Faizul Ridzuan is so generous when it comes to share his knowledge on property investment. During the webinar I hosted not long ago, he shared with us some tactics and strategies applicable for newbies investors. Watch this video for his sharing:
From Faizul Ridzuan:
Investing is about putting fundamentals in place. The first one is establishing long-term objectives. For example, I started investing because I wanted to buy time. My goal was to keep my cash flow greater than RM8,000 per month so that I’ll be able to retire from work.
So, if you’re buying a condo for your kid’s university fund, then you’ll have a different perspective and a different approach in your investment because you didn’t buy it for speculating purposes. You bought this RM300,000 condo over twenty years so that when your kid is ready, you can sell off the condo, and you can use the money to fund his education, a good education overseas. So, that’s very different.
Second is that that you need to understand your own Risk Appetite and which Property Class best suits your Objective and Risk. This is crucial. I’ve seen a lot of people giving out wrong advice. They would talk to fresh graduates or people with RM3,000 salary/RM4,000 salary, and tell them to go buy shoplot which I don’t think is the right thing to do. When the students say, “I can’t afford a $1 million shoplot,” they say, “It is okay; you can pool with a few strangers, share and buy.”
I think these are basically very harmful advice. These are very, very wrong advice because these strategies only work in a bull market. In a bull market, everybody makes money, even the banks. The problem is that the fresh graduates or people with RM3,000- RM4,000 salary are being put up as pigs which are going to get slaughtered.
That’s why we need to understand own risk appetite. I think that if you are Chinese you have heard of the saying: “If you don’t have a big head, don’t wear a big hat.” It’s very similar. If you’re starting out small – a fresh grad, RM3,000 – RM4,000 salary – don’t buy anything above RM200,000-300,000. Go slow. Understand the game before you put a lot of investments into it.
Third is putting a plan into action. Let’s say, I want to build a 1 Million portfolio for my kids’ education. Before you buy or sell a property, ask yourself the Golden Question: How does buying this property help me achieve my objective of reaching or building a $1 Million portfolio in 20 year’s time for my kid?” Ask yourself this before you buy or sell something.
Anytime, to me, is a good time to buy, even in the worst of times – not just good times, not just bad times, any time. I’ll give you an example: In 2009 there was a global economy crisis. People are very scared to buy. But that was the best time to buy. I bought about five properties, I think, that year alone, simply because the prices were lot more reasonable.
For example I bought Titiwangsa Sentral that was next to the Monorail and LRT, literally a two-minute walk, for RM250,000 3-bedroom unit. Then I also bought the Tropics which was on top of completed shopping mall. It was only RM250,000. Those prices are only available, you know, when people are not buying. So, don’t wait. As long as you can find a good property that fits your objective, I think you should just pull the trigger.
Today, if you ask me tips on what to look for, I’m very conservative by the way. I only go for things that I’m very, very sure that I’m going to make very good money out of for very little risk.
I believe older properties are your best bet, as of today, because valuation wise, it’s still a lot more reasonable than new, under construction properties. In OUG, for example, developer’s asking price for under construction units go for about close to RM400 per square foot, but an older development next door is going for less than RM200 per square foot. It doesn’t make sense. For me, the gap is too big, and I would rather bet on the old one instead of the new one.
Last is to go mass, aim for mass-market properties. I personally believe it’s less risky to go for mass-market properties that a lot of people can afford. It’s very simple: If you only go for $2 or 3 Million property portfolios, there are only a few people, a handful of people who can afford $2/3 Million properties. But, a $200,000 property, I think a lot of people can afford. That’s what I meant by “Go mass market.”
Now, let’s talk about landlording. Landlording, I think is very straightforward. Normally, in the event of a crisis, the mass market property demand actually goes up because during crisis, borrowings are hard to obtain. People will find it very difficult to buy a house due to difficult financing.
You know what they say about banks, right? They give you an umbrella when it’s not raining, but the moment it rains, like a thunderstorm, they take the umbrella off you. That’s why I say, don’t wait until the opportunity has gone by. Buy now while everything is still okay and as long as the fundamentals is strong.
Being a landlord obviously has its own benefits. Think of it this way, if you are buying a RM500,000 property and your monthly installment is normally RM2,500, it’s not a problem for you when you can rent it out for RM3,000 per month.
But, if you can’t rent out the property after six months, you will start to think, “Oh shit, you know, nobody is renting my property. Every month I pay 2,500 RM per month.” Then, you see your table in your office, one by one your colleagues receive the pink slip. So, it’s not going to be very pretty or very easy for us to get into this emotional state to say “I probably need to let go of the property in the event that something would happen to me and my job.”
If your property is still rented, you are not worried simply because you could say, “Hey, it would pay for me, no big deal.” So, you have a longer holding power. You have a longer and higher bargaining power. You are never going to be broke as long as you can rent your property for a decent cash flow.
Tenancy income is also part of your income. If your tenancy is RM2,000 per month, and you make RM5,000 per month, then the income recognized by the banker is 7,000 RM, right? That simply allows you to buy more properties. This is what a lot of people don’t realize when they buy under construction properties. The under construction properties, well, it has its appeal, but at the same time, it will also restrict you from making your next move.
Some of the skills that you need to learn for landlording are being able to ensure a low vacancy period by finding good tenant. You can only do that when you understand what the market wants for that particular property. So, that’s landlording.
For a comprehensive workshop face-to-face with Faizul Ridzuan, here’s your chance to attend his upcoming workshop. Click here to find out more.
For Premium Webinar Members, you can watch the full replay here: