www.propertyinsight.com.my
COVER STORY
ACOUSTECH BERHAD
AUGUST 2016
AREA FOCUS
ARA DAMANSARA
MAIN FEATURE
GETTING YOUR DOWN PAYMENT KDN PP 18181/04/2013 (033492)
AUG 2016 RM7.50(WM) RM9.00(EM)
EDITOR’S NOTE
EDITORIAL
We would like to wish our great nation Selamat Hari Merdeka KK Chua, Editor
E
verywhere we turn, we hear people complaining about the sluggish economy and lagging property market. But here at Property Insight, we’ve moved into high gear with a number of exciting events and launches coming up. We’re not going to spoil the surprise. So stay tuned. On our cover this month is Acoustech Bhd’s Chairman Leong Ngai Seng and its Executive Director Richard Ong. Acoustech’s property arm Teras Eco Sdn Bhd is kicking off the ‘commdustrial’ trend with its flagship project Senibong 88, which will capitalise on the growth potential of Iskandar Malaysia. The ‘commdustrial’ is a convergence of commercial and industrial real estate in one space, thus creating an avenue for entrepreneurs to be both innovative and creative. If your idea of saving up for the down payment of a property is putting some money aside every month, then we applaud you for taking the first, and very important step. What if we told you that there are alternative (and maybe even quicker) ways to achieve your objective? If you haven’t been in the workforce for long, it can take a long time to save up enough. Writer Fara takes a closer look at some enterprising and creative ways to build your stash, which can, hopefully, help you achieve your dream of having enough seed money that much sooner.
Vincent Chew, the group managing director of Pensonic Holdings Bhd, comes from the second generation of a family run business. He talks about the multiple hats he has worn and the numerous teething pains he’s gone through in order to set up the company’s headquarters in Petaling Jaya. For him, the most important value is to be trustworthy. Writer Natasha discovered a rising demand for co-working spaces. If you’re thinking of bean bags and a flexible working environment, then you’re actually not too far off. It’s an ideal setup for new start-ups, technopreneurs and solo workers as they can rent the space based on a daily, weekly or monthly basis. For landlords, it can also be a good way to generate rental yield. Natasha also met up with Chris Tan, who quit his high paying job as an electronics engineer to start his own renovation and ID company as well as invest in property in his late 20s. Although his current investment portfolio is impressive to say the least, like many, he wished that he had started sooner. They say the right lighting can do the trick. In the case of homes and even offices, good lighting can help owners rent out their property for higher prices. According to Superbright, the brainchild of E.S.H Sdn Bhd, it isn’t about spending a lot of money on good lighting, it’s about knowing what to invest in. That’s so true in more ways than one.
Editor-In-Chief KK Chua kkchua@propertyinsight.com.my Assistant Editor Kamini Raja Writers Fara Petial Avinash Sagran Natasha Gideon CREATIVE Creative Director Sarah Tan sarah@propertyinsight.com.my Designer Irman Hakim BUSINESS DEVELOPMENT General Manager Janet Loh +6012 205 0911 janet@propertyinsight.com.my Andy Fam +6012 601 9938 andy.fam@propertyinsight.com Hagenz Choo +6012 371 8831 choo@propertyinsight.com.my Iris Gan +6012 799 6685 iris@propertyinsight.com.my Wei Yeen, Chong +6012 927 2863 weiyeen@propertyinsight.com.my
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CONTENTS
38 FEATURED PROPERTY
52 18 COVER STORY
16
Kicking Off The Commdustrial Trend
Teras Eco Sdn Bhd’s Senibong 88 capitalises on the growth potential of the southern region
MAIN FEATURE
22
Getting Your Down Payment
An in-depth look at several ways you can accumulate seed money for your property
FEATURES
26
Getting The Right Legal Representative
Understanding the lawyers’ position as stakeholders in property purchases
30
Property Brain Games
Experts weigh in on the state of home buyers and developers
34
Embracing Coworking Spaces
Just a matter of time before people start to appreciate the flexibility and value it offers
DEVELOPER OF THE MONTH
38
Distinctively Niche
From a constructor to a developer, Tan Sri Dato Lim Yew Loong of LYL Group is now grooming his sons to takeover the business
AREA FOCUS
42
Ara Damansara: A Rising Tide
An investment worth considering for those who want to enjoy close-knit community living
PERSONALITY OF THE MONTH
48
The Sound of Success
Pensonic has set its sights on bringing the ‘sound of Penang’ to the world
A Saviour From The South
Reviving abandoned projects is part of MB Group’s CSR programme
INVESTOR NEXT DOOR
54
Taking Calculated Risks
Tan left a well paying job to achieve the financial freedom he was looking for
ROOKIE INVESTOR
58
Do It Like Diau
Diau Mun Chung sacrificed his leisure time to save up for his first property
INDUSTRY INSIGHT
61
Viva Forever
Alvin Foo, chairman of Vivahomes Realty, believes in leading by example and aiming high
HOME PLUS
64
Illuminating Design For Smart People
Enjoy good lighting with Superbright’s beautiful modern, unique and simple designs
International Market
68
The Best Structure for Property Development in Australia
LEGAL
70
Joint Venture in Property Investment
FINANCE
72
The Best Strategy to Finance Your Property
STRATEGY
74 76
Can One Arhieve financial success as an employee EOI & ROI Considerations: A Logical & Financial Comparison 78 Who Do You Wanna Do Business With?
PROPERTY SHOWCASE 2016 EVENTS CALENDAR
A place where the right people meet to achieve their dream homes & investments PROPERTY SHOWCASE
PIPDA GALA DINNER 2016
PROPERTY SHOWCASE NU SENTRAL
3
PUBLIKA
SHANGRI-LA
Solaris Dutamas
Kuala Lumpur
KL Sentral, KL
4 – 6 MARCH 2016
1 APRIL 2016
13 – 19 APRIL 2016
days
1
7
night
days
PROPERTY SHOWCASE
PROPERTY SHOWCASE
INVESTORS’ HOT PICKS PROPERTY SHOWCASE
QUEENSBAY MALL
4 days
KOMTAR JBCC
MID VALLEY EXHIBITION CENTRE
Penang
Johor Bahru
Mid Valley Megamall, KL
12 - 15 MAY 2016
3 – 5 JUNE 2016
3 days
3 days
15 – 17 JULY 2016
HOME+ & PROPERTY SHOWCASE
PROPERTY SHOWCASE
PROPERTY SHOWCASE
IPC SHOPPING CENTRE
CHERAS LEISURE MALL
PARADIGM MALL
Mutiara Damansara
Cheras
Kelana Jaya
25 – 31 JULY 2016
02 – 07 August 2016
12 – 14 AUGUST 2016
7
days
6
days
3
days
PROPERTY SHOWCASE
MALAYSIA’S LARGEST INVESTMENT SUMMIT
GURNEY PLAZA
SETIA CITY CONVENTION CENTRE
4
days
Penang
Shah Alam
27 – 30 OCTOBER 2016
5 – 6 NOVEMBER 2016
2
days
We look forward to collaborating and partnering with you Enquiries: +6012-2050 911 / janet@propertyinsight.com.my
30 & 31 August 2016 Darulaman Park, Bandar Darulaman, Jitra
Come & Join Us! AMBANG MERDEKA CONCERT l MERDEKA RUN l PROPERTY TALKS l HOT AIR BALLOON RIDE l FOOD TRUCKS l AND MANY MORE...
Property Showcase: Apartments / Terraces / Semi-Detached / Bungalows Come to our property carnival and discover all we have to offer in 2016. Have fun with the family, learn more about owning a property and see all we have to offer to suit a variety of budgets.
