Property.. Buy Buy Buy... Is it a Sure Sound Investment??

I love property investment.. And I can spend the whole teh tarik session just to talk about property investment rather than a cocky topic about sex scandal, politic and a mere talk cock.. Been residing in KL for almost 2 years and I did a simple study on how nifty the profits been made with selective strategic properties. In mid 2009, 3 properties came into my frame of mine after a thorough analysis namely Midfields by YTL at Sg Besi, The Endah Promenade by PJ Development at Sri Petaling and The Zest by Trinity Group at Kinrara. All are high end condo/ service apartment. The Midfields started with RM280k for a 1000+ sqft and now selling at RM400k plus. Endah Promenade with 3 rooms and size around 1000sqft started at RM246k and now selling at RM400k plus as well.. The Zest was a clear winner, at BK9 of Kinrara, selling at RM240k (at RM220 psqft) for 1200+sqft built up area unit, and now shoot at around RM440k+ for the same unit.. A nifty 100%++ appreciation. I must say, I am scratching my head now in dissapointment. Hahaha... The lesson.., if we intend to be a serious investor, belief is a key words, have a strong and handsome holding power, and once you think you wanna go after an analysis, have a courage to take a sound risk after considering affordability and pray for a nifty outcome.. Wish for a good luck 2011 year at my side... Amiiin...

Leveraging in Properties. Should We Go or Not..?

I have received many comments on my believe in properties acquisition leveraging by refinancing property.. The arguments are;
1. This was what western preach and belief, which lead them to recession in recent years;
2. The idea of mortgage paid by the tenant. How we know that there will be a demand in tenancy for any particular property we acquired?
3. Cash flow affected if no 2 not materialized as plan?

First and foremost, in any investment, no one could predict what will happened after it was made. Even Warren Buffet does not always hit the strike and jackpot. And the modest answer to the above arguments is, always look at your affordability, means debt and income ratio. Personally, I will make sure my debt to nett income ratio does not hit more than 40%, even though most of financial planner adviced to limit to 30% ratio. And not simply leveraging without looking at nett cashflow capabilities.

All in all, in current sophisticated market and with all resources, one may be able to predict and make a proper plan before acquiring any properties be it new properties or not. Location, historical tenancy demand, market price movement year on year, proximity to amenities and easy accessible etc are common key enablers before any decision made. Classic example, I always made a dummy advertisement in one of the popular selling/ renting website which is free. And from there I gauge the responds of potential tenant. Off course you have to be there physically to see and experience all the key enablers for making it a preferred choice for residents be in tenant or living for good. And you know what, the best way to look for acquiring properties are always auction properties.

Renting a Property - First Step

Renting a house is not as easy as ABC. Couples of things to consider.

First, you have to think who do you want to rent to. Who is your targeted tenant? Are you looking for a families, college students, single, expatriate or company.. The best tenant target would be company or expatriate as rest assured, the payment timing is sharp as normally company or expatriate via hiring company will do a standing instruction to your bank account at the pre determined date every month. So, less hassle for you to chase your tenant should there be any delay. Renting to a company and expatriate will normally expose to potential higher rental rate. Some of my friend who owned condominiums in Hartamas fetched a reasonable above market value for fully furnish units.

Related with targeted tenant, you may want to consider to rent it as basic (without any furnitures), partly furnished (with some nessecities furnitures, normally, kitchen cabinet with hud and hob as well as 1 unit airconditioner at master bedroom) or fully furnished (with completed furnitures in all bedrooms, living hall, dining hall and kitchen). Anyway, the rental may be differ base on the criteria. If you invested RM10000 for fully furnished, advisable to add another RM400 to RM500 into rental considering 2 years rental contract.

Second, how to advertise your unit. Nowadays, with speedy technological and informative environment, we could have an access to couples of free website like rumahsewa.com or the best is mudah.com.my. I experienced a very good moment using mudah.com.my when I advertised my condo unit in JB. The unit has been rented out within less than 2 weeks from the advert date. And to my liking it was free.. :)

Third, how you choose your tenant. This is a real head ache. You do not know anyone so to speak when you first met them while viewing your property. Anyway, we could base on few tips. By appearances... When you talk to people, try to judge the way they speak, their professionalism and their appearances, whether neat and tidy. Ask their profession, ask their company contact number and business card. And how long they want to rent the property..? Who will they bring to stay with..? If you deal with an agent, let the agent bring the potential tenant together. Interview your potential tenant. Ask where they rent before and ask for previous landlord contact number. If possible, call the company they work to confirm their job designation. So you don't have to worry their capability to pay the rent. Call their previous landlord to make sure their rental payment pattern before. This is just a basic process to make sure you choose the right tenant... :). And don't forget to politely negotiate with them the rental rate. Do not fall in the trap of loose negotiation. Remember, we, as a landlord are doing business. Our property is our business and business must be profitable. Do not rush to close the deal. Don't worry, give them a fair statement by saying, you want to finalize all potential tenant first. Give a time line to finalize who you choose. At the end of selection, notify the rest of interested tenant with nice comfort word, so that you are not burning the bridge with them. Who knows they will be your tenant in your next property..

Forth, after you choosed your tenant, now it is time to get the deposit. Normally, the deposit consisted of 2 months rental deposit + first month rental. Then, request for utilities deposit as well, normally a month rental. The deposit will make you sleep in sound, in case there will be any delay in future monthly payment along the way and when the contract ends, should be any outstanding utilities amount, could be settle using the deposit.. And hey, the deposit will be good enough for you to start thinking to find another quality property.. :)

Fifth, legal side.. You may want to make it as formal agreement with adviced from appointed lawyer, and make an agreement to be stamped as well. This is good as if there is any breach of contract, you are protected by law. Get a lawyer won't cost you a bomb. It could be as low as couple of hundreds ringgit only depending on your property type and rental. Some more, make it look like a professional dealing.. :) Remember, renting a property is a serious business.. ;-)

Mortgage Refinancing ~ Buying Additional Property

Buying a house is not to be a sole shelter anymore. It could be one of wise investment opportunities.. How about this.. Say 5 years ago someone bought a property at RM152k and now its value jumped to RM210k.. 5 years back, interest rate at 7% (6.75%+0.25%). 30 years 90% loan had cost him an installment of ~RM1k per month. Now many banks offered very good rate, for instance BLR minus up to 1.85%.. If he refinance the property with flexible home loan with an option of free moving cost (FMC), and he gets 90% loan of RM210k house value, his installment will be at ~RM900 a month. And he will get roughly RM60-70k nett considering his full settlement with previous bank at RM130k-140k. That is a handsome sum.. Forget about he will prolong his house repayment period at the flip side.. That is why he should look for flexible loan which will enable him to make pre-payment at any time.. Definitely his income will be increase in future. If he maintained his lifestyle or increase it by a lil bit only, he could channel all his salary increment into the home equity and lessen its repayment period.. Brilliant strategy rite..? Now, what he can do next..???? Precisely...., buying the next property... Say, buying a condo or service apartment in good location, he will need at most RM15-20k as a down payment.. And he still have a balance of RM40-50k which he could spare it as an additional fund to repay the new housing loan at least for 3-4 years... Again, his income will increase in conjunction of first 5 years... So, he should not worry of being unable to pay the installment... And that second property will increase in value in the next 5 years off course for another refinancing exercise.. :) Indeed, he can rent it out as well.. If fully furnished condo/ service apartment at prime location, someone will be able to rent it out up to 2k a month.. See, he is making money out of it...