the property is not yet fully paid for, then the rental income is the remaining amount after deducting the maintenance expenses and mortgage repayment.  Assuming the property price is RM400,000 and the rental is RM1,800 and the total expenses is RM1,700. It meant the retiree would have just RM100 per month. Oh dear, it’s just RM3.30 per day. Enough for just one loaf of bread shared over two days, an egg per day and a tub of margarine to spread onto the bread for some taste. So, should retiree buy or no buy properties for rental?

Okay, if the property did not appreciate much, not even based on the usual inflation rates, then the retiree may really be stuck with nothing but the RM100 per month. However, if the property price has gone up based on the usual inflation rate, it would already be worth much more than whatever price paid for. In other words, perhaps by selling the property, the retiree may get higher returns than the RM100 per month mentioned above. Let’s look at some simple calculations below. .

Based on the same assumption of a RM400,000 property in the beginning and a 3% increase every year for 10 years, the said property price would be worth  RM538,000 after ten years. After 10 years of paying for the mortgage and assuming the retiree paid just 10% downpayment and the interest rate is 4.5%, the remaining amount owed to the bank should be around RM330,000. If the retiree were to sell the property, he would get back cash of RM200,000. Now, assuming he parks this money in FD giving him 4% per year, that would be RM8,000 per year or RM667 per month. This is way better than the RM100 per month PLUS, the retiree still actually have RM200,000 in bank for emergency use.

I would not be talking about what if the property has been fully paid for because if it has been fully paid for, then once the retiree sells the same property, he would have RM538,000 and with the same FD rate, he would get around RM1,800 per month. Not really that amazing but this should be sufficient and the retiree still has RM538,000 in the bank for any emergency use. So, I feel that property investment when done right is still suitable for a retiree. Please do it as young as possible and not one or two years before one is about to retire!  Happy retiring, with a fully paid for property.

written on 18 Apr 2015

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Property investment: Returns of 6 percent per year, buy?

I read a Facebook comment about property investment returns a few days ago. The property price for the said property in Singapore has appreciated 30% over a period of 5 years. The comment was that 30% is not a lot. I think what the writer wanted to comment was that 30 percent divided over 5 years is only 6% simple returns per year. Thus, this is considered low. Honestly, if a property investment gives us a return of just 6 percent, it’s best to skip this altogether. The time, effort and risks are not not worth 6 percent. Fixed deposits give up to 4.5 percent these days and it’s risk-free no matter how bad the property market becomes. Actually, if a property has appreciated 30 percent over a period of 5 years, I would be happy to sell it, especially since it’s after the Real Property Gains Tax (RPGT) period. The return on investment is huge!

Imagine the original property price to be RM300,000. 30 percent appreciation is equivalent to RM90,000. With a loan of 90 percent, the total capital invested is RM30,000. Stamp duty comes up to RM5,000. Loan agreement is around RM5,000. Lawyer’s fee is RM3,503. So, how much is the actual return on investment? Well, if we assume the capital invested to be RM30,000 + RM8,503 (stamp duty + legal fees).
To make it simpler, we put the total as RM40,000. The return is thus RM90,000 / RM40,000 = 225%. Total return over a 5 year period? 225 percent divided by 5 years = over 40 percent per year. Yes, if the property price has appreciated by 30 percent, I would be very happy and would not be commenting that “it’s not that much.” Imagine if the same amount of RM30,000 was left in the Fixed Deposit paying 4.5 percent per year. Total gain at the end of 5 years is only RM7,400. Sigh….Inflation would have eaten away much of this FD gain.

What if the appreciation per year is ONLY 3 percent? Well, RM300,000 x 3 percent for a period of 5 years would meant that the property has appreciated by RM48,000. Using the same calculation as per above, total returns over the 5 years would be around 20 percent. Still pretty encouraging right? Of course, we must still ensure that we are not buying a property which is overvalued or buying the wrong one. Do note that when we bought the wrong one, whether it’s upturn or downturn, we will still be looking at losses when we sell. With sufficient reading and analysis, property investment is one of the best investments we can ever venture into. The capital needed versus the potential returns would be the highest most of the time even when compared to stocks, commodity or even unit trusts. Happy thinking and venturing into one yeah.

written on 3 Feb 2016

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Property Investment risks. Here are 5 of them.

