Today we have another reader, David who would like to share his experience managing his personal finance. He believes that financial management skills is critical in one’s life however, many fail to understand how to manage their finances. We would like to thank David for sharing his experience in managing his finances and investments. We also welcome other readers who are willing to share theirs in our blog.
Read on to learn more from David’s story:
I’m a 32 years old businessman divorcee with no kid. I’m earning a fix salary of RM8k per month running a multi million turnover company as a Director selling heavy construction equipment. I have a degree in bachelor of Law from a renowned university in England.
My investment plan
My investment plan consist of 2 parts namely the defensive measures and the offensive measures. Defensive measures comprises of investment which I deem safer or lower risk but yielding lower return i.e. mutual trust and insurance. Offensive measures comprises of investment with medium risk yielding higher return i.e. property.
My first goal in life is to achieve RM20K passive income excluding my fix salary. My ultimate goal in life would be to achieve financial freedom, time freedom and geographically freedom. Geographically freedom refers to the freedom to be in 1 place at any given time. Say today i’m in Malaysia and tomorrow i wish to be in Japan, and i can do that. With regards, to financial freedom, i believe many already achieve this including my father. However, not many can achieve financially freedom and time freedom simultaneously. Certainly even fewer can achieve all three together.
I think life is very short. I don’t want to live by surviving instead I wish to live the life.
My investment Journey
I was already passionate about earning money especially property since my teenage years. I did a few small businesses during my university years but nothing interesting to mention about. So after I graduated from university at the age of 23, I started surveying a few properties around Mont Kiara, whereby was one of the ‘happening’ places to live according to my friends in my social circle.
I went to many show houses, asking about the price, location, investment opportunity etc etc. At that time, property price was only RM 500 per square feet for a high end condo and was considered severely overprice. Anyway I did not buy any of them due to the fact that i was scared, illiterate on the world of investment and stupidly listening to those scary stories about economy crisis.
Capital was of course another concern, but considering the fact that i came from a well to do family, and also an incident where my father was ready to dump in RM 200K for me to learn how to invest in stock market, in which i did not accept, I believe my parents will support me should i decide to do investment. Ultimately fear was my number 1 reason that did not get me started then.
So I was hesitating to start investment for a few years. Only to carry on researching and reading about how successful people hit their jackpot and thinking I’m not gonna be that lucky. At the age of 28 years old, I finally made up my mind to buy a property, any property. So I called up one of my Uni-mate who’s working as a property agent. He immediately say that he has 1 unit perfect for my investment.
I made an appointment with him 2 days later and confirmed on the spot. The whole process from making a decision to paying my deposit happened in less than 3 days. So, yes I would say this is an impulsive buy. However I did not regret my decision. I always feel that failure teaches you more than success. I was prepared to lose but I wasn’t afraid.
It was The Wharf Residence at Puchong. This property was under DIBS. Selling price was RM 280K for 818 sq ft. When I bought the property I was considered lucky because I got the unit from a person whom her loan has been rejected. It was a nice unit facing swimming pool. She got it under early bird promotion with some discount.
So I bought it at RM 270K. I paid RM10K deposit and waited 3 years for completion without having any need to pay anything further. My initial planning was that this unit to be sold at RM100K profit after 3 years. Since lock in period is 3 years. After purchasing this property, I learned a lot about other stuff such as the existence of RPGT, different types of loan whether flexi-loan or non flexi-loan, MRTA insurance etc.
This is where I got excited and my next plan was to be a flipper. Buy a property, wait 3 years, get a profit of RM100K each time I flip. When i successfully accumulated enough wealth, I will do it more frequent which is once a year or more.
After 3 years, things got a little bit different now as I get more ambitious. I recently got the vacant possession in May 2015. Everything was as planned, my property was worth RM 400K bank valuation now. I could have sold it and get what I initially wanted which is the RM 100K profit. However, as i get more confident, my plan changed.
