Property 101 - Super Long Documents

Usually when you purchase or sell an property, you need to sign a lot of paper, for example:

• Booking Form
• Sales & Purchase Agreement
• Deed of Assignment
• Power of Attorney
• Bank Loan Offer Letter,
• Loan Document
• Tenancy Agreement

and etc....

We are not legal expert, and the document is so long, 90% of us will not bother reading it and just trust the expert. But what if the expert made mistake in the document and you signed it also? Then, I only can say TOO BAD.

Therefore as I emphasize previously, you need to have trusted people within your circle that you can rely on them when come to this kind of document, Lawyer, Agent, Loan Officer and etc.

http://wickinv.blogspot.com/2010/07/property-101-your-right-hand-man-lawyer.html

However, I still have a habit to check some key terms myself when come to document. For example, Name, IC, Loan Amount, Loan Interest Rate, Penalty,  Lock In Period and etc. Personally, I have experience below myself

• Lower penalty rate than what is agreed in Bank Loan Document (which is good news to me)
• Longer lock in period than what is agreed in Bank Loan Document, which extended from 3 years to 5 years
• Tenancy agreement with wrong bank account number
• Exclusive Agent Form which I never agree to from Property Agent
• Booking Form that stated higher commission rate than what I thought it would be

Lesson learnt, it is good to cross check some of the key terms yourself, else, you may end up in situation you never thought of :)

Which Shop Would You Buy ?

If you were to buy/rent a Shop for running your own business, where would you rent, and what are the "important factor" you looking at, to evaluate whether it is a good buy/rent?

Recently I come across a shop for sales, at Kuchai Avenue Service Apartment. Double storey shop, 20 x 70 sf selling at RM1.2 millions.

This shop can be rent at RM3-3.5k for ground floor unit and RM1.5k for 1st floor unit. The rental income is ok, even though it can help you settle around 80% of the loan amount.

Up to now, I am still evaluating, is it a good buy? What do you think?

High Tension Cable

Last month when I heading to Cheras Connaught, I saw a lot of super tall standing pole along Connaught main road, I was thinking what are all these tower for. After reading the newspaper today, and saw the picture, only realize those are new TNB High Tension Cable. Seem like this project also extended to Old Klang road. I dunno how does it affect the health of the resident, but I am sure it will affect those property price that near to the property.....

http://www.nst.com.my/nst/articles/2tbbh/Article/

http://beta.chinapress.com.my/node/203801

The Power of Marketing (Z Residence vs Sutera Maya)

Visited two properties launched today

1. Z Residence by Trinity Group
2. Sutera Maya by Home Flair

Z Residence is located right next to Bukit OUG, beside Kesas Highway. Layout start from 1200-1400++ sf. There are 4 blocks in total, each block have about 300++ units as there are 13 - 14 units per floor, serve by 3 lifts (be ready to grab a book to read whenever you wait for lift). In total there will be 1000++ units. Price wise, about RM340psf, selling from RM400k onwards.

Sutera Maya, located near OUG/Puchong, right opposite Akisama Parklane project. Layout 1300++ sf. There are less than 200 units in 2 blocks, very low density. Price wise is same range with Z Residence.

Personally, I prefer Sutera Maya over Z Residence, if buy for own stay purpose, as the density is lower and more important the access road is better than Z Residence (by comparing two property access road). Z Residence is heavily rely on the future LRT development and enhancement on existing access road. While for investment, both property not really look attractive either in term of capital appreciation or rental.

HOWEVER, TODAY, the crowd is crazy at Z Residence sales gallery, while there are only 1 or 2 people at Sute Maya. I can see quite a number of people rushing to book for Z Residence. Obviously the developer Trinity Group market their property well compare Home Flair. Trinity Group make their launch look much more grand, and their house model look bigger and modern, created good buying atmosphere as the crowd and competition make people look like it this is something should not be missing.

FYI, Developer is expert in heat up the environment until everyone worry they might miss the golden chance :)

New Trick

I notice that nowaday developer become more and more creative, until at one point I start feel that something fishy about their strategy.... Developer now can sell house with just few piece of drawing paper. I remember Empire Damansara project is selling like hot cake, even there is no show house nor a scale down model. Malton - Amaya Maluri and Pacific Place start collecting booking fees even before their permit is approve by the government. Bolton is now selling their Tasik Prima project - The Wharf without any price mentioned, in which they just will provide indicative price. However you are allow to book the unit by providing them a cheque which they are not going to bank in. Heard that Sime Darby is doing the same for their Isola project, which the project is cancel later on. You ever wonder why the developer wanted to do so? For Empire Damansara, Amaya Maluri, Pacific Place, I believe the developer want to catch the train of "Property Investment Frenzy", which is a hot topic for everyone last year. While for The Wharf and Isola, I would think this is a strategy to maximize the developer profit, by testing the market response before they set the final price. Aaii... when developer become smarter, the property price will become higher, the return will be lower for the investor ......