Darulaman Perdana SUNGAI PETANI
Taman Tunku Intan Safinaz
Sapphire Urban Living Collection
BDB LAND SDN BHD • No. Lesen Pemaju: 2926-40/04-2018/0298(L) • Tempoh Sah: 29/04/2016-28/04/2018 • Permit Iklan & Jualan: 2926-40/042018/0298(P) • Tempoh Sah: 29/04/2016-28/04/2018 • Pihak Berkuasa Yang Meluluskan: Perbandaran Sungai Petani • No. Rujukan: MPSPK (IP)B.94/2015 ‘D’RKM Bil (9) • Tarikh Jangka Siap: April 2018 • Jenis Hakmilik Tanah: Hakmilik Kekal • Bebanan Tanah: Tiada • Bil. Unit: 28, 2 Tingkat Rumah Berkembar (Sapphire): 4,004kps, • Harga Minima: RM689,350.00 Harga Maksima: RM781,566.00 • Bil. Unit: 10, 2 Tingkat Rumah Berkembar (Violet): 4,004kps, • Harga Minima: RM723,996.00 Harga Maksima: RM751,897.00 • Bil. Unit: 12, 1 Tingkat Rumah Berkembar (Scarlet): 4,004kps, • Harga Minima: RM449,290.00 Harga Maksima: RM453,552.00 • Bil. Unit: 28, 1 Tingkat Rumah Berkembar (Turquoise): 4,004kps, • Harga Minima: RM435,921.00 Harga Maksima: RM543,841.00 • Baki unit untuk dijual: 0 • 5% Diskaun untuk Bumiputra • No Pelan Bagunan: JA /10/15-HSE-(01-09).
FREEHOLD 2 Storey Semi-Detached Land Area: 40’ x 80’ Built-up Area: 2,560 sf 6 Bedrooms + 1 Utility Room 5 Bathrooms Price from: RM592,070
✆ 04-442 8080 land.bdb.com.my #BDBLANDFIESTA2016
BDB_LAND
BDB LAND SDN BHD
NEWS & EVENTS
INVESTORS’ HOT PICKS PROPERTY SHOWCASE AT MID VALLEY MEGAMALL Home buyers and property hunters had a blast at Property Insight’s ‘Investors’ Hot Picks’ property showcase at Mid Valley Megamall, held on the weekend of 15 – 17 July at the MIVEC hall. The event, held in collaboration with Property Guru, featured eight renowned property industry experts gracing the stage to give talks on property investment, owning and maintaining properties, and how to buy a property. Well-known property investment speakers
12 | AUGUST 2016 www.propertyinsight.com.my
such as Dr. Daniele Gambero (CEO of REI International Holdings), Chris Tan (founder and speaker of Chur Associates), Gary Chua (CEO of SMART Financing) and Alan Poon (principal of Superior Wealth Mastery) gave insightful talks and useful tips to patrons and property investment enthusiasts. Patrons at the three-day event, billed as the Hot Picks ‘STEAL DA DEAL’ property showcase, were impressed by the magnitude of the exhibition. Highlights of the showcase
included property investment seminars, funfilled activities and, most important of all, the choicest picks of the most coveted properties featured by renowned property developers such as Mah Sing Group, WCT Land, Hatten Group, De Centrum Land, UM Land, SunSuria Group and TitiJaya Land. Property buyers who purchased properties at the event were eligible for the grand lucky draw, whereby two premium smartphones were up for grabs.
Congratulations
www.propertyinsight.com.my AUGUST 2016 I 13
NEWS & EVENTS
MAH SING GROUP LAUNCHES THE FINAL TOWER OF LAKEVILLE RESIDENCE
TROPICANA COLLABORATES WITH PANASONIC GROUP TO BUILD INNOVATIVE ECO HOMES
M
ah Sing Group has launched the final tower of Lakeville Residence at its Lakeville Lifestyle Sales Gallery. The development has an estimated gross development value (GDV) of RM1.5billion and is situated on 12.38 acres of land. Mah Sing’s Group Managing Director Tan Sri Dato’ Sri Leong Hoy Kum says, “We are pleased to announce that Tower A and B are fully sold while Tower D, E and F has a 90% take up rate. Looking at the responses from previous launches, we are confident that the launch of the final tower will also receive positive responses from the public.” Lakeville Residence is a masterplanned development that consists of residential and retail component with a total of six towers of residential suites as well as 3- and 4-storey retail shops and SOFO. The latest tower features a total of 327 units with eight types of built up, from 977 sqft to 1,359 sqft, priced from RM598,000. It is targeted to be completed by 2020.
Tropicana Corporation Bhd has entered into a strategic collaboration with PanaHome Malaysia Sdn Bhd, a local subsidiary of PanaHome Corporation based in Japan, to build 272 semi-detached innovative eco homes at its latest township, Tropicana Aman. The unveiling of Cheria Residences, the third phase of the residential precinct at the 863-acre Tropicana Aman marked the first collaboration between both companies. The development, expected to complete in 2019, embraces innovative design and concepts that are fitted with Japan intelligent construction technology that aim to improve the quality of lives. The signing ceremony was witnessed by Yasuteru Fujii, corporate advisor of Panasonic & PanaHome Corporation. Tropicana was represented by Group CEO Dato’ Yau Kok Seng and Deputy Group CEO Dato’ Dickson Tan; whilst PanaHome was represented by Kenji Koyama, executive officer, and Haruhiko Kuwano, managing director of PanaHome Malaysia. Speaking at the event, Dato’ Yau Kok Seng says, “Building innovative intelligent homes with PanaHome is a sign of our commitment to not just creating harmonious partnerships for the benefit of our customers but ultimately, to also create an ideal and vibrant township that is sustainable and holistic in nature. Going forward, Tropicana plans to build more sustainable homes in each of its townships.”
MAH SING GROUP CELEBRATES ROOF TOPPING UP CEREMONY FOR SUTERA AVENUE
M
ah Sing Group has organised a roof topping up ceremony, Sutera Rooftop Jazz Night, to symbolise the completion of the development structure and preview of the sky bar concept of the Lifestyle
Shop-Offices of Sutera Avenue@Kota Kinabalu. As the official developer sponsor of Kota Kinabalu Jazz Festival 2016, the event adopted a jazz theme and featured live jazz performances. It was graced by Datuk Yeo Boon Hai, Mayor of Kota Kinabalu; James Bruyns, chief sales officer of Mah Sing; William Ow, chief operation officer of Mah Sing; and Jack Ong, chairman of Kota Kinabalu Jazz Festival 2016. Sutera Avenue@Kota Kinabalu is an integrated development with an estimated gross development value (GDV) of RM502million that sits on a 4.26 acres of land. The entire development consists of Lifestyle Shop-Offices, Festive Avenue Retail shops and The Residences, serviced apartment. “We are pleased to share that the commercial components of the development, the Lifestyle Shop-Offices is fully sold and the Festive Avenue Retail has a 75% take up rate. Sutera Avenue’s inherent features as an integrated development and its strategic location will see Sutera Avenue as an effective property for retail yield or capital appreciation,” says Bruyns.
