Four Deadly Mistakes Every Successful Property Investor Should Avoid
This is another guest post by Mr.Joseph Tan, Owner of a Computer Shop in Plaza Low Yat, Kuala Lumpur and an avid Property Investor.
Even though Property Investing seems like an easy way to achieve Financial Freedom there are things you need to learn about the Property market to avoid making financially painful mistakes.
In the early 1990s when time was good, I was crazy chasing for properties to buy.
I was in a mad frenzy to acquire properties because I had some surplus cash and heard that buying properties was one of the best way to beat inflations.
I have always heard the famous slogan, Just Do It and so, I just did it.
I went to buy properties without much thought or knowledge.
I was lucky with the first property because as soon as the property was handled over to me, I got a tenant for it and it was generating positive cash flow. Later I sold it for a hefty profit. 😀
However, I wasn’t so lucky with my 4th property.
I bought a shop lot in a shopping complex in Ampang Mewah in 1990. The property was real cheap and I thought it was a steal.
Little did I know that it was one of the worse decision I have ever made in my life.
Twenty years have pass and my shop lot is still vacant. Worst of all I can’t sell it although I had fully paid for my property.
The total amount of interest I had paid for the property is more than doubled the cost of my purchase price.
Well it has been a hard learning experience for me and I would like to share this experience with you so that you do not make the same fatal mistakes like me.
So, what were the real mistakes I had made?
I have classified the mistakes to avoid as follows:
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1. Buying from an Unknown Developer.
I feel that one of the most important thing you must consider when buying a property is to choose a developer with a proven track record.
New developer without any track records could be give you a nightmare.
2. Buying because the Plan and Sales Brochures look Impressive
Do not buy a property just because the property looks good on paper.
It could turn out to be a real disaster when it is completed.
What is shown on paper could be very different from when it is actually completed.
3. Buying in a complex which is 100% sold out to the public
Never buy a shop in a complex that is fully sold out to the public because then the developer has got no interest to promote or upkeep the complex.
4. Buying in a bad location
On of the worst thing about buying the property is choosing the wrong locations.
Without a good location, you are going to find it very difficult to get a tenant. The saying about choosing a properties is location!, location! location!
Therefore do a through survey of the surrounding area before you choose to invest in the property.
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Panel discussion entitled: Property investment strategy in a recession with hyper inflation where should you put your money?
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My conclusion is that you have to be real prudent about your property investment or you might end up a lot poorer.
Worst still, you could end up with a huge burden and lots of frustrations.
The best advise I can give you is do your due diligence before you commit to your investment.
Get plenty of advice from the experience property investors.
It could save you a lot of money and headache.
About The Author:
Joseph Tan is the owner of IT Megamall Sdn Bhd at Lot 2.36 2nd Flr, Plaza Low Yat, Kuala Lumpur.
If you need to Repair your laptop or get a branded laptop bag like AGVA, Cadogan, Case Logic, CAT, Datalite, Echolac, Etc Ware, Golla, Idealstyle, Loius Mountain, Summer Active, Targus, VZ-Tech, X-Case, X-Style, feel free to visit us at the above address.
Malaysia Real Estate Investment Talk (in Mandarin):
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[…] Four Deadly Mistakes Every Successful Property Investor Should Avoid […]
nice sharing! I have commended in my blog that most property investors actually face similar experiences after some time …
Property perking up
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Affordability of residential properties at its all-time best
PETALING JAYA: The local property market is in for a brighter prospect this year as the economy is forecast to return to growth while prices are now at affordable levels.
A recent CIMB Research report said that due to moderate price appreciation, rising income and record low interest rates, affordability of residential properties in Malaysia was at its all-time best.
It said that for this year, developers such as E&O Property Development Bhd (E&O Prop) would focus on its maiden condominium venture at Seri Tanjung Pinang, Penang.
“The RM1.8bil project will kick off with the official launch of the first block this month, which includes an aggressive awareness campaign,” it said.
E&O Prop would also work towards the launch of a new condo in Kuala Lumpur as its St Mary Residence project had already reached a critical milestone, with a combined take-up of 60% for the two blocks, it said.
“For SP Setia Bhd, the group is targeting to sell a minimum RM1.6bil worth of properties in FY09/FY10.