All investments come with risk(s). That includes even Fixed Deposits! The risk of not having enough and realizing it only 30 years later. Imagine…  we save every cent we have every month ONLY into Fixed Deposits and realized 30 years later that the 1.8% interest rate per year is actually lower than even the officially announced inflation rate which is usually between 3 – 3.5 percent? What happens when we discover this only after we retire and income has stopped and we see a dropping number in our account every month? Today, let’s just look at 5 risks for property investments.

#1 Mistakes are costly; money and time

When it come to a property, it’s really quite dangerous. Imagine buying an affordable home of RM300,000 and then realized we totally hate the place? Well, it’s RM1,140 per month for the next 360 months and by the end, the total amount paid is very lose to RM410,000 (after including interest) even though our loan from the bank was for RM270,000? We are only talking about a RM300,000 home for this case.

Image source: calculator.com.my

As we needed to pay this RM1,140 per month and not staying / unable to stay there and on top of this still have to pay rental, it will be very financially stressful. We will need to earn by far more money and save it up in order to buy another place which we like maybe many years in the future. This is why we will lose both money and time. Do enough due diligence to minimise this risk.

#2 Unforeseen circumstances hard to predict (does not need to be a financial crisis)

Many years ago, my good friend Mr. C told me that an owner arrogantly rejected a RM1.2 million offer for a semi-detached home and said that there was a unit within the same row which sold for RM1.6 million. My friend pointed out to him that the RM1.6 million unit was bigger. Under normal circumstances, the buyer could wait and get the price he wanted.

Then, Penang was hit by a flash flood in 2016. That whole row of semi-detached homes were all under 60cm of water and the road in front of the row of homes cracked as well. The buyer called my good friend and says that he is now willing to consider RM1.2 million. My friend politely informed him that he could only try and market to more people but the photos of the homes under water has gone viral earlier…

#3 Hard to run (cut loss) or sell (quick profit) if ever needed

If we have money invested in the stock market and we pay very close attention, if the company share suddenly show a sharp correction, it will be possible to cut loss and just sell all the shares and take back the money within days. If the shares suddenly spiked upwards, we could also sell and have the money in our bank account in a few days.

Now imagine the property price suddenly dropping because a recession starts. In order to sell, we need to make sure we appoint a good real estate agent, the person needs time to post up the advertisement and the potential buyers need to have time to come and view the property. After viewing, the buyer will need time to decide and perhaps even a few other viewings in order to compare objectively. Even after the confirmation, the money from the property from the bank will only be in the owner’s account many weeks later. This is the fastest.

Assuming, the prices suddenly spiked. The same thing would happen too because selling will also be taking a long time! Property is an illiquid asset.

#4 What if the tenant came from Hxxx?

Just google for ‘bad tenants’ and click on images and start feeling very bad to become a landlord. An image below for reference. Searched on 2nd Jan 2022.

Yes, earning rental yield may not be as straight forward as it seems right. Chasing for rental every month will be very tiring… Evicting a tenant who refused to pay will also be a big hassle too… Let’s not forget the fact that the cost of cleaning up, of repairing all that’s damaged and replacing the items in the home after the tenant has moved out will be another huge financial stress too.
Here are some tips on how to choose a good tenant to minimise risk.
No such thing as zero risk by the way.

#5 NOT owning even a single property

We save this best one for last. What happens if we did not start our property investment journey at all? Briefly, we believe renting is better than buying? As per advocated by many personal finance experts who said property investment can be easily replaced with stock investment?

The risk is the never-ending rental month after month and year after year until the day we say good bye to the world. Imagine RM1,500 rental per month for just 20 years? RM1,500 x 12 (months) x 20 (years) = RM360,000. Just need to note that this RM360,000 calculation assumes rental does not increase (which is impossible) and that the tenant will always find a good landlord versus a landlord from hxxx.