14 | AUGUST 2016 www.propertyinsight.com.my
COVER STORY
KICKING OFF THE ‘COMMDUSTRIAL’ TREND
Teras Eco Sdn Bhd’s Senibong 88 is an innovative concept that capitalises on the growth potential of the southern region BY: AVINASH SAGRAN
16 I AUGUST 2016 www.propertyinsight.com.my
PERSONALITY OF THE MONTH
W
ith proper foresight and planning, one can never go wrong in the real estate business. The industry itself has always been a stable segment in the Malaysian economy; land prices have generally remained steady while selected hotspots have seen significant appreciation over the last few years. The recent economic downturn might have made some buyers, investors as well as developers wary about upcoming development projects. However, with due diligence, a developer can rise above the quagmire with a unique proposition that caters to the needs of present and future
building development trends. Coined by Teras Eco Sdn Bhd, ‘commdustrial’ is one of the latest development trends to emerge. The concept is one where commercial and industrial real estate converge in one space. A NEW DIRECTION Teras Eco’s journey began about four years ago as a small enterprise. It soon caught the eye of Acoustech Bhd, a manufacturing company specialising in the OEM audio production for MNCs. The management of Acoustech realised the need to diversify
their income stream to include businesses which will provide stable long term returns. Thus, the chairman Leong Ngai Seng together with Board of Directors made the decision for the company to undergo an extensive corporate reshuffling to eliminate non-productive business segments within the Group and to venture into new areas. With a new focus, the company decided to venture into the property business to garner stable better returns and bigger profit margins. Another reason for the restructuring, according to Leong, is because the currency fluctuation affects the value of its raw material more severely
www.propertyinsight.com.my AUGUST 2016 I 17
COVER STORY than the property segment. As with any expansion, careful consideration was placed on acquiring the right developer to ensure the sustainability and success of the business long-term. The directors found Teras Eco appealing because of its vision, mission and a strong, dynamic and young management team. According to Acoustech Bhd’s Group General Manager Tee Kuan Hong, the company gauges the needs of buyers by studying the market in detail. They are able to create a sustainable business model by matching the needs of buyers with the supply of new properties in the market. This was what attracted the directors of Acoustech to the developer, which led to the acquisition of Teras Eco in August 2015. Subsequently, JM Cemerlang Sdn Bhd, which has land bank in Johor, was also added to the property portfolio of Acoustech. The entire Teras Eco team was actively involved in Senibong 88, its flagship project; from discussing the value of the product to providing feedback on issues such as land location, property types, potential buyers and target investors to the directors. Tee says, “Teras Eco provides a onestop solution for everyone’s needs. In order to achieve this, the entire value chain of the company, ranging from project management, sales, marketing to construction and administration staff was involved in the whole development process, from planning to launching.” The reason for this is because Tee believes that his company’s ecosystem represents the ideas and voices of their consumers. Having assembled its dream team, Teras Eco is in pursuit of creating value added lifestyle products across all generations and in return help its buyers and investors realise their dreams. SENIBONG 88 Over the years, Iskandar Malaysia has transformed the landscape of Johor. The growth of the economic zones within the southern region in particular has created quite a buzz. Some of the factors that are driving this growth include the establishment of an education hub, medical hub, industrial hub and increase in tourism related activities. Driven by the success of business 18 I AUGUST 2016 www.propertyinsight.com.my
PERSONALITY OF THE MONTH investments and job opportunities at Iskandar Malaysia, the region has seen a population growth of 28% over the last six years, from 1.3 million in 2010 to approximately 1.8 million last year. The mature population living in the area favours Teras Eco’s project Senibong 88, which consists of 45 units of industrial lots spread over 20 acres of prime real estate at the heart of Permas Jaya. Located between the Johor Bahru East Coast Highway and Pasir Gudang Highway, Senibong 88 offers easy access to the Johor Bahru City Centre, Singapore, Port of Tanjung Pelepas and Senai International Airport. Surrounded by reputable projects, the development is capitalising on offering a unique proposition to the residents of Permas Jaya. Tee says, “Offering the right product to the public is crucial as we are able to bring new perspectives to the existing real estate landscape.” Long gone are the days when industrial lots are considered dirty and only built for the specific purpose of catering to manufacturing businesses. According to Richard Ong, Acoustech Bhd’s executive director, the population growth within Plentong, Masai and Permas Jaya places them in a unique position to attract a variety of businesses to Senibong 88. Branded as The Entrepreneur Park,
Senibong 88 offers 24-hour security with 30 units of street CCTV, patrolling services and two guardhouses, thus creating a safe haven for businesses to operate. To further transform the landscape of the industrial lots, Teras Eco has included an outdoor gym and jogging track within the fully landscaped garden setting. The Entrepreneur Park encompasses a balanced lifestyle; merging work, relaxation and healthy living all in one. Providing an avenue for working adults to workout and have a place to unwind after work offers the perfect work balance environment. The concept of the project allows a flexible usage of the space without restricting the space to only manufacturing businesses. The high ceiling and spacious area can be converted to create a mezzanine. Unlike shop lots with limited parking space, the development’s additional 2,000 sqft of land provides ample parking for shoppers. With 3,000 sqft of ground space, businesses can easily utilise the floor area according to their needs instead of having to cram everything in shop lots that usually have only half the ground space. The inimitable offering has drawn various investors; from law to architecture firms. Incidently, Teras Eco would be relocated to Senibong 88. After all, what better way to boost the confidence of investors and the
From providing service with a smile to solving all the issues that buyers have as swiftly as possible, our main priority is to cater to their every need. That will help ensure the buyers’ interest in coming in for future projects” -Leong Ngai Seng
public than by utilising their own creation to highlight the strength of their product. To tap into the catchment of younger entrepreneurs, Teras Eco is currently in
www.propertyinsight.com.my AUGUST 2016 I 19
COVER STORY
talks with several food and beverage outlets, including coffee houses and a Japanese/ international buffet. For investors, the attraction of the project lies in the dual functionality of the space, coupled with the potential appreciation in terms of value and rental makes it a good proposition. The rental rate per sqft for a project that is solely a manufacturing site is between RM1.00 and RM1.20, while a commercial property rate is RM1.50. What this translates to is business owners are open to endless possibilities in terms of being creative with the space. PROSPECT FOR INDUSTRIAL Although Johor is currently experiencing a lull in the residential property market, especially in terms of high-rise developments, there has been a steady flow of multinationals expanding or relocating to the state for several reasons. Firstly, Singapore’s land scarcity is pushing manufacturers to the closest available area to conduct business; and Iskandar Malaysia is the best choice due to its great accessibility to both sea-ports and airports. Furthermore, the weaker Ringgit and 20 I AUGUST 2016 www.propertyinsight.com.my
Iskandar Malaysia’s proximity to Singapore is an attractive proposition for MNCs. Examples include Frost and Sullivan, which is currently operating in Iskandar Malaysia. Coca-Cola is making the moving from Tuas to Iskandar Malaysia as well. There are also numerous affirmations by Korean, Chinese, Russian, United States, Italy and Japanese MNCs to open services and facilities within the region. Tee says, “Teras Eco is focused on the industrial sector at the moment to capitalise on the spillover effect from manufacturers moving from Singapore to Iskandar Malaysia.” Currently there are quite a number of industrial lots operating as commercial lots within Iskandar Malaysia, however, none are purpose built as a commdustrial hub. As a pioneer of this concept, Teras Eco’s rational behind creating such a hub is to challenge the traditional notion of an industrial development, which is usually gazetted far away from the catchment population. Senibong 88 capitalises on its close proximity to Plentong, which has about 500,000 residents living in the surrounding area. Ong says, “One of the advantages of
