It has been done over and over – making money out of property investment, but it is not without its share of peril.

It has been done over and over – making money out of property investment, but it is not without its share of peril. At recent Property Convention, four proeprty millionaires shared their journey towards financial freedom. The convention was organised by Paysolution Technologies Sdn Bhd. The company’s founder, Michael Tan, 34, channeled positive energy and vibes through a “motivational” approach by eliciting “I” from his questions. “Who wants to be a property millionaire?” and the crowd goes “I”. “Do you want to be financially free in five years?” And the crowd hollers, “I”. You get the picture.

The convention was also interspersed with stretching exercises and participants giving one another high fives. Additionally, each participant was given an egg to take care off. So right off the bat, it was an eye-opener for many participants.

Tan’s financial advice
Tan has been involved in property investment for approximately four years, with wealth accumulation of more than RM2.28 million. Through his mortgage broking firm, he has taught more than 220 students within 8 months and has helped them purchase properties worth more than RM8.07million.

He also advised all to find out how much one can borrow, to find out how much one is worth. “If you currently have rentals, then your income (level) goes up. For example, if your monthly pay is RM10,000 and rental income is RM2,000, the amount that the bank will calculate is based on RM12,000. Therefore the (borrowing) limit goes up,” Tan explains. 

 Tan also provided a few formulas. One included determining one’s Finish Line, which translates to determining how much you need to have in order to retire within your limits. Not surprising, all 150 participants’ figure ran up to the millions.

“Last time, to be a millionaire is a privilege. Now, it is becoming a necessity due to money inflation,” he explains. 

Tan’s formula – calculate your required Pension Fund
 Pension Fund (PF) is the amount you need when you arrive at your desired retirement age, in order to receive your Desired Monthly Income (passive income).

DI (Desired Income)  =  Ideal passive income monthly

CA (Current Age)  =  Current age, rounded down to closest 5 years (e.g. 48 becomes 45)

RA (Retirement Age)  =  Ideal retirement age, rounded up to 5 years (e.g. 48 becomes 50)

POA (Passing On Age)  =  Age of passing, rounded up to 5 years (e.g. 81 becomes 85)
 

PF  =  DI  x  (POA-RA)  x  12 months
For example:
PF = RM10,000 x (75 – 45) x 12 months
= RM3,600,00

Which means, I would need to have RM3,600,000 in savings, so that I can retire by 45 years old and enjoy a passive income of RM10,000 per month (assuming that I pass on at age 75)!

Chin’s investment strategies
One of Tan’s convention co-sharer, Juanita Chin, 39, became a property millionaire in less than five years. She currently owns RM5.6million worth of properties comprising resort condos, shop offices and office suites. She cautioned would-be-investors to be rational and not emotional. It is all about money and sense.

  All her properties are in Penang and her first property was with a low downpayment of RM5,000. The property was in Gurney Drive. Chin said, “It was a balance unit. On the 4th floor. Facing a graveyard. Leasehold.” After the chatter of amazement eased, she added that she did research and discovered that Japanese community favoured living in the area and preferred the lower floors. The first unit was rented out and fetched a positive cash flow of RM400. She has since purchased two more units and is getting a total of RM3,000 in rental from the three units.

 Some of the strategies that she employs include: 
• Knowledge – the more you know, the less mistakes
• Leverage on assets – refinance properties for extra capital to reinvest
• Joint-loans with family members
• Know your banker
• Look out for discounts and early bird specials from developers
• Find a group of people and negotiate for a “bulk” discount

Yee’s practical approach
Dr Peter Yee, a guest speaker at the convention, has benefited many times from property auctions. So far, he has purchased 14 properties, including terraced houses, bungalows and shop offices. Rental income and the sale of six properties have earned him profits of more than RM1million.

His straightforward candour and funny anecdotes during his sharing session were more than well received. He is perceived to be like a family’s funny uncle. His area of expertise is in the auction and secondary markets. He mentioned that he has paid tens of thousands in “tuition fee” – monies lost from bad purchases. As the years progressed, he stopped paying tuition fee, but instead made a tidy sum.

He also shared that it is important to know what’s going on. “See this shoplot. Beside the two lots owned by the same person. The owner of the two lots beside mine, did not know the next lot was going to be auctioned. I bought it and then the owner purchased it from me. I like people like this. Busy, hardworking people who don’t know what’s going on,” he said cheekily.

Yee also added that it is important to know an area well and adopt a wait-and-see approach. Look out for signboards at properties. If the owners are desperate, the prices will drop in time. Or if a piece of land is priced at a low value, due to the owner’s mistake, then it is to Yee’s benefit. 

Doshi’s principles
Milan Doshi, a Singaporean residing in Malaysia and the convention’s second guest speaker, has been involved in investment property for more than 10 years. Currently, he has 19 properties, with one in Singapore. The loans amount to RM11million, with a positive cash flow of RM15,000 to RM20,000 per month.

“When I started working, my friends were driving second-hand cars. Two to three years later, they were driving new cars and I was still taking the bus and LRT. I knew something was not right,” Doshi shared.

“My first job was as a commodity trader. My boss told me that the sooner I learn that the four years in university is nothing but rubbish, the earlier you become useful to me,” he continued. It was years later that he found out what his boss meant because everything he learnt was theory, not real-world practical learning.

When he began investing in units in HDB flats in Singapore, he was doing well, until one friend told him to buy the most expensive property that he cannot afford. It made sense at the time, because the more the asset appreciates, the bigger the gain. But alas, as values can increase, it can also nosedive.

He has since moved on and has made many good purchases. To date, he has more than a handful of shoplots at Berjaya Times Square. Some of these lots are lesser than 1,000sq ft and were purchased for a price tag of more than RM1million each.

The six principles that he strongly advocates are:
• Learn as much as you can –  from sales people, the market, entrepreneurs, experts
• Network – it’s who you know
• Earn as much as you can, as fast as you can
• Savings – invest in yourself e.g. save RM200 and spend RM200 on books, etc.
• Borrow – as much as you can and invest to gain returns that are more than interest rates 
• Invest wisely, as much as you can

The egg
Back to the egg. What was it all about? It was to represent a loved one and the reason one is striving financial independence for. In short, be grounded and remember loved ones and those in need even when one joins the millionaire club.

My point of view… Learn is a process and I fully agreed that “applied knowledge is POWER”!!! I know a lot of property investor invest a lot in learning the basic of investing. But at the end of the day it seem like they still repeating their mistake and the worst it do not really helps in growing their wealth. Beside wasting time and money, they will also feel frustrated and at the end of the day they might give up. As a beginner of property investor you have to learn the basic that is Save, Save and Save your monthly income and lives below your means to raise your investment capitals then start investing in smaller properties ie BELOW RM100K. Your guts eventually will be developed to digest bigger investment when you are ready. When the number grows, I believe your road to financial freedom are clearer…

Happy Investing

You cannot Grow Land..CK Wong & MY DAD

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Tagged as: capital appreciation, Financial Freedom, Leverage on Asset, Live below your means, Property Millionaire's, Rental Income, Secret