Conclusion

Here are 5 risks of property investment and the last one is of not having a single property at all which belongs to us. Remember, the essence of investment is so that our investments can grow enough so that we have enough to spend when our income stops.

At the same time, a property investment is also to stop us from paying non stop when our income stops (one day it will). So, reducing the expenses is an extremely important factor as well, not just the building up of wealth. All the best in your property investment journey and remember, if we are able to build wealth way faster in any other type of investment, then perhaps property investment is no longer necessary. Cheers.

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Property investment? Risky mortgages are increasing. Why?

To all property buyers, please do not try to submit fake information just to get the loan approved yeah. If we do not qualify, we do not qualify. Period. Buy something cheaper. There’s plenty of them. it does not even need to be from the developer. There’s also the sub-sale property market too. Last but not least, take a look at the auction market too.

Well, as for risky mortgages or liar loans, this is something which has been reported in an article below.

Article in abc.net.au
   Investment bank UBS has warned that record level of “liar loans” as buyers “chase the market” could be one reason why property prices in Australia has risen close to 20% within the past one year.

The bank’s annual survey of around 900 people who took out a mortgage over the past year showed that 41% submitted loan applications that were not completely factually accurate a.k.a “liar loans.”  That is a record high in the seven years UBS has collected this data, up from 38 per cent last year and 27 per cent back when the survey started in 2015.

 Australian Prudential Regulation Authority (
APRA
) chair Wayne Byres said, “The issue of concern at present is that there is an increase in high debt-to-income lending, but it’s offset against a number of other metrics which are going in a more positive direction from a macroprudential perspective.”

He added, “Our supervision tells us balance sheets are still strong, lending policies are being sustained, and there’s no obvious poor-quality lending going on.” There are a lot more charts, figures and explanation in the article. Do read the full article:
Article in abc.net.au

It’s important not to “overhelp” too much on the loan applications

By the way, risky mortgages do happen over here as well. For the bankers or mortgage brokers, it’s also important that you do not ‘help’ the ones who do not qualify to turn into someone who qualified yeah. Let’s stop all these unnecessary happenings from happening just because the more successful submissions, the more financial rewards there would be.

All these would be at the expense of the borrower who’s taking on risks which are not necessary. The person may be overstretched because of the wrong encouragement.

More importantly, buyers should be well informed and do not resort to such ways to buy a property yeah. The risk is yours, the rewards may not be. There are reasons why people want to encourage you to do something to afford the property. Sometimes they even help you to falsify documents. At the end of the day, after they have earned the commission, they will be gone too. Happy understanding.

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Property Investment Slowing, Land Buying Increasing

What do you do when the stock market is down? According to many stock gurus, when people are fearful you should be courageous and buy. When people are way too bullish about the stock market, you should be fearful. Come on, if everyone whom you meet from the morning market until supper time is talking about the stock market, are you sure it is not over speculated? What about when property market is slowing down? In The Sun online today (7 April), AM Research said that many developers are buying up lands or also known as landbanking activities.

Many of them (developers) are expecting the residential demand to continue moving up once the effects from the RPGT moves wear of. Thus, all these transactions are still continuous because any listed company with a huge landbank is seen highly compared to one without much. The buying of these new lands are also at a higher price which gives confidence that the market is expected to continue moving up. A few examples were quoted, such as Mah Sing’s acquisition of a Shah Alam land worth RM327.4 million and another large private developer’s land in Canal City from Tropicana worth RM470.7 million.

Personally, I feel that no developer in the right frame of mind would want to spend close to RM800 million and hold the land for a few years. It will be developed soon enough. In fact, slow times would be the best time to negotiate for a better deal because both parties would be on a more equal status compared to when market was booming and every seller is CRAZY. Besides that, when market slows down, it gives every every developer some time to rethink their launching, is it over-priced? Should they sell a different product instead? Don’t you feel that the new launches in 2014 are much more reasonably priced? In Penang, there are developers who once proudly declared that their projects are awesome and amazing has started to advertise more. It’s not so much that the buyers have all disappeared. It’s more like, I better think carefully which project is better instead of just closing my eyes and buy whatever everyone says buy.