a commdustrial hub is its ability to attract both businesses and people because of the wide range of services and facilities that it can offer.” Creating an avenue for entrepreneurs to be innovative and creative by offering boutique hotels, art gallery, gym, coffee houses and restaurants within a building structure typically associated with industrial manufacturers is different from the norm, which automatically creates a buzz regarding the development. BRANDING THE WAY FORWARD As a relatively new player in the property industry, Leong states that one of Teras Eco’s main challenges so far is branding. He elaborates, “It takes about two to three years to complete a project, one project would not be enough to satisfy buyers. They need to look at several to have the confidence to go for subsequent projects by the developer.” To ensure that Teras Eco stands out in terms of product delivery, Leong
PERSONALITY OF THE MONTH
emphasises on the services the team provides for buyers from beginning to end. He says, “From providing service with a smile to solving all the issues that buyers have as swiftly as possible, our main priority is to cater to their every need. That will help ensure the buyers’ interest in coming in for future projects.” Capitalising on the spillover effect in Iskandar Malaysia is Teras Eco’s biggest goal over the next five years as they position themselves as a reputable and sustainable developer. And one of the growth area that has been identified is Pengerang. The state government has realised the importance of creating a workforce related opportunity in order to increase population growth. Therefore, Teras Eco’s industrial and commercial projects will certainly fit into the plan of the Johor state government. MNCs such as Petronas and Samsung are attracting skilled expatriate workers to the Pengerang oil and gas refinery. As a relatively new area, Pengerang has a shortage of commercial lots, thus Teras
Eco has undertaken joint venture projects with the state government to cater for the shortage. TARGETING THE RIGHT MARKET Tee points out Teras Eco’s other areas of interest, which include Batu Pahat and Kluang, as the outskirts of Iskandar Malaysia would be the next area to grow considering the upcoming electric train project. The developer believes in working together with the government in joint venture developments that cater to the mature population in locations such as Masai to ensure the wholesome growth of the entire Iskandar Malaysia region. Besides Iskandar Malaysia, Teras Eco also harbours interest in venturing into the Kuala Lumpur property market and the state of Melaka. Touted as one of the best tourism sites in Malaysia, the developer believes the strong economy, coupled with adequate basic amenities and greenery makes Melaka a great location. Ong sums it up by saying, “When times
are slow, sales will be affected. It is up to us to expand on businesses that can give us recurring income. We may look into the hospitality segment to complement our business. Nowadays, developers do not build houses; they build homes. That is why bringing in a hospitality arm may help strengthen our branding efforts.” By increasing public awareness of the brand, the developer would be in a better position to reach out to the buying public. TEE’S TIPS Tee says: Location! Location! Location! 1. Location is very crucial; buyer’s accessibility to the product plays a huge role. 2. Focus on the products that the developer has to offer, and analyse the sustainability and concept of the products. 3. Besides the reputation of the developer, the quality of the product and after sales service are also important factors to consider. www.propertyinsight.com.my AUGUST 2016 I 21
MAIN FEATURE
GETTING YOUR DOWN PAYMENT
They say that the first step is always the hardest. So, we at Property Insight decided to look at several ways you can accumulate your seed money BY: FARA PETIAL
22 | AUGUST 2016 www.propertyinsight.com.my
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any agree that it’s a good time to shop at the secondary market with the current market being what it is. However, there are many things to consider when buying property from the secondary market, especially the down payment. If you have worked for at least five years, you might have enough savings for your down payment. But how about the younger generation who just started working? There are so many ways to get seed money, from the mundane to the enterprising. Here, we take a closer look at a select few. GOVERNMENT SCHEMES The Government has implemented a few schemes to help young adults buy their first home. Two of the well-known schemes are My First Home Scheme and MyDeposit. My First Home Scheme (Skim Rumah Pertamaku) was first announced in the 2011 Budget to assist young adults who have just joined the workforce and earning not more than RM5,000 per month to own their first home. The scheme allows young adults to obtain 100% financing from financial institutions, enabling them to own their first home without the need to pay the 10% down payment. The scheme is open to all Malaysian citizens aged 35 years old or less (age next birthday is 36 years old or less) with a gross income of not more than RM5,000 per month for single borrower and a gross income of not more than RM10,000 per month for joint borrowers (based on a gross maximum income of RM5,000 per month per borrower). Point to ponder: Even if a young adult or fresh graduate qualifies for My First Home Scheme, how much would they need to earn before they can afford the monthly bank loan instalments? Even if a fresh graduate is paid an average of RM2,500 a month, depending on the job scope and academic qualifications, they may have a long list of debts to bear as well – i.e. student loans, car loans and credit cards. MyDeposit, which was announced during the 2016 Budget last October, is aimed at helping the lower-middle income group with a household income of RM10,000 and below. The Government has allocated about RM200 million for the MyDeposit Scheme for first time house buyers. You are eligible for MyDeposit if you are a Malaysian citizen who is 21 years old and
above and is a the first time buyer in your household (meaning both you and your spouse have not bought property before). Your gross household income lies between RM3,000 and RM10,000 a month and you must be able to get financing from the banks. The price of the property must be RM500,000 and below and it must be a sub-sale unit. You can only sell the property 10 years from the date stated on your Sale & Purchase Agreement (SPA). The property should not fall under any other category of government initiatives to encourage home ownership, such as 1Malaysia Civil Servants’ Housing Programme (PPA1M), 1Malaysia Housing Programme (PR1MA), People’s Housing Project (PPR), Federal Territory Affordable Home Project (Rumawip) and Rumah Mesra Rakyat. Without doubt, this initiative benefits all Malaysians who have been planning to own their first home. With the down payment taken care of, home buyers can afford to buy a house without draining their cash reserves, and use their cash for future monthly loan repayments. Point to ponder: It’s important to take note that the SPA must be signed within 30 days upon receiving approval from MyDeposit. So you need to get your bank loan approved before you can get your MyDeposit application approved. MUTUAL FUNDS (UNIT TRUST FUNDS) Investing in a mutual fund is one way to make money for a down payment. Kevin K.M. Neoh, a licensed financial planner from VKA Wealth Planners Sdn Bhd, says, “If you invest in stocks or REITs directly, you will have to buy it from the stock market. REITs is also a ‘stock’ listed on the stock exchange market. The difference between a REIT and any other stock is that the underlying of REITs is real property, and the income is derived from property management and assets that generate income.” If you invest in stocks or REITs via a mutual fund, you will be buying into a fund that invests in the stock market, but is not limited to a single stock as a typical mutual fund invests in approximately 30-50 stocks. This gives the benefit of diversification to the investor as you are not ‘placing all your eggs in one basket’. www.propertyinsight.com.my AUGUST 2016 I 23
MAIN FEATURE “Similarly, there is also a REITs fund whereby the fund will invest in multiple REITs. There is also regional REITs or regional stocks fund that allow the investor to diversify and avoid exposure to a single country. Unlike investing directly on the stock exchange, the fund manager has to buy back the unit from the investors when they want to sell, so you do not need to wait for a willing buyer when you want to sell your holdings,” he adds. Neoh explains further, “Upon submitting your redemption request, typical mutual funds will have a waiting time of T+4 to T+7 depending on the funds. Investing in mutual funds will incur a front-end load (sales charge or subscription fee) that usually ranges from 2% to 7%. Apart from that, funds will also have a yearly management fee ranging from 1.5%2%++ depending on the type of funds or the fund the manager selected. Therefore, it is highly recommended that investors read and understand the product highlight sheet or prospectus before deciding to part with their money.” Point to Ponder: It is not advisable to invest in these instruments if you are trying to get your money back in a short duration, for example, within a year. This is because such investments are volatile, and you may lose your money as a result. It is also very important to understand your investor risk profile, risk capacity as well as investment time horizon before investing.
