Banking On Bargains

Banking On Bargains

As the saying goes, good things come to those who wait. Richard Lim, however, blows this quote clear out of the water. He is a firm believer of seizing the opportunity and to always trust his gut feeling. It is this pluck that has seen him actively acquiring more than 70 auction properties over the past 5 years – of which he rents out or sells off for a profit. Currently an auction manager with Rina Properties Johor Bahru, Richard has never been happier.

FINDING HIS NICHE

Rewind to 2006, when Richard equipped with an Accounting diploma, started off his career as a mortgage broker with a bank. Moving on to being a Relationship Manager and after obtaining his license as a Certified Financial Planner (CFP), he joined a local bank as an Area Sales Manager – overlooking a group of sales personnel handling mortgages.

It was at this post that Richard became acquainted with the auction property market. As his team dealt with property loans, Richard oversaw quite a few foreclosures as some borrowers failed to keep up with their monthly repayments.

“Dealing with repossessed properties, I had the opportunity to learn the lingo, rules and nuances of the whole auction process. Also, as the bank’s representative, I met and made friends with many dealers who exposed me to the world of auction brokering.

Over time, my interest in the market was piqued. I saw how auction is a growing factor in the real estate marketplace and realised that I can match my interest with an opportunity. That was how I found my career sweet spot – and in 2011, I finally decided to make the jump from the banking line to be an auction broker instead,” says Richard.

THE FIRST BUY

Being in the industry and knowing first-hand what deals are out there, it was only natural that Richard himself would invest in an auction property not long after. What he found most appealing about the auction market is that it is not susceptible to the market forces. Unlike Forex, stocks or options; the value of auction properties could possibly be controlled by the buyers and sellers’ hand.

His first acquisition was a joint effort as he did not have sufficient cash in hand for the down payment. He and a few friends pooled money together to bid for a low-cost flat worth 40,000. They purchased it for RM30,000 – at a 25% discount.

Richard’s maiden purchase proved fruitful – He has been receiving a monthly rent income ever since, which sum is RM600 at the moment and the property’s value has doubled to RM80,000.

That was the beginning and he has not looked back since. To date, Richard had acquired an impressive 73 properties over the years, mostly collectively with his group of friends and the rest, individually.

“I am not partial to a certain product or stick to only one location; my purchases include apartments, landed homes, shop offices and even factory units – spread across Johor, the Klang Valley and Penang”, he adds.

THE AUCTION PROCESS

According to Richard, the auction process is relatively simple. Many Malaysians are pretty hesitant to purchase properties through auction as they believe that only high-end properties go under the hammer.

“There are tonnes of good deals out there – Every time there is an auction and nobody bids for the property, the price gets slashed by 10% in the subsequent auction. My cheapest purchase was at RM7,000 for a flat,” he shared.

DUE DILIGENCE

My mantra is simple – as long as I am purchasing a property for at least 30% below its market value, it is a guaranteed good deal.

Even if I have to spend some money for renovation works or for paying the required Real Property Gains Tax (RPGT), I will recoup the expenses from a gain in capital appreciation or rental income,” explains Richard.

THINKING OF GETTING STARTED?

Richard’s advice for those looking to get started in auction investing is to firstly determine why one is purchasing a property – Is it for rental income, capital appreciation or for inheritance purposes?

For rental properties, he recommends looking for lower-end to medium-cost properties as they will fetch a better rental yield. As he puts it, “A RM50,000 apartment unit can fetch a monthly rent of RM 500 – that is a rental yield of 12% per year.

Whereas, a unit worth RM200,000 will bring in roughly RM700 per month, translating to only a 4% yield per year. However, the latter will enjoy a much better capital appreciation growth, hence, it will be perfect for those who have the holding power as they can then sell it after a few years.”

FUTURE PLANS

Richard is also looking to take his investing journey a step further by getting into land investment in the near future.

This article was first published in the iProperty.com Malaysia November 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine.  Better yet, order a discounted subscription by putting in your details in the form below!

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