Secrets of buying from property developers

by Sherry Koh - StarProperty

Juanita Chin is one gutsy lady. Her property investment journey with her husband began in year 2003 and today, they own 13 properties in Penang worth approximately RM5.6 million. 12 of those properties were purchased from developers.

How do these numbers make her gutsy you ask? They don’t, but the following figures do; when she started, she was a bank teller earning RM400 and she had two young children. She had the courage to take action and the story of her journey towards financial freedom is as inspiring as it is heartwarming.

In a recent two-day property investment course titled Breaking the code: Discover the secrets of buying from property developers in Malaysia, Chin partnered with fellow property millionaire and close friend Michael Tan. This is not their first collaboration and certainly, will not be their last.

The first day – information download by Chin

Even before looking at new residential developments by developers, there are many things that each investor must do and ask oneself.

Research: Spend 80% of your time on research before placing any deposit. Make sure that the price per square foot and location is right. Chin shared, “There was an expo overseas and most of the buyers bought a property that was in the jungle, with beautiful scenery and all that. But these investors were not aware that the development would be 100km from the nearest town! By asking the right question(s), these investors would not have been stuck with their purchase.”

If one does not conduct the necessary research, one could be stuck with a property that has depreciated from RM100,000 to RM50,000 and be stuck with the property after seven years (and counting!). That is another example that Chin shared. The unfortunate investor told her, “I should’ve invested in seminars. What is a few thousand (to spend on seminars), to save a RM50,000 mistake!”

Set your goals: You need to know whether you are going purchasing to keep (for rental returns) or flip (buy-to-sell upon capital appreciation). It is also important to figure out who the target tenants or buyers are once the project is completed as that affects your goals. Ask yourself, “Would a restaurant or grocery store want to do business here?”, because future tenants or buyers will ask such questions.

Set your budget: Decide on your property portfolio, whether it would be less than RM500,000 or RM100,000 and so on. For a newbie, it is advisable to begin with a smaller budget.

Set your target location: Don’t run all over the place. Instead, be an expert in a particular area and keep farming (investing) in that area.

Pick type of development: Would it be residential, commercial or industrial?

Once you have figured all that out, then you should analyse the developer. To evaluate, you need to find out these key information - track record, financial strength, reputation, past projects (completed / abandoned), end-financiers, workmanship, license approval and the individuals behind the project.

Chin also cautioned that it is important to find out if a developer has been blacklisted by the Ministry of Housing and Local Development. As reported by The Star on March 23, 2010, a total of 1,345 housing developers were blacklisted from carrying out projects the previous year. As at March 5 this year, a total of 1,120 developers were blacklisted and the highest number of blacklisted developers were from Selangor, followed by Kuala Lumpur and Johor.

To help residential property investors select the right project, Chin shared a list of positive and negative indicators.

Positive indicators

Near amenities
Good property management
Surrounding neighbourhood
Developer’s track record
Property layout
Car park
Good catchment area
Growth potential

Negative indicators
Near sewerage treatment plant
Next to electricity sub-station
High tension wires
Facing empty land
Garbage dumpsite
Smelly surrounding
Specifications Noisy
High density

The second day – field trip

On the first half of the day, all participants were ferried to two upcoming residential projects. They had to evaluate these projects based on the first day’s learning and decide which project (of the two) that they would purchase.

The second half of the day was a sharing session with two property investors – Prudence Wong and Nancy Ng, who are of course, property millionaires themselves. In fact, they are so successful that they are currently collaborating on a commercial project in Shah Alam. Both have attended many workshops and courses (property and non-property related) before finding their Midas touch in property investment. They actually met through an Internet course eight years ago.

Read the interview with driven property investor-turned-developer Prudence Wong and find out about her property investment journey and retail-cum-business suite project, Qube.

Nancy Ng is the sales project director for The Qube. She began investing since year 2003 and has attained more than 15 properties within six years. This comical and cheerful Ng shared the following with regards to financing.

• Pay your taxes

• Refinance some of your paid properties or properties that have increased in value

• Be a member of banks’ priority or privilege clubs

• Pay all your loans on time

• Establish good working relationships with your bankers, lawyers and property agents

• Look out for discounts and promotions such as 5/95 (5% down payment / 95% financing from bank), 10/90 or 20/80 from developers

If you are new to property investment, she advised to take baby steps and invest in yourself by attending property seminars (or attend to get the latest updates if you are not a novice investor).


Patrick said...

Great stuff. I can’t stand it when we see real estate again with only 1 generic picture in MLS and they wonder why their property isn’t being showed

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bujju said...

Quite informative and interesting.

Hector said...

In general, investing in property is not like investing in the stock market, as property has a relatively low risk with good potential income. Select the right project that suits best your needs. Just my thoughts!

Jason Young said...

Patrick, thanks for the tip and your continuous support.

bujju, thanks for your comment.

Hector, seling property is not like selling stocks too. Some properties take months or even years to dispose. Thanks for sharing your thoughts.

kelly said...

It is a fact that door porches draw the eye to a property in a way that is hard to achieve in any other way - at least not for the same low cost and convenience. If you're looking to sell your property and need a way to help your home stand out within a market that's currently growing at a rapid rate, then fitting cheap door porches could well make all the difference.

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Jason Young said...

Thanks for the wonderful advice Kelly.

Sandra Peters said...

Great post. Quite informative and useful reading!