Property 101 - Some Tips....

In property investment, you will engage with real estate agent when buy or sell your house. Therefore it is quite important for you to understand how real estate company function to ensure you cut the cake in your favour.

Real estate company make living by completing a sales between Buyer and Seller. They take certain percentage from the total sales value. Usually between 2-3%. Out of this 2-3% of commission, 1-2% will go to the property agent pocket.

For example if a property transaction close at RM100k, then the commission charge to Seller will be around RM3000. The real estate company may take up RM1500, and RM1500 will be given to the property agent. This means, property agent main interest is to close the deal.

Let's assume there is a situation below
Sample
- Seller A want to sell his house at RM500,000
- Buyer B want to buy the house at RM450,000
- The commission charge to Seller is 3%
- The commission earn by the property agent is 1.5%

If the deal is close at RM500,000, then agent will get RM7500 as commission
If the deal is close at RM450,000, then agent will get RM6750 as commission
If the Seller and Buyer cannot reach an agreement on the price, then the property agent will get RM0 as commission.

By the way, property agent is also kind of professional mind reader when come to property. The face different kind of Seller and Buyer everyday, and they easily can see which party is interested and which is not.

For situation above, if Seller A is eager to sell than Buyer B, this can easily spot by the property agent. As the agent mission is to close the deal, the property agent will try to convince the Seller sell at lower price so the Buyer will get interested. Even though it means the property agent will get lower commission, but it is OK for them as they rather earn slightly lower commission at RM6750 than get RM0 commission.

So...play smart when you deal with the property agent .... always remember that they are mind reader.... when you hear thing like this below, think twice before you register it into your mind

- Someone already make an offer to buy this house, if you seriously want it, please pay the booking fee now so I can reserve for you .
- There are many people interested in this unit, act fast if you want it.
- Not many people interested, you need to lower your asking price.
- You house condition is so bad, your asking price is very difficult to get.
..............................

Property 101 - Celiling Height

Recently I learn something new in property renovation - Ceiling Height. I found out that Ceiling Height is something quite important that I should have pay more attention.

I visited Opal Damansara @ Sunway Damansara and Sterling PJ @ Kelana Jaya recently. Both condominium are about same size 1400sf++. While Opal Damansar is selling at higher price (>RM100k) Sterling PJ.

However when I went into unit at Opal Damansara, i does not look like 1400sf condo at all. It look like 1200sf condo to me instead of 1400sf house. After spend some times to inspect the house, finally I notice why..............ceiling height.

Opal Damansara ceiling height is 9ft, while Sterling PJ is 11ft. The different of 2ft make Sterling PJ look more spacious, and more bright. Worse is owner at Opal Damansara will have difficulty to put on plaster ceiling in their condo, as plaster ceiling will take away another 1ft height, and it will make the house much more smaller.

Lesson learn is when scout for property for own stay in future, is better to ensure the ceiling height is at least 10ft and above...

Property 101 - Professional Negotiator

Have you ever encounter situation below:

You as Buyer
You would like to buy a house and the owner insist on the selling price. Eventually you only manage to get RM10k discount for a RM700k house?

You as Seller
You would like to sell your house at RM500k, but end up selling at RM450k after few round of negotiation with the buyer?

WHY SO ???
Why when you are buyer, the seller only willing to give you small discount even you have try hard to get more discount? Why when you are seller, the buyer only offer to buy the house with much lower price?

The answer is simple, not everyone of us are good negotiator.





We may good at certain skill, but not all skills including negotiation.

Have you ever think, if there is someone you can employ to negotiate on behalf of you, and you will be able to get additional RM50k discount when you buy a house, or you will be able to sell your house with extra RM50k?


This job is something new in the property market, and not everyone ready to accept this kind of concept.
- First is people tend to think they are good negotiator.
- Second is people tend to trust the agent more (Will write some article about this later).
- Third is people is not willing to pay for this service.


If you are the person, and the negotiator is charging you RM10k to represent you, and he can help you to earn extra RM50k or get extra RM50k discount, are you willing to pay for his/her service? Will you???

Property 101 - Delay From Bank

Just to share recent experience I have with Bank.

My cousin bought a condominium last year. Applied loan with Standard Chartered Bank in Dec 2009, and signed the offer letter in same month.

