Celebrity property guru, Faizul Ridzuan, was 24 years old and had only RM2,000 in the bank when he set out to purchase his first property in 2005. Yet in a mere five years, the regular salaryman from Kuala Lumpur was able to transform his modest seed capital into a multi-million property portfolio with 23 properties to his name!
His bestselling finance and investment guide, WTF? 23 Properties by 30, Faizul details his exploits in Malaysian real estate. His keen eye in viewing properties for their utility, value and potential has propelled his ascend towards becoming a reputable figure in property investment.
Faizul is a shining example of a savvy “propertypreneur” who has made bank using property as his main income-generating medium — and he did not have to have millions to get started. For many successful propertypreneurs, the passive income they make from their investments are more than sufficient to cover their lifestyles. Some even end up doing it full time.
Faizul himself had been so successful in the trade that he was able to quit his day job and start a business to help others realise their property investment dreams.
Many dream of enjoying a lavish lifestyle brought about by successful wheeling and dealing in property – but what does it really take to be a propertypreneur?
1) Be financially creative
It takes money to make money, and securing adequate seed capital is one of the most critical elements to property investment.
For example, a property selling at RM400,000 with 90% loan will entail a 10% down payment of RM40,000 and an addition of roughly RM20,000 in processing fees and charges. This means a homebuyer will have to fork out an initial payment of RM60,000 in cash.
Not all of us have that kind of money at hand. Faizul himself had encountered difficulty securing enough capital during his initial stages of property investment. But with a little financial creativity, he was able to grow his modest capital by leveraging on the zero-interest payment scheme offered by his credit card.
Find out which credit card provides zero interest payment plan.
“Someone needed to buy a laptop. My credit card came with a zero-interest payment scheme, so I offered to use my credit card and their money was parked in my bank account,” Faizul explained in a 2014 interview with the Malay Mail.
Faizul repeated this strategy with family and relatives by “helping” them make purchases on credit. In just four months, the resourceful young man was able to accumulate over RM20,000 to use for investment. Though your seed capital has to be a lot more in today’s property market, but we all can learn from Faizul’s creative way of leveraging on credit.
Like Faizul, you don’t have to sell your kidneys to secure enough money for your down payment. There are various ways that you can explore to make your money grow.
Young working adults with a bigger risk appetite may consider investing in stocks. You may also consider expanding your finances with unit trusts. However, liquidity can be an issue with unit trust investments, as investors are often advised to hold the unit trust for three to five years or longer to start raking in substantial returns.
Putting your money in a fixed deposit typically gives you lower yields than stocks or unit trusts but it ensures liquidity, has low risk and will give you higher yields than an ordinary savings account.
2) Make friends with like-minded folks
The saying “it’s not what you know, but who you know,” rings especially true when it comes to property investment. One of the most effective ways to learn the ropes and get in the know of property investment is by attending property forums and workshops.
Such avenues put like-minded individuals together to moot investment strategies and opportunities, and are excellent learning avenues for the novice investor. Newbies will find these workshops especially beneficial for building new networks, which would help them make useful contacts with other investors and service providers through word-of-mouth recommendations.
More importantly, it keeps you up-to-date with all the latest happenings in the property market. This is very important as the property landscape changes over time and strategies that may have worked two years ago are probably not the best strategies to use now.
These workshops can cost anywhere from a few hundred to a few thousand Ringgit, but can be a worthy investment, especially for those who are unacquainted with the trade.
The advent of digital media has made networking easier and more assessable than ever for the property investor. Sites like iProperty are some popular avenues in which investors can exchange ideas and keep up with the real estate market.
3) Be hands-on with your investments
Whether you are eyeing to make a profit from property resale or from rental yield, research is paramount to an investor’s success. It is important to get your hands dirty and know exactly what you are getting into before taking the plunge.
You’ve surely heard of the mantra, “location, location, location,” and indeed, where the property is situated is vital when choosing a real estate investment. Easy accessibility to highways, public transportation, regeneration plans, and amenities like schools and shopping mall can boost house prices. Having foresight (which comes with practice and lots of research) will definitely help you make wise property decision in this case.
Beyond that, you also need to take note of the local vacancy rate, as it is one of the most costly expenses an investor could face. Minimise vacancy by getting to know the average rental rates in the area and adjusting your rate accordingly. Ensuring that you have a steady rental income is vital because the cash flow will make the holding of the asset more affordable and also provide the passive income that you expect.
To get a clearer idea if the location fits your plan, it is advisable to drop by the neighbourhood at different times of the day to help you determine if there are any undesirable local activities. Also, you should always visit a property at least twice before making any financial commitments.
It is also important that your class of property suits the demographics of renters in the area. For example, if it is near a university, condominium units will be in greater demand than a double-storey terrace house with a huge backyard for kids to run around.
Elsewhere, a family home that is located near schools and parks on a quiet streets will be more desirable than a property on a busy road.
However, aspiring propertypreneurs will need to be careful with disposable cash flow to ensure timely mortgage repayment. It is important to keep in mind that what the bank says you are eligible for based on your salary and what you can actually afford may not necessarily be the same.
When we look at how much you can really afford, the golden rule is that your monthly home loan instalment, including principal, interest, real estate taxes and homeowners insurance should not exceed 28% of your gross monthly income. By following this simple rule, you can avoid getting into bad debt or worse, risk foreclosure and end up losing your property if you are unable to pay your monthly mortgage payments.
At the end of a day, securing a profitable, cash-flow positive property boils down to a fair amount of inquisitiveness, hard work, research, networking and a LOT of reading up to make smart, educated decisions to acquire the best real estate investments and in becoming a top-notch propertypreneur.
Contributed by iMoney.my, Malaysia’s leading financial comparison website, you can view the original article here. To compare and apply for the best financial products, such as fixed deposits, home loans, personal loans and credit cards, visit www.iMoney.my.