Jun 10
5
Property Cashflow 101
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New Straits Times – Interview The Experts
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PROPERTY INVESTMENT is still regarded an “evergreen business" by many due to its stable and profitable returns. Once you own a property, you can always capitalise it in many ways from renting to selling it for a profit. Another factor is there are pockets of opportunities everywhere all the time, if you look carefully for proeprty bargains and follow your action plan. Real estate investor Yvonne Chong from Kuala Lumpur believes that anyone can get rich in real state business with the right knowledge and action. She said: “Once you find a good property, it is like a cash machine which helps you earn money through rental income or by selling |
"To some, being in the property game is a strategy for wealth accumulation and to gain financial freedom," she added.
Yvonne Chong said there are two key benefits to property investment. First is leverage. “For example when buying a RM100,000 property with 90% loan, it requires only RM10,000 down payment. However when the property price appreciates by 10%, ie. RM110,000, you get back your down payment in equity or cash,
“Secondly, banking products which comes with flexi loan and overdraft facility which generates liquidity for your real estate investment," she said.
Yvonne Chong who was previously a sales manager with big companies like 3M, Kellogg’s, F&N, Seasons, 100 Plus, Coca-Cola, Jacob’s, Chipsmore, Twisties, encourages everyone to start investing in real estate, as she too was once a wage earner before venturing into it full time.
“Although one may think the property game is only for the rich as it involves a sizeable amount of money for investment, anybody can do well in this business," she said, adding even her children are involved in the real estate business, and are generating passive income.
“Besides being financially free, being in the real estate business gives me the opportunity to help others by providing them knowledge on how to run a profitable business, create jobs and contribute to the society.”
Yvonne Chong will be conducting her first property investment seminar Fast Track Your First Million in Real Estate Investment, in Petaling Jaya on June 19. In this Q&A we interview Yvonne Chong to find out what are the tools of the trade, and her game plan on how to succeed in the real estate business.
Q: What preparations must you do before getting into the real estate business?
Yvonne Chong: You would need some money, lots of property viewings, continuous learning, sharing, and networking; but most importantly is having the right mind set. You must know your exit strategy for each investment property before putting your money down. Always buy what the market wants! Learn the numbers. Understand the supply and demand curve according to the location and type of property. My advice is to start moderately according to your capability. When you make a profit, it will challenge you to put in more effort and enhance your financial intelligence.
Q: What kind of property do you look for as an investor?
Yvonne Chong: Generally I will choose a property which fits the checklist of my current purchase goals like: high capital appreciation, positive cash flow, type of property and good location (gated and guarded, landed residential property, or commercially vibrant with many shops).
Good rental properties are those which generate positive cash flow, are easy to rent out (in less than a month). When buying properties for capital appreciation, I act fast when I see a property having at least 2 rounds of capital appreciation at the point of purchase. For example, in 2007 I bought a Setia Eco Park bungalow with the intention of selling it upon vacant possession. However upon completion 16 months later, the property appreciated in value due to its timely completion and high quality finishing, and it increased in value again when an international school opened 3kms away.
Q: Where do you look for good property bargains?
Yvonne Chong: The Classifieds section of the newspaper is a good place to start, as you can find serious sellers, buyers and real estate negotiators in the Classifieds. As they invest money to market their properties, the transactions usually happen faster and smoother. You can also visit property auctions, but before you proceed, do perform a reality and legal checks. It is good to bid for yourself. Also set the ceiling price before buying the banker’s cheque.
For properties still under construction, I go for reputable developers with solid financial ratings with bankers. My definition of reputable developers are those whom I have profited from their previous projects, with at least 30% capital appreciation upon timely completion. I will also go for properties recommended by my investor friends.
Q: How do you avoid the mistake of buying the wrong property?
Yvonne Chong: Do not buy and sell due to peer pressure, or when emotionally challenged by others, and avoid over gearing. You must also have emergency funds. Be diligent and be responsible for your own decisions. For example, I keep a file for each property I buy and update it from time to time with the development in the surrounding area. I also write my reasons for buying the property and exit strategy. By keeping a record, will help me increase my knowledge and sharpen my property buying skills.
Q: Where do you get funding for properties you buy?