My second property
Last year, I have acquired another property which is the EcoSky at Jalan Kuching for investment purposes as well. I bought it at RM 600K for 904 sq ft. For this property, I paid RM 25K as deposit and furnish interest every month because DIBS no longer exist anymore. I withdraw RM50K from my personal EPF for the purpose of paying deposit for this unit as well as renovating my Puchong unit. Yes, I know, my initial plan was to sell my Puchong unit but as i said, i got greedy. I figured selling it now will not fetch me a decent price as compared to selling it 2 years later. Besides, I can save 30% RPGT if I sell it 2 years later.
I started investing in Public Mutual Trust in 2012 which I think is a good interest paying investment. Comparing Mutual Trust and property, if i buy a RM500K property, I don’t think I can rent it at RM5K a month. But in Mutual Trust, I can get around 12% – 15% interest a year.
Meaning If I put RM500K in mutual trust, I can earn RM5K a month on interest. But of course in property, you earn the appreciation as well as the rental. So arguably, property is still a better investment. Besides, in property, we use bank’s money to invest whereas in Mutual Trust, we have to use our own money to invest.
My coming strategy
So right now, this is my plan. First, I am going to renovate my Puchong property and rent it out at RM 1500 which will be sufficient to cover my installment at RM1163 plus my maintenance at RM 164. After 2 years, I will sell this property at RM550K, hopefully, thereby earning me around RM200K more or less. Then I’m going to simultaneously purchase 2 more property for rental purposes.
So my initial RM200K will be use as the deposit and down payment. This will be around the same time EcoSky, which is my second property, completed. I will not buy anymore new or uncompleted project, instead I will focus on completed projects where they need to satisfy at least these 2 criteria, namely, rental can exceed my installment or at least break-even and property is under valued according to bank valuation.
For every property that I bought, I will sell it around 5 years later and for every property that i sold, I will use the earnings as down payment to purchase 3 more properties. So in another words, I will triple my net worth every 5 years. I think it is unwise to keep a property for too long because i believe older property will appreciate slower.
One may ask, how are you going to get loan from a bank for so many properties? Of course, if i have a tenancy agreement secured for all my properties, i believe getting a loan from bank will not be a problem. That is why i will choose to purchase completed projects with rental exceeding installment.
Reaching my goal
So as i said, my initial target is to achieve RM 20K passive income every month. If my plan works, I may be able to achieve this in less than 10 years. I believe RM20K is enough to cover all my expenses as well as my family expenses for a month. So in another words, I only need around RM 2 million in my Mutual Trust or my accumulated rental income exceeds RM20K, whichever comes first. I believe the formal is easier to achieve.
What if everything come true, what will be my next move?
Well, i have not really thought about this yet to be honest, however, there are quite a few things that I may do if I am blessed enough to achieve my target. Contrary to popular thinking, I will not strive to earn more or continue my investment plan because i think that nothing will ever be enough. If I go on and on earning money, I will not be living my life. I will of course enjoy my life together with my families going vacation every month.
Other than this, I also wish to continue my legacy. Something people will remember me after I died. So maybe I will set up a charity trust fund under my name with initial capital of 2 million or whatever i can afford after I sold some of my properties. This trust fund will benefit only Chinese independent school.
I believe education is very important especially in a country whereby a government doesn’t support vernacular school. Instead of donating a large sum of money, I hope through this trust, I can continue to do charity forever and even after my death.
There’s also 1 thing which I would really wish to do if i’m afforded the luxury. I feel that, being born in a rich family, I often get discriminated in a way and I believe I may not be the only 1. People always assume that the fact that you come from a rich family, you do not know how to earn money, you have never suffered poverty, or you will always be overshadowed by your fathers achievement.
No matter how successful you have become, people will always attribute your success to your capable father instead of you. Hence if i am able to, I wish to set up an institution catered for “rich man’s son” to teach them how to properly manage your finance, I believe this is a very important subject for our generation.
Many knows that money is important, but not many are exposed to financial management skills and even more thought they know how to manage their finance but they don’t. If I am able to create a generation armed with ample financial knowledge, Malaysia will not be as poor as we are right now. Anyway that is just a dream.