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If you can spare the time and willing to make the effort, doing part-time jobs can be a good supplement to your monthly income. Depending on the type of part-time work you are doing, it may take less than a year for you to save up money for your down payment” FIXED DEPOSITS, CASH MANAGEMENT FUNDS, MONEY MARKET FUNDS According to Neoh, if one’s investment time frame is only one year or shorter, they should consider placing the money in fixed deposits, cash management funds (funds that invest in fixed deposits) or money market funds. Cash management and money market funds offer similar returns to fixed deposits, but it has daily liquidity. For example, if you withdraw this money after 20 days, you will still receive your ‘dividend’ for the 20-day period. Neoh says, “Unlike a fixed deposit, if you redeem after 20 days, you will likely forfeit your interest. Cash management fund and money market fund will usually have zero sales charge, so it can be as good as a fixed deposit, with the additional benefit of daily liquidity. However, it will usually take T+2 days before the money is in your account;
for fixed deposit, it is usually T+0.” Bank Negara Malaysia (BNM) recently announced the reduction of the overnight policy rate (OPR) by 25 basis points to 3% at the Monetary Policy Committee (MPC) meeting on July 13, 2016. How will this affect you? With the 25 basis points reduction in borrowing rates, consumers will see a hike in their disposable income due to a reduction in interest payments. In other words, consumers will have more cash to spend, which will likely spur the domestic economy. Point to Ponder: The fixed deposit rate is affected not just by the OPR movement. The fixed deposit rate may be slightly higher for a particular bank because they want to attract more funds. If the former goes up, the cash management fund rate will go up in tandem too. Therefore, if the interest rate decreases, putting money
in fixed deposit may not give you a good return. You may want to keep the money in your savings account instead. EPF WITHDRAWAL This scheme allows individuals (or joint purchasers) to withdraw money from their EPF Account 2 to purchase a house (type: bungalow/terrace/semidetached/apartment/condominium/studio apartment/serviced apartment/townhouse/ SOHO) or a shop lot with residential unit, from a developer, individual or in a public auction. To apply, the SPA as well as the Housing Loan Approval Letter or Loan Facility Agreement must be submitted at the time of the application. According to Loanstreet, money from EPF Account 2 can be used to pay the price difference between the SPA house price and the housing loan amount, up to an additional 10% on the price of the house. So if a full housing loan (100%) is obtained, the maximum that can be withdrawn is up to 10% of the price of the house. If the house was purchased using cash, up to 110% of the price of the house can be withdrawn. Any withdrawal amount is
subject to whatever money that is available in the applicant’s (and where applicable, joint applicant’s) Account 2. As such, you can withdraw from Account 2 to purchase your first house, and withdraw to purchase a second house, provided the first house is sold, or disposal of the property has taken place. Point to ponder: One of the terms for withdrawal is you have signed the SPA not more than three years from the application date. This means that you still need to pay the down payment using your own money first before you can apply for EPF withdrawal. Also, you need to consider how long you will need to work for before you have enough money in your Account 2 for that purpose. WORK HARDER AND SPEND LESS I met some young investors who managed to obtain their seed money from doing multiple jobs and spending less. One investor, Diau Mun Cheng, worked parttime as a tuition teacher and did home tutoring for six months before he managed to save up his seed money (Read his story on page 58). An Additional Mathematics teacher can earn between RM50 to RM65
per hour giving tuition. How much you make depends on the type of part-time job that you do. Many young people are now driving Uber, GrabCar or running a part-time business on Instagram. And as with any job, the more time and effort you put in, the more money you make from it. Nashruddin, who drives GrabCar as his full time job, makes an average of RM3,000. During those months when he puts in extra effort, he can make at least RM5,000 per month. As a part-time accessories seller on Instagram, Eda Mansur makes at least RM2,000 per month. In her first month alone, she made RM1,200. Point to ponder: If you can spare the time and willing to make the effort, doing part-time jobs can be a good supplement to your monthly income. Depending on the type of part-time work you are doing, it may take less than a year for you to save up money for your down payment. These are just some of the ways to obtain money for your down payment. It is by no means an exhaustive list as it goes back to the root of financial management – you. Are you willing to work a little harder for it? Or would you opt to take the easy way out? www.propertyinsight.com.my AUGUST 2016 I 25
FEATURE
GETTING THE RIGHT LEGAL REPRESENTATIVE It’s important to understand the lawyer’s position as a stakeholder in property transactions BY: AVINASH SAGRAN
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hen Andrew sold his property in Subang Jaya last year, the transaction was completed and the balance purchase price was fully released to his lawyer who was the appointed stakeholder. However, he learnt an expensive lesson from not vetting his real estate lawyer thoroughly when his lawyer failed to release the money to him according to the sale and purchase agreement (S&P). Lawyers are commonly appointed as the stakeholders of property transactions, and are deemed to be the administrators of the estate. Appointed lawyers often wear two hats; for example, as the lawyer for the client (can be for the vendor or purchaser, but never for both of them at the same time as there would be a conflict of interest), and also as the stakeholder to the deals with the monies according to the S&P. The scenario suffered by Andrew is rare but should not be viewed lightly. Lawyers and bankers play a crucial role in the real estate industry, especially during the transaction of a property. Malaysia has very concise and coherent laws pertaining to property ownership. MALAYSIAN LEGAL SYSTEM Compared with other Asian countries, the Malaysian legal system is predominately based on the English Common Law. Therefore, all legally binding contracts and documents are written in English. Enacted 26 | AUGUST 2016 www.propertyinsight.com.my
in the National Land Code, Act 56 of 1965, Malaysia uses the Torrens System of land law, which mandates that all ownership of property is to be registered, which means that the title cannot be disputed or challenged by anyone. In the instance of what happened to Andrew, he should directly lodge a complaint to the advocate disciplinary board. Though cases such as this has no statute of limitation, it is best to act quickly once the client realises the released monies is not transferred to them. Appoint a lawyer and proceed with a civil action to obtain a court order against the malpractice of the real estate lawyer. Typically, such cases are a done deal with the victim coming out victorious. So the question now is why did someone like Andrew have to go through this ordeal in the first place? Purchasing or selling properties through a property agent as your representative can be instrumental to the level of duress you go through. An experienced agent from a legitimate licensed agency would deal with the necessary paperwork and link you with professionals such as bankers and lawyers to provide legal and financial services. The rapport between agent and client can be pivotal in maximising the benefit margin through a property. There is less risk involved when you engage an agent who is well established with good networks, compared to engaging several parties
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FEATURE
individually on your own. DON’T CUT CORNERS Sellers often want to keep their cost down as much as possible in order to increase their profit margin. Legal fees in Malaysia are standardised through Malaysia’s Solicitors Remuneration Order. It is 1% for the first RM150,000 of the transacted price, 0.7% for the next RM850,000, 0.6% for the next RM2 million, 0.5% for the subsequent RM2 million and 0.4% for the next RM2.5 million. So if a seller sells his condominium unit for RM2 million, he pays about RM20,000 in legal fees. To avoid paying the lawyer’s fee in addition to the legal fees, sellers would often rely on the purchaser’s lawyers to conduct such arrangements. The red flag here is that the lawyer often only has the interest of the client in mind, as the fiduciary responsibility does not extend to the seller since he or she did not appoint him as their official legal council. Furthermore, this is not wise as it puts you 28 | AUGUST 2016 www.propertyinsight.com.my
at risk, it’s a conflict of interest, and is a breach of the lawyer’s own professional ethics. UNDERSTADING DEFECT LIABILITY PERIOD For any new housing development that is under construction, developers are statutorily required to appoint lawyers as stakeholder to retain a portion of the purchase price upon completion of a development. The lawyers will deal with the retention sum according to the provision of the SPA. It will be retained and only released to the developer upon the expiry of the Defect Liability Period (DLP). DLP is a feature and standard practice in all construction contracts in Malaysia. The contractors or developers (as the case may be) are obligated and liable to rectify any defects between the period the Certificate of Completion and Compliance (CCC) is issued and the expiry of the DLP. Contractors are obligated to remedy any shortcomings or defects in accordance with the architect’s instructions. In the
event that the contractor fails to comply, the homebuyer can recover the cost of remedying the defects as damages from the lawyers. Here’s a case study to illustrate this point. Julia purchased her home directly from a developer. After she collected the keys, she discovered that there was a leakage. Julia notified the developer of the leakage but the developer did not respond to her, and the 30-day liability period lapsed. As the problem was not rectified, Julia decided to repair the leakage herself. Julia can now proceed to claim the money she used to attend to the repairs. However, she has to write in to the lawyers appointed by the developers. Julia’s repair cost would be attended and reimbursed by the appointed lawyers within 2-4 months after all the necessary paper works are in order. These two instances where lawyers are appointed as the stakeholder requires us as clients or buyers to be vigilant and to know our rights in case we need to take necessary actions.
EXPERT COMMENTS
Chris Tan (Lawyer) Property investment is one of the biggest investments in your life and you have to live with it for a long time depending on your loan tenure with the bank. The consequences of not doing it properly is far reaching. Getting the right lawyer with the relevant experience and knowhow will ensure that you are kept informed throughout the whole process and your expectations can be managed appropriately. There is no standard only norms; every sale and purchase transaction is unique on its own. The lawyer’s role is to ensure a tailor-made transaction is designed and executed to meet your unique requirements.
Dato Teh Tai Yong (Lawyer) When you buy or sell property, it is extremely important to appoint a good lawyer who is well versed in property transaction. A good lawyer will be able to advise you on the procedures and avoid pitfalls throughout the transactions. Some people try to save on legal fees by not appointing a lawyer to vet through the documents, but end up paying a much higher price in the form of penalty or damages.
Mike Lee Seang Yik (Lawyer) If you can conduct thorough research to purchase or sell a house, then do the same when hiring a lawyer. Instruct your lawyer to have everything in writing. Any feedback and correspondence regarding the transaction should be well documented.