The bank appointed their lawyer for handling this case, "highly recommended" by the bank agent (My cousin have to pay for the loan lawyer fee). Personally I would encourage you to use your "own" lawyer instead of follow advice from unknown people, you may refer to my previous article - Your right hand man.

This so call "good lawyer" make silly mistake in the loan agreement, causing delay in property processing. Eventually the loan lawyer rectify the error and whole process (redemption & balance disbursement) only completed in June 2010 - 7 months in total. Then the S&P lawyer issue penalty letter to my cousin, as there is delay in the property transaction... cost about RM2000++.

Do remember, the property seller will issue penalty to you (the buyer) directly. Not the bank or loan lawyer regardless of whose mistake.

My cousin discussed this matter with me, and we send in formal complain letter to
1. The Manager of The Bank Agent
2. The Loan Lawyer
3. The Bank HQ - Customer Service

The Loan Lawyer and the Manager of the Bank Agent did not bother to entertain us. Worse is the Loan Lawyer keep chasing my cousin to settle the loan lawyer fee. (Of course we disagree as the penalty case is still not settle).

Surprisingly the Bank HQ responded, and agree to bear 90% of the delay cost. Even though not 100%, but it is something very encouraging from consumer point of view. As I never thought such Big Company will response to complain from normal people like us.

Learned a lesson here, if you find the right person in right department to file complain, it may work :)

Property 101 - Timing - When to Sell ?

Question: Let say you have invested in a property, have you ever think when is the best time to sell it to maximize the profit?

Very tricky question. This depends on many factor:

1. What is your profit target? Is the offer price able to meet your target?
- RM50,000, RM100,000, RM200,000?
2. Do you have holding power to hold it for another few years?
- Rent it out, and top up the different per months until the property price go higher?
3. How is the supply vs demand at that area? Is supply > demand at this moment?
- Are they many owner rushing to sell it after VP? Should you wait till the demand > supply then only sell?
4. How much is the cost to sell now compare to the cost sell later?
- Penalty from bank due to lock in period of the loan?
- Property gain tax ?
5. Is this leasehold or freehold property?
- Leashold property take longer time to process and your property will be leave empty while waiting for the sales of property to complete.
6. Is the property deliver in good quality, good design, good community, good environment and good place to stay?
- If above all is positive, yur property will command much better capital appreciation.

Maybe I take the soon to be VP - Sutera Damansara as example.

Let's Assume
Property Purchase Price: RM440,000
Loan Amount: RM400,000
Installment Per Month: RM2,000

If Owner Sell immediately after VP
Selling Price: RM540,000

Time to Find Buyer: 2 months
End to End Processing Time: 8 months
Total Waiting Period: 10 months
Estimate Waiting Cost: RM2,000 x 10 = RM20,000

Bank Penalty = 3% x RM400,000 = RM12,000
Selling Agent Fee = 2% (subject to negotiation) x RM540,000 = RM10,800
Selling Lawyer Fee = RM4,000
Property Gain Tax = RM3,000
Total Cost: Rm20,000 + RM12,000 + RM10,800 + RM4,000 + RM3,000 = RM49,800

** Assumption:
- S&P Lawyer Fee free
- Loan Lawyer Fee free
- Interest Free During Construction
- Selling price benchmark based on OSK current selling price
- Loan Lock in is 5 years

Profit if sell immediate after VP: RM540,000 - RM440,000 - RM46,800 = RM50,200

You would be able to cash back: RM40,000 (downpayment) + RM50,200 (profit) = RM90,200

If Owner Rent It Out and Sell after 5 Year Counting from S&P Date
Rental : RM1,500
Time to Find Tenant: 2 months
Rental Agent Fee : RM1,500 (1 month rental)
Basic Renovation Cost : RM15,000
Selling Agent Fee = RM15,000
Selling Lawyer Fee = RM5,000

Total Cost : RM2,000 x 2 + RM1,500 + RM15,000 + RM15,000 + RM5,000 = RM40,500

Estimate Amount to Top Up per month : RM500 (bank installment) + RM200 (misc) = RM700
Estimate Holding Cost per Year: RM8,400

** Assumption:
- Renovation take 1 month to complete
- Rental benchmark based on Park Avenue Condo, Armanee Condo at surrounding area.