“It will continue to focus on its core competency of township development but at the same time, lay foundations for a big improvement in profits over the longer term from two fronts – commercial-type properties in the Klang Valley and overseas contribution from Vietnam and China,” it said.
The research house said that a year ago, most developers’ strategies were to hold off on new launches, consolidate their business activities and change the product mix to weather the storm.
“Now, most developers appear optimistic about longer-term prospects and are willing to take on more risks,” it said.
DTZ Nawawi Tie Leung Property Consultants Sdn Bhd deputy managing director Adzman Shah Mohd Ariffin said new residential launches in the Klang Valley this year would focus on mainly high-end properties in well-established locations.
These are the KL City Centre/Golden Triangle, Jalan Tun Razak corridor, Mont’ Kiara/Sri Hartamas and Mid Valley/Seputeh.
He said landed properties would still be sought after as land became scarce in and around KL city and increasing preference for low-density boutique developments.
“Features such as better security, individual pools, greeneries, panoramic views and aesthetic designs will continue to be incorporated in the developments.
“Prices will continue to be tested at increasingly higher levels but will largely depend on the positioning of the products and the performance of the first phase launched in the last three months,” Adzman told StarBiz in an e-mail reply.
He added that innovative packages such as stretched instalment periods and low downpayment offered by developers, coupled with attractive rates offered by financial institutions, would continue to spur buying.
“As long as the base lending rate stays at its current level, the market is expected to remain active albeit at a slower rate unless the economic recovery is expedited,” he said.
He added that the Government’s recent review of the real property gains tax would also help the secondary and sub-sale market.
Glomac Bhd said the company would launch new phases at its township this year but didn’t give details on when they would take place.
A spokesman said the new phases would be at Bandar Saujana Utama, Saujana Rawang and Sri Saujana (Johor Baru).
Gamuda Land Sdn Bhd told StarBiz that it would, at end-February, launch its second gated-and-guarded precinct, Ambang Botanic 2, at Bandar Botanic in Klang.
A company spokesman, in an e-mail reply, said the new project following its earlier Ambang Botanic 1 was prompted by the increasing demand for gated-and-guarded living.
fr:biz.thestar.com.my/news/story.asp?file=/2010/1/11/business/5416548&sec=business
Gradual interest rate rise seen
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Benchmark interest rates are set to gradually rise by 25 to 75 basis points before year-end after Bank Negara signalled its readiness to normalise interest rates in due course as a pre-emptive move to prevent the build-up of financial imbalances, say economists.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng said although the overnight policy rate (OPR) was maintained on Tuesday, the central bank had signalled its discomfort over holding interest rate too low and for a long period of time.
“As exemplified by the US subprime mortgage and housing market crisis, which some analysts attributed to overly low interest rates being stayed too long, loose monetary policies inevitably spawn overleveraging, excessive risk-taking and asset bubbles,” he told StarBiz yesterday.
At 2% currently, the OPR was lower than the average 2.5% to 2.8% seen in the year following the country’s most severe recession in 1998, he said.
“Depositors and savers are currently bearing the brunt of a low interest rate environment, which is aimed at spurring domestic demand,” he added.
With headline inflation or consumer price index turning positive in December, Yeah expected the upward adjustment to take place in the first quarter of this year, but the quantum would likely be gradual given that domestic demand was not expected to accelerate strongly as global economic recovery, especially growth in the advanced economies, remained sub-par and tentative.
“We expect a 25-basis point adjustment to bring the interest rate level to a more ‘normal’ level which we define as one that remains low and supportive of domestic financing and other economic activities,” he said.
However, he noted that the case for a 50-basis point hike was less compelling unless both domestic and external demand surged in the coming months.
“Nonetheless, a 50-basis point adjustment cannot be ruled out as a front-loaded measure to normalise the interest rate for the rest of the year,” he added.
Meanwhile, Malaysian Rating Corp Bhd chief economist Zahidi Alias noted that it was imperative that the quantum of any OPR hike take into consideration the growth of the economy relative to its potential output.
“One must bear in mind that at this juncture, policymakers might not be aggressive in hiking rates to ensure that the economy continues to pick up pace, and households do not become unduly burdened by heightened debt-repayment amounts,” he told StarBiz.