WCT Realtor (Real Estate Agency) Agents these days do more than just help their clients sell property. Their wide networking provides a stable value chain, which connects clients from lawyers to bankers and tenants.
Dexter Lim Cheng Yew (Investor) You may have to try a few out before you find the right one. Maintain a good working relationships with them at all times. Look at the long-term, not just the short-term benefits only. In fact, I have lawyers who personally attend to my cases to make sure that everything is according to plan.
Gary Chua (Banker/Investor) Getting the right lawyer is important. Fees should be the key concern because the contract protects our interest, therefore we need to ensure the contract is effective, precise and non-bias. If they are not diligent and efficient in sending the right sets of paperwork at the right time, they can cause delays in the buying or selling process. Avoid hiring a conveyancing solicitor who is overworked or who may not have enough experience. You want their full attention and experience to make sure no important details are missed. You should try and source a solicitor that you trust and feel that you can work well with. Make sure that the solicitor takes the time to explain everything to you in layman’s terms. It is their duty to ensure you fully understand what you are signing up for.
Khalil Adis (Author/Consultant) A right lawyer is able to ensure that all your paper work and Sale and Purchase Agreement is legally binding. More importantly, it protects you from errant developers under the Housing and Development Amendment Act 2007. A right lawyer also ensures that you are able to secure a loan by declaring the right SPA price. They will see through everything until the keys are handed over to you. There have been cases of lawyers running away with the client’s money so consumers should only work with recommended lawyers or those whom they trust.
www.propertyinsight.com.my AUGUST 2016 I 29
PROPERTY BRAIN GAMES The psychology behind successful property investment BY: AVINASH SAGRAN
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nvesting in the real estate industry is an art on its own. The tricks of the trade from securing a good deal, growing your property investment portfolio to managing your properties need a fair amount of strategising. It’s a mind game both internally and externally; the decision-making starts from you, hence there are numerous decisive actions to be taken. Property investing requires dealing with numerous stakeholders, therefore one needs to be persuasive yet accommodating in order to
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achieve their objectives. Without a proper internal structure, one will not be able maintain yet alone pursue a successful property portfolio. So what is the psychology behind investing? IT BEGINS WITH YOU Property investment falls under the category of business psychology. According to a psychologist from University of Malaya, those with an interest in property investing has to treat it like a business instead of a hobby as it involves money, numerous
stakeholders and success margins. By equating property investment to a personal business, one will become more vested in the matter which will lead one to conduct numerous researches and verify the information. This would entail skills such a being analytical, resourceful, possess good judgment and able to make executive decisions. Dayana Rahman from Help University says, “Starting anything new is usually a difficult process and requires selfdiscipline. But over the long run, the
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Positivity from a good support system releases hormones such as endorphins, which stimulates the feel good vibe needed by an individual to pursue anything they want” - Dr Shanti Mugenen behavioural patterns picked up through the process of buying a property would become ingrained and habitual.” WHEN ARE YOU READY? Investor Kam Wei Tsung points out, “Homebuyers and investors have to have a game plan ready, there is no reason to rush into a purchase just because your friends are doing it or someone told you so. You must know how you will manage the property, from financing, maintenance and exit strategy.” Often an exit strategy is not discussed in the context of property investment. However, in the current market, it is important for individuals to have a full contingency plan in order to not part with their money needlessly, or worse, go bust. The art behind a game plan is knowing where each step would lead you; remember to always fall back on your initial goals or objectives if you get carried away from the game plan. Understanding the subject matter is crucial, hence property gurus, property investment books and seminars are important to have as references. The psychology behind it is to know who to trust and what works for you. There is no shortcut to this however; it relies on a goal set by you. The UM psychologist points out, “The moment an individual selects a method he or she wants to emulate is the first step in their decision making process. By exploring the different facets of an ideology, one is already making all the calculated decisions to commit.” According to risk management lecturer Hidhir Mohammed from Putra Intelek International College (PIIC), any individual who made the decision to never take their commitment lightly will go through a series of internalisation, which allows the buyers or investors to be at ease with their 32 | AUGUST 2016 www.propertyinsight.com.my
decision. IT CAN GET LONELY Hormones and emotions govern our bodies; so it is up to us to keep ourselves balanced and healthy. Positivity from a good support system releases hormones such as endorphins, which stimulates the feel good vibe needed by an individual to pursue anything they want, according to medical professional Dr Shanti Mugenen. If you pay any attention to the success stories of property investors, you would have noticed they would always thank their partners for being understanding and patient. Investing requires time away from your loved ones; viewing properties, meeting agents and negotiators will take up the bulk of your time. Surround yourself with a good support system; discuss the matter with your family, partners or close friends first. By having their support during tough times, you will not feel lonely or isolated because there is a positive support system to safeguard your personal state of mind. Sandeep Grewal from Freeman jokes, “It can be very boring, but having the right team to work together and push each other is the key which then turns to fun.” The economic climate has pushed many likeminded people to come together in their pursuit of property investing. As any rookie investor would say, ‘it was the notion of financial freedom that led me here’. Going through the process as a team allows for faster knowledge sharing, which is key in property purchasing as time is money, especially in hotspot areas. Furthermore, one would feel a sense of belonging with a team, which would motivate them to weather any rough days. Sandeep points out how site visits can be turned into a fun activity with the right group. He says, “We often turn it into a food hunting expedition within an area
under the pretext of market research and while negotiating with developers, vendors or agents.” Besides research and analysis, it’s also important for you to stay level headed and enjoy the process with a group of people who is supportive of your decision in order to succeed in property investment. It’s good to be part of a team during bad times; by sharing your problems with like-minded people, you can get words of encouragement, advice and ideas to refine the failures or methods to get your property. THE RIGHT TEAM/PEOPLE Property investor Hazel Leong amasses property through auctions, and she credits her success to her team. She says, “My team does everything for me, from vetting through the documents thoroughly to dealing with tenancy issues. I rely on them to provide me with the best advice from the legal and banking stand point.” Although one cannot substitute selfresearch and discipline, one can enhance their capabilities with the right group surrounding them. Vincent Ng, CEO of Kim Realty, explains that he trains his agents to be sincere, honest and provide accurate information to their customers to ensure that a strong rapport can be maintained between the agents and buyers or sellers. This sentiment is echoed by Colin Tan from ColinTan Group of Companies during a speech entitled the ‘Psychological And Professional Requirements To Succeed In Real Estate’. It is a two-way communication as the trust obtained from the agent would entail a good long-term relationship which benefits both parties. The right team would not allow you to stray away from your goals and would instead complement your success. To find the right team, you need to start at the very beginning of your property investing journey.