For buyers with cash, I think you are really KING for now. Exercise your financial powers wisely yeah.

written on 7 April 2014

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Book Review:  Property Investment Wisdom by Dr. Peter Yee

Over 10 years ago, I bought Dr. Peter Yee’s book entitled “You Can become Rich in Property.” It’s a good book and he writes from the heart. He is also the author of all the following books too: “The Certain Way to Life’s Riches”, “Property Secrets” and “Hierarchy of Money Skills.” Recently, he has published his latest book, ‘Property Investment Wisdom.’  Today, I will do a book review for this book. I have read this latest book a few times.

Straight from the Heart.
 This is not just my favourite song by Bryan Adams but also aptly describes this book. Dr. Peter Yee is describing what has actually happened with his own property investment journey over the years. For every chapter, he listed down the key learnings from the chapter. There are no speculative stuffs here. Just simple step by step and the potential pitfalls as well as the signs for windows of opportunity.

Simple and Easy to read.
 The first chapter is simply, “What is property?” and this tells us about all the different types of properties. The choices are actually aplenty and it’s not just whether it’s landed or high-rise yeah.  The next chapter is a natural progression, “Why invest in property?” and this tells us why we should begin our property investment journey. The chapters after keeps building up our knowledge on property investment until the final chapter which is “Property Investment Wisdom”.  This is where we learn get a final overview of the calculations and also all the many important terms we should be aware of. The language used is simple English and I believe most Malaysians would be able to read and finish this book within a few days if they chose to.

Interesting Chapters
  Let me share 2 interesting chapters in my opinion. This is Chapter 3 – Pitfalls in Property Investment. Everyone thinks property investment is easy. This is untrue! Some thinks property investment is too hard, read this chapter and you would understand that it’s actually not that hard either. Another interesting chapter is Chapter 8: “Property Investment Strategies.” This tells us that there are strategies involved and it’s not just buy low and sell high. That’s not strategy yeah. That’s just plain tactics.

As someone who has invested into properties for over 16 years, I still get many fresh ideas from reading the book. I think it serves as a good reminder that many times the opportunities which present itself would also be a different one depending on the circumstances at the time. You see, if I were starting, perhaps that first-home is a good starting point. If I have been buying only in the city I live in, perhaps diversification is the next step. In the book, Dr. Peter Yee gives everyone an overview of all the different types of properties and how we could benefit from each one of them. Happy reading!

— end of book review —

In Dr. Peter Yee’s own description, when you buy this book, it will reveal strategies on:

Shorten your learning curve in property investment by many years
learn the secrets to acquiring wealth in property investment
How to identify the right residential, commercial and action property
How to achieve financial freedom
Wisdom in property investment and much more

What’s the Investment?
 There are a two ways to become nearly as good as Dr. Peter Yee.  First one is to start property investment and keep learning for the next 15 years. You may have to spend lots of money and hopefully everything turns out okay.  Second way is to buy this book and learn from Dr. Peter Yee’s learnings and absorb all his property investment knowledge and experience in a few days. The investment is only RM40 per book and this includes delivery charges via Pos Laju.
According to Dr. Peter Yee, if you could buy two books at once and you give him this code
#kopiandproperty
, it will only be RM70 and it includes delivery charges too.
Mail him here. (peteryeekc@gmail.com
)

*kopiandproperty.com does get any commission for the sale of this book. Cheers.
 Happy learning.

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7 reasons for property investment with REITs

Do you know that it is possible to start commercial property investment with REIT? Yes, investments could start as low as probably a few hundred ringgit and not the typical 10% downpayment for a property which could easily be RM50,000 for a RM500,000 property.

What is REIT?

REIT is Real Estate Investment Trust. We could invest into them just like how we do for Unit Trust (UT) or even buying stocks in BURSA Malaysia. Just like the UT or the management of the companies, they would do their best to ensure the money we invested are put to good use. Do note that there’s no guarantee as usual. This is not like the
EPF where there’s a guarantee of a minimum 2.5% per year yeah…

How do REITs generate their income?