If property price at Damansara Damai area

Growing @ 5% a year, in 2013 it is worth RM625,117
Growing @ 7% a year, in 2013 it is worth RM661,523
Growing @ 10% a year, in 2013 it is worth RM718,740

For 5% scenario: Profit if sell in 2013: RM625,117 - Rm440,000 - RM40,500 - (RM8,400 x 3) = RM119,417
For 7% scenario: Profit if sell in 2013: RM661,523 - Rm440,000 - RM40,500 - (RM8,400 x 3) = RM155,823
For 10% scenario: Profit if sell in 2013: RM718,740 - Rm440,000 - RM40,500 - (RM8,400 x 3) = RM213,040

Conclusion
Should I sell the property immediately after VP or later?

- If I confident I can earn >= RM150,00 within 3 years, with the cash I receive (RM90,200) by selling the property in 2010, I will sell immediately
- If the property quality is bad, and foresee the demand for this property is low, as it will impact the capital appreciation rate (5% and below), I will sell it immediately
- Lastly, if I have no holding power, need cash immediately, I will sell it immediately

Just some thought, please share if you have other view....

Property 101 - The Trend

What is the latest trend for Malaysian:

Organic Food - I notice there a lot of organic shop in Malaysia now. Seem like Malaysian become more health conscious and they do believe that organic food is good for health. So they willing to pay extra premium for organic food. Those smart businessman riding on this trend by selling organic food (raw), organic restaurant, organic farm, and the latest one in TV is "Safe Egg".

Pet - Nowadays Malaysian prefer to marriage at later age. Career first, family later when everything stabilise. This make Pets become popular "choice" especially for those who have no children yet. You can see Pet shop is growing like mushroom everywhere. Those more creative one is opening up Pet beauty shop, Pet training center, Pet hotel and etc

Safety - Most of the Malaysia especially those living in city think that Malaysia is not a so safe country, looking at the crime rate and news in newspaper everyday. Many Malaysian willing to pay premium price to get a safer place when come to buying property for family stay. This make Gated & Guarded one of the criteria for Malaysia when come to property now, and this is what I would like to talk today.

Trend can determine the price of property, if you catch it right. Look at the example below

1. Valencia and Sierramas
2. Desa Park City
3. Puchong Lake Edge

You would not able to enter the housing area without knowing the resident inside. They will cross check with the related resident unit before allowing outsider to go in. This is what people are looking for now. This enable those resident feel safe and allow their kids to play around the housing area.

Most of the condominium is build with Gated and Guarded concept by default. However not all the condo management guard it strictly. Therefore those condominium who have implement tight security, double access card entry card system (main entrance + lobby/lift) will command better demand, compare to those conventional condo who you may just go in by waving your hand or just simply register at entrance.

Conclusion: Better demand = Better price = Better profit

also

If you can spot what is the next coming trend, then ....

Property 101 - Developer

Human like ranking. Who is the richest man in Malaysia? Which is the best University in the world? Who is the staff of the year in your company?

So do developer ranking, they must be a way to rate and rank property developers in Malaysia. You may rank it yourself, or you may see how other rank them. Example in Malaysia, The Edge every year will come out with the list of top developers in Malaysia. Below are the top 10 developers ranked by The Edge in year 2009.

• Sime Darby Property Bhd
• SP Setia Bhd
• Sunway City Bhd
• IGB Corp Bhd
• Island & Peninsular Sdn Bhd
• IOI Properties Bhd
• Bandar Raya Developments Bhd
• Eastern & Oriental Bhd
• Sunrise Bhd
• Bandar Utama City Corp Sdn Bhd

However as mentioned above, it is important to grade the developer if you would like to success in Property Investment. For example:

1. Innovative Developer

Developer who dare to try new idea, new concept and able to execute it. For example, "Perdana Parkcity Sdn Bhd" who develop the "Desa Park City" is one of the innovative developer who dare to try out new concept and implement it in DPC. Fence-less house, common facility within each "taman", commercial center (waterfront) within the city, "high class" design even though it is just a terrace house.

This type of developer is the one who can double or triple your property value in short time, if they able to execute it.

2. Developer with Master Plan

Developer who build a township, instead of a block of condo, or few rows of terrace house. For example, IGB Corp Bhd who develop the entire Mid Valley City by building one of the hottest shopping center in Malaysia, surrounded with office tower and high rise residential. SP Setia who develop a huge townshop in Shah Alam named Setia Alam, Setia Eco Park and etc. UOA who plan to build Bangsar South City into another new township in KL, consist of retail mall, office towers and high rise residential condo.

As this is huge master plan, the developer must have the capability to deliver it right. Once the entire master plan is implemented, it should be no problem to double your property value in few years time.

3. Developer who piggy back on others

This is the developer who ridding on existing infrastructure at surrounding area. For example, building property near to LRT station, next to existing Shopping Center, or next to Collage and etc. Most of the developers fall under this category. Usually this type of property will not appreciate compare to the first and second type above, as all the existing infrastructure is already in place and usually the developer already factor in the "existing infrastrcuture price" when they launch the property.

