- May 23, 2019
- Posted by: adrianwee
- Categories: English, 文章 Article
For most people, the only investment strategy they have is to buy a property (or stock or shares for that matter), and start praying to all the Gods in the world. Of course, nature will take its course, and when things don’t work out the way they want it to, they have absolutely ZERO back up plan! Heck, they don’t even know why they are buying that asset in the first place (other than being told by their family and friends OR other gurus to buy).
The problem with most people is that they are living a life like an “ostrich in the sand” while trying to be an investor. An investor, by nature, is someone knowledgeable and he is trying to play a game of forecasting the future. Notice I use the word forecast, NOT predict. The point is not if you are right or wrong, but if you are wrong, what are your game plan and exit strategy?
All these matters – forecasting the Malaysian Property Market and having a game plan – simply means that the investor must be very learned and knowledgeable, and to be learned and know you cannot be like the proverbial ostrich with your head in the sand. Lift your head up and see what’s around you! What’re the possible incoming dangers, and most importantly, what are the opportunities.
That’s why in my course – Die With Massive Debts – I have never really tell people where to buy (unless of course people are asking where I am buying, and I tell them which place I think is a good investment – up to them to follow me). It is more important that they have the knowledge themselves – and that is why I have taught them about the “13 Principles” which is my trade secret.
The “13 Principles” will tell you if the property is good and if you should buy it, but ultimately you also need to know what is your game plan. Sun Tzu in “Art of War” said, “know your enemy and know yourself, you need not fear the results of a hundred battles.” By the end of this article, you will probably have more questions than answer, and that is good because it forces you to think before you act, rather than just jumping head first into the wall.
Here are a few points to consider for yourself:-
- Your Client
Is this a time to buy or a time to sell? The government recently lowered the overnight policy rate (OPR) to provide economic relief. Furthermore, there is a new initiative called “Stay2Own” by Ecoworld – it all points to a more vibrant, robust property market. In case you don’t already know, this initiate allow you for to rent for up to 5 years before deciding if you want to buy the property, and the best part is that the rent that you have paid for 5 years can be used to offset some of your downpayment.
Against this backdrop, you need to decide if you would prefer to sell your property, or rent it to tenants? Either way, you would need to know who your clients are in the Malaysian property market, and in what way you can add value to your property to cater to them.
- Your Area
The property that has been purchased – how well aware of you of it’s surrounding? What is your intention in investing in this particular property in the first place? To rent it out to students from a nearby college? Seems sustainable. But how much are they willing to pay for? Also, some students live a pretty wild lifestyle (night parties and such) – if there is damage to the property and they “cabut” – do you have cash reserve for repair work?
Furthermore, if you are planning to rent to working adults, what then is the average pay for the people in this area? If the average pay of people in this area is RM 3,000 and you are trying to rent out this unit for RM 2,500 – do you really think that this plan will work? It would be more feasible to rent out room by room at RM 1,000 or RM 800 instead?
This will also affect your decision on how to stage/renovate this property, as we can see below.
- Your Game Plan
So what is your plan in purchasing this property? Do you intend to buy it to flip? Or for rental?
If you buy a property to flip – most probably you are selling it to people with family. As such, spend at least 10% of purchase price to “stage” your property. You do not want to sell your bare unit looking like a rehab center, right?
Therefore, consider spending more on renovation. Note that renovation must be for things that the “eye can see.” Chandelier, carpet, wallpaper to name a few. If you go and change the piping (unless it is leaking), who can see that you have put up an effort for that unit?
There is also a thing that a lot of investors neglect, especially in the Malaysian Property Market. Besides our sense of sight, we have other senses – mainly smell and hearing. Try putting potpourri or some other pleasant smell when bringing people to view your property. If everything else fails, try to put a packet of coffee in a small bowl, it will give out a pleasant aroma.
As for hearing, try switching on some classical music at the background. Just like any business proposal, we want our prospect to feel good when viewing our house (which is basically our proposal).
If you intend to rent out the house to students, a different set of ball game. Look is not as important. Instead, try decorating the property with practical items. Single bed. Cupboard. Table. Study lamp. Washing machines. Don’t spend too much as you might need to increase the rent to cover the initial cost. Basic. Practical. And of course, comfortable. They will appreciate that more than fancy designs by interior designers.
- Your Risks
Also, know your risk. If you buy the property for either flipping or renting, what if all your plans failed? What if you cannot sell the property at the price which you expected to, neither can you rent it out? If you are holding a cash-out property, how many more months can you “tahan” the bleeding before foreclosure?
These are the things which you must take into consideration in the Malaysian Property Market. What about short term rental? Air B&B is a good option here. Otherwise, perhaps renting out at a lower price? Yes, you will still bleed, but at least it doesn’t hurt as much. No one likes negative gearing, but if it must be done, it must be done.
- You Yourself
How much money do you have? If you buy such and such and such properties – how long is your holding power? How many months can you bleed before forfeiture? How many months have you got to work with to either sell or rent that property?
There are opinions out there which says that cash-out properties in Malaysian Property Market are bad. I disagree. It actually depends on your personality and how you spend money. If you cash out on properties and use the money for leisure, travel and such, then, of course, it won’t work. But does that mean that the plan is bad?
No. It just means that you don’t have the strength to see it through. This plan is not for you – even if it is available to you. That simply means that you need to find other alternatives/investment methods that work for you!
You see this is the beauty of property investment. A friend once mine once told me, “in currencies and stock investment, discipline is the key. You need to have a game plan – if the price drops to here, you quit with a loss. If the price goes up to here – you quit with a profit.”
This is because, in currencies and stock investment, there is nothing you can do when all things turn to hell. You cannot go into the company and whack the board of directors. You cannot put your hands into the graph and physically pull the graph up. You basically can just sit there and cry. That’s why discipline is important – to stick to the game plan and exit as planned.
However, in property investment – there are plenty of things you can do. That is the reason why I love property investment. You renovate it, make more rooms, AirB&B (short term rental) or what not. Holding power is important in any investments – and it is never truer in property investment.
In order to do so, you will need to have knowledge. It won’t cut for you to just buy a property and hope and pray for the results! Remember, a veteran investor always think of risks first, and not reward. What if everything goes wrong? How much must I bleed to fix things?
Follow us at our links below, maybe you will get to pick my brains when I do my postings on how you should be running your business and how to do it when it comes to property investment.