Very briefly, the professionals behind these REITs will invest into commercial properties which will generate incomes. Commercial properties are not necessary just the malls, factories etc. It could also be SOHO… It could be an acquisition of a commercial property for continuous rental stream. It’s possible to even acquire and redevelop an underperforming mall and turning it into a sufficiently popular mall too. Meanwhile for the existing malls, the right management team could make it even better and with more visitors too.

In future, if the price of some of these assets increase in value, they could sell the property and the shareholders would also enjoy part of the profits while they reinvest into other income generating real estate opportunities. These rental returns or even profits from selling an asset which has appreciated would be returned to the investors on a periodical basis. Again, these are for LONG TERM yeah. Anything related to property cannot suddenly rise 10% the next day…

Photo by Gabby K on
Pexels.com

Do we get returns every year?

REITs have tax incentives from the government. If it distributes at least 90% of its current year taxable income, the REIT will not need to pay the 25% income tax. This means that REITs would want to maximise this benefit and with this 25% income tax exemption, it also meant that most of the time if we compare REITs with most of the counters in BURSA, the dividend returns from REITs would be superior.

On a longer term basis, with the appreciation of the property owned by REITs, the price per unit would also reflect this appreciation and thus the RM1,000 invested a few years back may have appreciated too.

Here are the 7 reasons to invest into REITS in Malaysia

#1 – We love property as an investment but does NOT KNOW the HOW

It’s a very risky thing to buy into a RM500,000 property, thinking of it as an investment with all the sweet promises from the sales person and does not know enough. There’s a chance to go
bankrupt yeah (what is bankrupt? read here)
, if somehow we are just so unlucky or somehow bought into a super overpriced property. The latter will set us back many years even if we managed to climb out of it to restart.

#2 – Easy to start

Choose a brokerage firm.
Choices of brokerage firms? (here)
Open a trading account and CDS account.
What is a CDS account? (here)
Put funds into your trading account
Choose a REIT and Invest.

#3 – Affordable to start

Anyone who’s earning a monthly salary could start. There’s no need to save for years to buy a property anymore. Just proceed to have exposure to a mall you love to frequent every week. If there are lots of people in the mall and you think highly of the mall and wants to ‘OWN’ the mall, even if it’s a super duper small ‘ownership’ then go and find the corresponding REIT and buy some units. Then, you can start telling people that you are technically an owner of the mall too, sharing with thousand or more investors.

#4 – Liquidity

The major issue with property is that it needs time to view, time to negotiate, time to get agreements ready, time to get the loans, time to wait until we get the key… and more time. With REITs, well, it’s almost immediate that you could convert the investments into cash. Just need to sell the REIT units and you will get back your cash within days.

#5 Stable dividends

Start getting dividends periodically every year. (note that this is not a guarantee even if it’s most probably). As of currently, the dividends are also above the below 2% fixed deposit rates which most of us are getting. Please check the REITs prior to deciding yeah. Not all REITs are the same.

#6 It’s pretty safe too

REITs are regulated and needs to be approved by the relevant institutions yeah. In other words, REITs need to be approved before they could start offering this investment opportunity to the public.
 Click here to read in full of all the compliance they needed prior to getting listed in BURSA.

#7 Lots of OPTIONS to pick from.

Just pick the one which matches to what you like. It could the office you are currently in. It could the mall your wife spends the most money in and more. Here is a list of all of them. Go to BURSA website to have details for each and everyone of them.

Image source:
https://www.bursamalaysia.com/market_information/equities_prices?keyword=&top_stock=&board=MAIN-MKT&alphabetical=&sector=REAL+ESTATE+INVESTMENT+TRUSTS&sub_sector=

Conclusion

When it comes to property, there are a lot of ways to invest. Directly buying a property is one. Buying stocks of property developers would be another way. REITs would provide another way where the professionals will now manage what we are investing. Of course the same answer remains. If we believe we could do better than these professionals behind the REITs, then please do proceed to invest by ourselves. That’s always the best option as we would have full control in what we do. For REITs, we have no control on how they invest our money yeah. Happy knowing.

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