The twins’ interest in properties was piqued four years ago when the headmistress at a school they were teaching at encouraged them to give property investing a shot. Chris and Andy wasted no time to place a booking for a promising property deal. “
At that time, the Developers’ Interest Bearing Scheme (DIBS) was still in place and like many others, we were excited to jump on the property bandwagon.
However, being prudent by nature, we decided to carry out a little research on the project and at the end of the day, we decided to let the deal go as we felt it was too risky,” shared Chris. Their cautiousness paid off as the project was delayed and construction works are stalled as to date! This close call got them started to attend numerous seminars and workshops in order to glean as much knowledge as possible in property investment.
We learnt more about leveraging and how to conduct our due diligence from Adrian Un, CEO of Skybridge International Sdn Bhd. Adrian Wee’s “Die with massive debts’ programme which highlighted on property fundamentals and loan education was also especially helpful when we were starting out. Seasoned investor, Jesson Lim played a hand in shaping our property investment strategies and tactics as well,” added Chris.
EMBARKING ON THE JOURNEY
When asked about how did they invest in their first rental property, Andy said, “We took tiny steps to prepare ourselves – Chris and I read an article/blog post each day and spend an hour each weekend looking at price-to-rent values of promising neighbourhoods.” The twins gave personal tuition lessons after work in order to raise capital for their first property deposit.
“We were clocking in 70 hours each week – it was just work, tuition and sleep. Lather, rinse and repeat for a year and we eventually amassed enough cash for our first down payment and to guarantee a solid holding power,’’ said Chris. Living at home with their parents allowed them greater capacity to save for the deposit and service future investment properties.
In order to increase the chances of them getting a home loan, the twins ensured that their CCRIS report was solid and that their Debt to Service (DSR) ratio was as low as possible. “One trick Andy and I used was to apply for a car loan under our parents’ name,” shared Chris. Their first investment is a serviced apartment in Subang Jaya USJ.
INVESTMENT PHILOSOPHIES: WORKING FROM BACK TO FRONT
When questioned about their approach to investing, the twins shared that they start with the end in mind and actually work backwards, where first of all, they ensure that they are able to borrow first. Their logic is “Why look at a property when you haven’t secured a loan?”
Of course price, location and facilities/amenities are the many other key drivers the twins look out for – it’s just that it’s not the number one item on their checklist. Instead, proving their financial strength to bankers takes precedence and they make sure that their financial profile is in order. This includes collating their bank statements, income tax return forms and monthly financial statements.
All these are scanned and filed orderly at the end of each month which provides for quality data and enables for a fuss-free and successful loan application process. On top of that, there will be negligible issues with the Internal Revenue Board over taxation issues. The twins have even coined a phrase for this step, ‘Commitment to documentation’.
The twins have an interesting concept when deciding on purchasing primary properties.
“We will look at the project’s panel banks or the number of end-financiers as this shows how confident the banks are in the project. Banks are the real buyers, not us, as they are the ones handing out a 70-90% loan and determine whether a specific project is worth the investment or not. Hence, the more panel banks for a project, the better. We never consider a property which has less than five end-financiers, “ revealed Andy.
MAKING MONEY GROW THROUGH REFINANCING
The entrepreneurial pair recently discovered a way to use properties to obtain more capital for investment purposes – cash-out refinancing. As Chris explained, “Refinancing a property allows you to obtain a loan (cash) of 80% of the property’s value. We took out a loan on one of our properties (which was already paid in full) to acquire investment funds from the bank, whereby the property was used as a collateral”.
The twins leverage on the concept of how properties almost always appreciate in value over time even though the loan value remains the same. When the cash obtained earlier is kept in a full-flexi current account and none is withdrawn out, no interest will be charged. Hence, after some time when the property is revalued by the bank, the twins are then able to cash out tax-free money (gain in value) effortlessly!
The beauty of refinancing is that cash outs are not limited and can be done each time your property appreciates in value. We then use this ‘profits’ to finance other property investments and also to expand our tuition business. Our recent purchase is a condominium unit in Shah Alam which is being leased out as a homestay,” beams Andy.
It goes without saying that refinancing is not as easy as it sounds as the requirements are more stringent and there are more clauses involved. Also, we received a lot of flak from friends and family who felt that it was a risky plan and we were being too greedy. What is their reply to the naysayers, then? “Preparation is the key to success – we are merely building our rainy day fund,” they enthused.
Besides looking to refinance more properties, Chris and Andy’s future plans include being property speakers. The dynamic duo is hoping to educate the public on how to maximize home loans and minimize tax payments in property investment.