Yvonne Chong: You can get funding from soft and hard loans. For example: your own savings, refinance, cash out, partnership, housing loan, credit cards, over draft, etc. To get loan speedily, it is important to keep an excellent CCRIS record (bank repayment records). Also build a good relationship with experienced and service oriented bankers and find ways to increase your income.
Q: What do you mean buy and wait, and not wait and buy?
Yvonne Chong: This refers to buying real estate with higher returns of investment. We should buy, add value to the property, rent it out to enjoy the immediate cash flow and wait for the equity to grow while we sleep. A good investment strategy applies in both good and bad times. In fact, if you are cash rich, bad times is a boom time for you.
Q: What is the title of your upcoming workshop and what can participants learn?
Yvonne Chong: The workshop is called Fast Track Your First Million in Real Estate Investment, and will be held on Saturday (June 19) in Petaling Jaya. In the workshop I want to help willing individuals to benefit from my proven system and achieve financial freedom. My metaphor for success in this business is like a racing car game. The best drivers win by improving their score on each lap, over and over again. My workshop provides the proven system to help you get started in the race, until you eventually make your 1st million in real estate. Unlike racing, in real estate business we can all win!
Posted in Property Investment by .
Let’s look at investment from a different angle.
Assuming you bought $10,000 worth of stocks, would you be able to increase your stocks’ investment value by improving the company and it’s profitability? I bet you couldn’t. Even if you can, it won’t be that easy to accomplish.
Alternatively, a $10,000 investment on a property is different. Since where are they properties sold at $10,000 nowadays? Get a 90% bank loan and you can afford a $100,000 property! Also, do not forget that there are properties that are below market price or also known as wholesale price. Imagine if you could find a property costing $100,000 and $10,000 below market price. You’ve already earned $10,000 the moment you buy that property.
Of course, you’re not gonna let that be your only profit. How to further increase your property value? Easy, you decorate it. Adding carpet or tiles and a high quality paintwork to your property or just cleaning it can bring surprising results.
A tastefully done renovation will further boost to the property value. This has been personally experienced. The $110,000 property could transform into a $125,000 to $130,000 with just the tiniest of efforts.
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What am i trying to say? Property, go for it. Stocks, only invest when you’ve got extra money. Having a sound and steady property with passive income beats stocks anytime. Best of all, banks are our stepping stone to achieve all this.
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May 10
16
Leverage Below Market Value
Buy Below Market Value (easier said than done?)
As we mentioned previously, if you purchase $10,000 stocks, you own exactly $10,000 worth of stocks (clear cut point). If you purchase $10,000 Property using the leverage of 90% housing loan, you own $100,000 worth of Property right?
Well, above property is purchased on “retail price”, so call market price. What if you purchase a $100,000 property that happened to be worth $110,000 the day you bought it? Does it happen? The answer is absolutely! You just have to know where to find them!
Is it Great? You have just added $10,000 to your asset column in the form of equity.
Remember, you make money in Property when you buy, not only when you sell.
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Arts of Leveraging For most individual, we have at least one lifetime experience to get a loan from Banks to buy First property (on top of First car, of course). Very rare that one would get a loan to buy stocks. In this reporting season, most Malaysia's Banks reporting impressive loan growth, mainly attributed to growing consumers' loan. All Banks are aggressively promoting their attractive housing loan packages to customers, especially those with good credit rating. Why is that so? It has to do with risk management. The fact that banks want to loan you money to buy Property creates a situation which we will call LEVERAGE. Let's assume that you have $10,000 to put into some type of investment. If you choose to buy $10,000 worth of stocks, you will own exactly $10,000 worth of stocks. However, suppose you choose to invest that $10,000 into Investment Property using an 90% margin financing, you will own $100,000 worth of Property. If both of these investments were to appreciate by 10% (which is a realistic assumption), the gain would in such:
- actual gain on stocks investment would be $1,000 (10% on $10,000 stocks investment); compared to
- actual gain on property investment would be RM10,000 (10% on $100,000 property value)
With same up-front investment, one have achieved 10% returns on stock investment versus 100% returns on property investment. Above simple comparison revealed that property investment gives 10X better returns than stock investment. However, some may argue if taking into consideration of time factor, stocks may perform better than property investment. It is known facts that stocks' prices are volatile in nature, none can guaranteed a 10% returns on stocks. In contrast, prices for property in prime location has one one-way, is to go up! Wow! That's what we call leveraging!
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