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EMBRACING COWORKING SPACES Although the trend is relatively new, it is just a matter of time before people start to appreciate the flexibility and recognise the value of a coworking space BY: NATASHA GIDEON
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T
he usual case for start-up owners is to order a cup of coffee from Starbucks, and leech off the free wi-fi for as long as possible until someone gives them a dagger stare. In effect, such commonplace scenarios have given rise to the need for cheaper, more flexible working spaces, thus the idea of coworking spaces was born. Coworking spaces are a relatively new emergence in Malaysia, which many believe is due to the mushrooming of start-ups in the past couple of years. If you have yet to hear of coworking spaces, that is because the trend is just beginning to catch on. According to an analysis in 2014 by Smallbizlabs, a website that features key social, technology and business trends impacting small businesses, the number of its members using coworking spaces around the world will reach one million by 2018. The platform not only gives its members a comfortable working space and environment, it also supports collaboration, openness, knowledge sharing, innovation and user experience. This is merely the tip of the iceberg. A recent report by Jones Lang LaSalle (JLL) entitled ‘A New Era of Coworking’, states that, with the growing number of companies looking to tap into these benefits, it is only a matter of time before coworking becomes an integral part of the corporate real estate toolkit. AFFLUENT SPACES One of the earliest coworking spaces to be setup in Kuala Lumpur is Fluent Space. “My brother-in-law started Fluent Space around 2010 to 2011, as a space to share with friends while he worked as a programmer. He got the idea from his trip to the United States when he used several coworking spaces there. Soon after setting up Fluent Space, he was hired by a company in Singapore and now resides in San Francisco. At that time, we both felt that the business was worth keeping alive, so I manage the space now,” says Fahmi Fazil, operator of Fluent Space. Since its opening, Fluent Space has increased its capacity from 24 to 32 desks. “The business is dependent on the economy as most coworkers are either start-ups, techno-preneurs or solo workers who work on adhoc projects,” he explains. Alongside the techno-preneur and start-up culture, coworking spaces has become a common practice in developed countries. “It’s far more robust and competitive today than it was 5-6 years ago. There are cookie-cutter spaces as well as hybrid spaces out there, in many areas of the Klang Valley and beyond. This is a good sign, as the coworking culture is about being independent yet remain socially-connected in a comfortable work environment. It’s really conducive for creative workers, but also for people who are starting up something new and don’t want to invest in their own space yet,” says Fahmi. So how is a coworking space any different from renting a traditional office space? For Fluent Space, its space is open for coworking based on a daily, weekly or monthly pass. “Right now, most of our coworkers are here on a monthly basis, as they see the benefit of having 24/7 access to the space and can come in anytime. Daily and weekly coworkers are bound by our regular operating hours – Mon-Fri, 9am-6pm,” he says. In terms of business growth, it’s a bit more tentative as coworkers depend on the state of the economy for their continued operations. “So, instead of having one big space www.propertyinsight.com.my AUGUST 2016 I 35
FEATURE up for rent, you’re actually putting a certain number of tables on the market. There are pros and cons to this, but our interest has been about providing a space to allow new startups, techno-preneurs and solo workers to make us their base of operations,” Fahmi points out. “We’ve come across instances where coworkers end up creating new work or personal relationships, and was also able to come up with fresh perspectives or ideas, or even cross-pollinate products and services based on interactions with other coworkers,” he adds. NEW AGE BUSINESS TRENDS Many companies are now transitioning from the traditional 9-to-5 work hour with rigid layouts, to flexible hours and comfortable working environments. There is also growing pressure to bring more flexibility to the real estate portfolio and create greater volumes of on-demand space according to the report by JLL. Coworking can help satisfy this growing demand for the agility, fluidity and liquidity of space, whilst allowing companies to experiment in a ring-fenced environment without the need for organisation-wide change. “The workplace of the future will be more open and collaborative, more focused on sharing and community. We founded the space on these principles and it is also how we personally work,” Alex Tee, founder of H Space, points out. Within Bangsar itself, there are already four coworking spaces available with an active community to boot. The number of members opting for this alternative space as a workspace has been steadily increasing. “A traditional corporate setting will still represent a large percentage of the workforce, while a growing trend of coworking spaces will coexist in the same space,” shares Ee Soon Wei, CEO of Uppercase. Stephanie Chew, sales and marketing manager of White Space, explains that their spaces are a hybrid of both owned properties and sublet, whereby the structure depends on the location of the working space. “In some cases, landlords enter into a joint venture with us in order to increase their yields on their property,” she says, adding that in terms of yield, it is a very stable and progressive investment. 36 | AUGUST 2016 www.propertyinsight.com.my
According to Chew, a coworking business is an enhancer for landlords and will provide approximately 10% to 15% more return compared to the general rental yield. However, a small initial investment is required at the start to ensure the place is conducive for setting up a virtual office. “For the layman, it adds value to the premise from RM4-RM5 per sqft to a minimum of RM20 per sqft or more in some instances,” she says. In this challenging economy, many companies are facing intense pressure to
reduce the operating expense of their real estate portfolios. Although cost reduction is not typically the primary driver of coworking; nevertheless, it can create an opportunity for a more efficient utilisation of space, thus helping companies to reduce costs without compromising on the quality of the workspace. THE DOWNSIDE Although coworking spaces have grown in popularity in recent years, there are several shortcomings to this concept. One of the
issues, commonly associated with any property, is safety. According to the report by JLL, for companies that deal with high volumes of confidential data, sharing a space with external organisations or easing the rules for using personal devices can be potentially challenging. In addition to dealing with the security of its premises, cyber security is also a growing strategic challenge for organisations. As such, effective coworking solutions are needed to help mitigate both of these concerns. Similarly, privacy is an issue when in close contact with coworking members. To overcome this, organisations will inevitably need to adapt their existing processes to manage potential privacy risks associated with opening up their organisation to external coworking environments. Besides that seemingly minute but just as important to note is the risk of a potential clash in working culture among intercoworking members. By tailoring workplace solutions, companies can achieve a seamless integration of coworking space into their established real estate strategy.
The workplace of the future will be more open and collaborative, more focused on sharing and community. We founded the space on these principles and it is also how we personally work� - Alex Tee
www.propertyinsight.com.my AUGUST 2016 I 37
DEVELOPER OF THE MONTH
V12 SOVO
DISTINCTIVELY NICHE From a constructor to a developer, Tan Sri Dato Lim Yew Loong of LYL Group is now grooming his sons to takeover the business BY: FARA PETIAL
38 | AUGUST 2016 www.propertyinsight.com.my
L
YL Group was established in 1990 as the result of Tan Sri Dato Lim Yew Loong’s blood, sweat and tears. The developer specialises in property development and providing warehousing solutions. As an esteemed property developer in the Klang Valley, LYL Group has expanded its property development portfolio to include commercial and residential properties. The Group’s customer value proposition promises value added investments with an excellent track record to boost. Armed with the foresight to anticipate market demands in the warehousing industry, LYL Group is able to translate such demands to meet the needs of consumers, a niche strength the Group possesses. With the ability to create unique spaces and provide warehousing specifications advisory for their tenants, the company has earned the recognition of being a preferred warehouse solutions provider in the industry. DIFFERENT DIVISIONS Being the successful business tycoon that he is, Lim is able to foresee how developments in certain areas will look like in years to come. He is the type of leader who wants everything done fast but carefully. He handles all of LYL Group’s projects on his own and whenever a problem occurs, he will go to the site and inspect in person. He is also the type of employer who will convince his employees that the things that seem impossible to them can actually be done. As part of his succession planning, Tan Sri Dato Lim is grooming his sons to run the business. His second eldest son Dato’ Kian Lim is the Chief Executive Officer of Geno Hotel, while Adrian Lim is the Corporate Planning Director who handles property developments. His youngest son Andrew Lim is the property management executive who manages the warehouse and logistics side. WAREHOUSING The Group is one of the main players in the country’s warehousing market. Its first industrial warehouse – measuring 50,000 sqft – was built in 1994. To date, the Group has built and owns more than three million sqft of warehouses. The latter is rented out