Nevertheless, if the economy persistently expanded more than its potential rate which the International Monetary Fund estimated to be around 4.25%, interest rate hikes were likely to happen to prevent the economy from overheating, Zahidi added.
Maybank Investment Bank Bhd (Maybank IB) chief economist Suhaimi Illias said in a note Maybank IB was prompted to revise its OPR forecast to a 50 to 75-basis point hike compared with no change previously following Bank Negara’s latest indication.
“Still, the expected magnitude of increase in OPR this year is less than the 150-basis point cuts between November 2008 and February 2009. This should still keep the monetary policy stance accommodative to spur private sector demand (consumer and business spending) as the Government aims to trim its deficit spending, hence public sector demand, in the medium term starting next year, to RM40.5bil (5.6% of GDP) from RM51.1bil (7.4% of GDP) last year, and eventually to -3% of GDP by 2015,” he said.
Meanwhile, Kenanga Research said although the sudden change in the central bank’s tone would likely be interpreted as a signal that it may soon raise rates, the research house believed that it generally reflected Bank Negara’s genuine concern and way of managing market expectations.
“The current unsettling global financial environment as well as the modest recovery trend outweighs any inflationary concern or unchecked asset bubble at the moment. Hence, we expect the OPR to be raised incrementally from mid-2010, from 25 to 50 basis points to 2.5% by year-end,” it said.
OSK Research in a latest update concurred that Bank Negara would hold interest rates steady till June in its efforts to boost liquidity as the Malaysian economy was still finding its footing with third quarter GDP still contracting at 1.2% and unemployment coming in at 3.6%.
“However, we do not discount a potential hike in interest rate in the second half of 2010 as the economy gains traction and inflation exerts its influence.
“Even if there is a hike, we believe it would be on a gradual basis, for example by 25 basis points per policy meeting, to ensure the sustainability of economic recovery,” it added.
CIMB Research also expects interest rates to be raised at a measured pace, and possibly sooner than expected in the first half of the year.
It has revised its OPR target for the year to 2.5% from 2% for 2010.
“As this will still be lower than the historical OPR since 2004, the rate move will not have a significant impact on demand,” it said.
fr:biz.thestar.com.my/news/story.asp?file=/2010/1/29/business/5571049&sec=business
We are ‘normalising’ interest rates, says Zeti
KUALA LUMPUR: Bank Negara’s move to potentially raise interest rates in the near future should be viewed as a “normalisation” process, rather than an act of “tightening” monetary policy, said governor Tan Sri Dr Zeti Akhtar Aziz.
She emphasised the need for the markets to make a distinction between normalisation and tightening, pointing out that the significant reductions in interest rates implemented by the central bank last year were just an emergency position that the country had to take to avoid a fundamental recession.
“We need to look towards the normalisation of interest rates at some point. It should not be seen as tightening,” Zeti told reporters yesterday after a public lecture by Dr Abbas Mirakhor, the first holder of the International Centre for Education in Islamic Finance Chair.
Zeti voiced her concern that if interest rates were kept too low for too long, people would turn away from the conventional banking system in search of other instruments to enhance their returns on savings, and that could possibly involve them taking excessive risks without realising it.
“That could create a problem later on.
“We don’t want to wait for something to happen and then only take action,” she added, while pointing out that there was no sign of asset bubble forming or excessive leverage by consumers in the country yet.
“Borrowings of households are still at prudent levels,” she said.
On Tuesday, Bank Negara kept its overnight policy rate unchanged at a record low of 2%, but indicated that it could not keep the rate too low for a prolonged period as the local economy strengthened, otherwise, there would be a build-up of financial imbalances in the system.
The markets took that statement as a hint that the central bank would raise interest rates sooner than expected.
According to Zeti, the central bank could not tell when it would raise interest rates and by how much, but she said the monetary policy committee would continue to assess the prevailing economic trends to decide on the right quantum and timing to do so.
The next meeting of the monetary policy committee at Bank Negara is scheduled for early March.
“Anyhow, our stance is still to remain accommodative to support growth, especially in an environment where inflation is going to remain modest,” Zeti said.
The Government has targeted to hit a 5% gross domestic product growth this year, although the official forecast is for between 2% and 3% growth this year.
fr:biz.thestar.com.my/news/story.asp?file=/2010/1/30/business/5577992&sec=business