So, start to rank your own developer today and it may will help you make better investment decision in future.

Property 101 - Your Right Hand Man - Lawyer

In this world, we cannot survive alone. Whatever we do, one way or other we will need help from other. Same for property investment. You will not able to success without your right hand man, left hand man, right leg man and left leg man.

Let's talk about your right hand man in this article -The Lawyer. The person you must liaise with in your property investment.

1. To purchase a property, you will need S&P lawyer
2. To borrow loan from bank, you need Loan lawyer
3. To sell your property, you may need Lawyer to help you liaise with bank, goverment authority and buyer lawyer.
4. To rent out a house, you may need Lawyer to prepare the rental agreement.

Why You Need A Trusted Lawyer?
1. You need advisor who you can be trust, and he/she is good in legal matter, reason is buy/sell property involve many legal documents and it is hard for normal people like us to understand the legal term by reading it yourself.
2. By assign the task to your trusted lawyer, it will help to speed up the processing time, let me repeat, speed up a lot. Most of the lawyer will take their sweat time to process your document. When you in rushing mode, they are still in relax mode. Worse is you are not able to contact them when you needed.
3. Conventional lawyer will always limit their "scope of work". They will "taichi" back some of the work to you and you sometimes end up dunno how to handle, or no time to handle. Trusted lawyer always walk extra miles and will provide "end-to-end" services.


What Are The Criteria To Be MyTrusted Lawyer?
1. They must reachable when I need to call them.
"Not so good" lawyer is easily spot, they would not answer your call and they will not return your call. You should avoid this type of lawyer as you need to discuss with your lawyer regularly during your buy/sell process.
2. They will advice me "more" than other conventional lawyer do.
"Not so good" lawyer will always explain things in brief, like very rush in time and never explain more than they should do, especially if you did not ask any question.
3. They will offer you VIP rate for their service.
"Not so good" lawyer will always quote you in "high price". Trusted lawyer will give you the best rate without much negotiation required.

As rules of thumb, you need to have at least 2 trusted lawyer who can help you in property investment. Don't believe in monopoly by using only one lawyer, competition always make them improve their service.

Always remember, most of the time, you have the right to choose your own lawyer, especially loan lawyer. And always ask the bank to assign your case to your trusted lawyer.

Lastly, don't be fool by the size of the lawyer firm, it doesn't mean the bigger the better.

Property 101 - Benchmarking

One of the analysis method I like to use when come to property investment is Benchmarking. Whereby I do research at surrounding area, looking for similar type of property and evaulate their performance.

Let's taking Amaya KL as example, one of the service apartment nearby the area is Pertama Residency, developed by a relatively new developer (http://www.smland.com.my/)

This apartment launch @ 2007 with price ~RM190,000, average RM311 psf for Studio unit with 610sf size.

Today, the apartment is selling at ~RM250,000+-, average at RM409 psf. It is increase of 30% over 3 years, which is about 10% increase per year.

Minus all the cost, the owner can pocket in around RM30-40k, for 3 years investment. Not bad, not excellent either.
**The best I ever see with such low entry cost is at Kuchai and Subang, again, will write something about this when got time lar.....


Let's reverse the time backward 3 years <<=== <<=== <<===
- In year 2007, will you buy a Studio unit @ RM311 psf @ RM190k ?
- With this price, you need to rent the studio @ minimum RM1000 to break even, can rent at this price mer? Cheras wor?
- Did anyone tell you that same amount of money can buy you 3 rooms apartment somewhere else in Cheras

So now the questions is, is Amaya KL a good investment? You judge yourself lar...

Property 101 - What Is Your Property Investment Target ?

Friend of my ask me, how much you plan to earn by investing in property? There are two type of return

a) Rental
b) Capital Appreciation

Let discuss on capital appreciation for now. This is very different depends on different indiviual. For me

Property between RM100k -RM200k: Profit of RM20k - RM50k between 3 to 5 years...
Property between RM200k -RM400k: Profit of RM50k - RM100k between 3 to 5 years...
Property between RM400k -RM600k: Profit of RM100k - RM 300k between 3 to 5 years...
Property between RM600k -RM 1mil: Never try before....

Let me do some sample calculation for Amaya KL Service Apartment

Below is calculation of estimated profit if sell after 5 years, using assumption of 7% of capital appreciation per year.

Based on assumption and calculation above, it is still possible to achieve RM100k profit within 5 years of investment.... if all assumption is work as it is :)