From back: Andrew Lim, Dato’ Kian Lim, Adrian Lim to logistic companies. With the increasing demand for logistic warehousing, LYL Group launched the U10 Logistics Park @ Shah Alam back in 2011. Spread over 65 acres of land, the development comprises Class A distribution centres ranging from 100,000 sqft up to 320,000 sqft of lettable space. The U10 Logistics Park has since become the logistic hub and distribution centre for tenants such as MYDIN Mohamed Holding Bhd, H&M Retail Sdn Bhd, Linfox, DB Schenker and many more. V12 SOVO PHASE 2 The V12 SOVO that was completed in
2013 is in every way an exquisite blend of unique space, designer amenities and grand model for professional living. It is situated next to the V12 Corporate Park, and strategically located fronting the ELITE Highway for superior visibility. Other than that, it is also easily accessed via the Kesas Highway from Cheras, Bukit Jalil, USJ, Kota Kemuning, Bukit Tinggi and North Port; NKVE Highway from Bukit Jelutong, Sungai Buloh, Damansara and Kuala Lumpur; Federal Highway from Shah Alam, Klang CBD, Petaling Jaya and Kuala Lumpur; as well as the Guthrie Corridor from Klang, Rawang, Kelana Jaya and Kota Damansara. www.propertyinsight.com.my AUGUST 2016 I 39
DEVELOPER OF THE MONTH Due to popular demand, LYL Group launched Phase 2 of the project, which was completed in mid-2016 shortly after the immediate sell out of Phase 1. Tower 3, totalling 392 units, will appeal to entrepreneurs and small businesses alike in the commercial hub of Subang Jaya. Types A, B, C and D range from 430 sqft to 540 sqft, and each unit is semifurnished with a stylish pantry cabinet, a cooker hob, air conditioning, washing machine and more. This innovative SOVO concept combines a commercial home office with a practical and contemporary living space well suited to the modern lifestyles of today. So what makes LYL Group’s projects different from the rest? Adrian responds, “Our product offers space utilisation; most of them are designed with an open concept in mind. Our father has always reminded us that we must strike a balance between the ‘want’ and the ‘need’ in our projects. So we have to build a property that is both practical and affordable.” “When we launched the first phase, we did not do a lot of marketing or advertising for the project. So the response that we got made us really proud of it. Although we have not build a residential property for quite some time, the feedback was
LYL Logistics Park @ U10 Shah Alam
tremendous when we launched one. It feels great to know that we still have so many loyal followers,” he adds. SOVO Phase 2 is the last phase for the development. To date, 97% of its units have been sold and only a few units are left. “In just over a year, the occupancy rate for Phase 1 is already at 80%. Most of our buyers are investors, and the yield that they got is probably around 6%,” Adrian points out. GENO HOTEL LYL Group has ventured into the hospitality
industry with its latest development – Geno Hotel. It is a brand new 4-star business class hotel. Equipped with 244 rooms, the hotel, which began operation in June 2016, offers deluxe international class accommodation and contemporary facilities to guests. It aspires to provide an exquisite, professional and pleasant hospitality experience to the business and leisure market segments. Kian says, “The idea of building the hotel was so that we would be more involved with the community. Since LYL Group’s vision is to be an innovative property
Geno Hotel 40 | AUGUST 2016 www.propertyinsight.com.my
Wisma LYL developer by creating developments for a sustainable future, building Geno Hotel is our way of giving back to the community. How are we doing that? By offering many facilities like meeting rooms and ballrooms at the hotel.” “Shah Alam is divided into two sides – on the right its all residential units, while on the other side its all industrial units. There is no hotel here. So that’s why we decided to build it because we’re confident that this project is going to be successful. For example, people who work in the surrounding area of the hotel need a venue for meetings, dinners and events,” he adds. YOUNG DEVELOPERS Many people are under the impression that following in the footsteps of a successful father would be easy. However, that is not true at all. Kian says, “Running a family business is not a luxury, it’s a commitment. How much are you willing to commit to your father’s business? To be honest, we’re a very new hotelier, but I am so grateful that I have a great management team to support us.” Adrian points out, “My father always helps me and give me the opportunity to learn, but he never spoon-feeds me and my brothers. He wants us to learn the fundamentals of development, which is the construction site. Working under the guidance of our Project Director,
coordinating and managing contractors is the key to achieving tight handover deadlines for our clients. This applies not only to construction but in every aspect of the business. My father tells us, ‘If you want to be a developer, you must actively be at the site, you can’t learn construction from sitting on your desk’. ” Lim has been reminding his sons as well as his team that keeping one’s word is very important – that they must maintain the good reputation of the company in order for it to sustain. Because of that value, LYL Group has steadfastly grown into an established group delivering products and services with the highest distinction.
Running a family business is not a luxury, it’s a commitment. How much are you willing to commit to your father’s business?” - Dato’ Kian Lim
U10 Warehouse - Interior www.propertyinsight.com.my AUGUST 2016 I 41
AREA FOCUS
ARA DAMANSARA: A RISING TIDE
An investment worth considering for a better future for those who want to enjoy close-knit community living BY: FARA PETIAL
T
he current market is said to be a buyer’s market, which means you have a chance to strike the deal you are looking for. But how do you decide if the
42 | AUGUST 2016 www.propertyinsight.com.my
deal is really the best for you? Is location a key factor for you? If it is, then Ara Damansara is one of the areas in the Klang Valley that has everything
you are looking for in one place. Besides great accessibility and connectivity, the area is also offering a number of new developments.
CONNECTIVITY AND ACCESIBILITY Ara Damansara was first developed in 1999 by Sime Pilmoor Development Sdn Bhd, a wholly owned subsidiary of Sime Darby Bhd, and is managed by Sime UEP Development Sdn Bhd. The area is expected to encompass approximately 4,000 units of various property types once completed. It is a 739-acre (2.99 km2) township taking shape along the Subang Airport expressway in Petaling Jaya and is strategically located at the north and west of the New Klang Valley Expressway (NKVE), east of the Subang Airport Highway and south of the Puncak Alam Highway. It is embraced by Kota Damansara to the north, Taman Tun Dr Ismail to the east, Subang Jaya to the south, and Kayangan Heights to the west. It also sits between the Saujana Golf and Country Club, and the Tropicana Golf and Country Club. Ara Damansara is served by the Federal Highway, NKVE and the Subang JayaKelana Jaya Interchange, thus connecting motorists in the area to other parts of the Klang Valley. With its strategic location, easy accessibility and affluent customer base, the area is poised to develop into a prestige township, offering a lifestyle that
promotes close-knit community living. Accessibility into the township is also via the six-lane dual carriageway Subang Airport Highway and Subang KelanaLink interchange. The second access is through the NKVE tunnel via Crimson Condominium to Damansara-Puchong Expressway (LDP). The eastern portion of Ara Damansara is linked to Persiaran Tropicana by a new access road that passes through Damansara Idaman. Yien Ong, a real estate agent from Reapfield Properties (Subang Jaya) Sdn Bhd, who is also a specialist in the area says, “Ara Damansara is a favourable neighbourhood with high potential in Petaling Jaya. This is mainly due to its strategic location situated right in the middle of several prime locations such as Bandar Utama, Tropicana, Sunway, Glenmarie and Kota Damansara. Also, there are two new LRT stations along the Kelana Jaya LRT Extension that started operating in Ara Damansara on 30 June 2016, which will definitely provide further accessibility and convenience for the community.” The Kelana Jaya Line runs from Putra Heights through Kelana Jaya to Gombak, serving the Subang and Petaling Jaya
regions to the south; southwest and central Kuala Lumpur, and Kuala Lumpur City Centre in the centre; as well as low density residential areas further north. The Ara Damansara LRT Station has an entrance from the neighbourhood of Taman Mayang Emas near Evolve Concept Mall, and another entrance from the Subang Airport road. Ong, who is also the co-founder of aradamansaraproperty.com, points out, “In term of amenities, Ara Damansara is very much a self-sustained neighbourhood. There is Tesco, Jaya Grocer, Village Grocer, Mediveron Clinics, MBO Cinema, Sime Darby Medical Centre, Evolve Concept Mall, Citta Mall, branded kindergartens, international schools, popular restaurants and many more.” PROPERTY DEVELOPMENTS Ong mentions that the population in Ara Damansara will continue to grow due to several upcoming condominium developments, such as Ara Greens Residence, Verde Residence, The Potpourri, Maisson, H2O, Cantara Residence and others. “With this, I foresee a rise in demand and price for commercial properties in the area. On the other hand, www.propertyinsight.com.my AUGUST 2016 I 43
AREA FOCUS landed residential properties are scarce and limited.” Sime Darby, the pioneer in the area, is also looking forward to launch two of its projects in Ara Damansara. Its upcoming residential project is Cantara Residences. It is an apartment that bridges aspirations for its residents. It is designed to rejuvenate
one’s body and relax one’s mind, with a sparkling pool, aqua gym and multipurpose hall. There will also be a stunning sky bridge that connects all four residential towers of the development. Oasis Corporate Park, a commercial development, is also one of the new projects in the Ara Damansara area. This one-stop
hub, with a perfect mix of corporate offices, serviced suites, retail outlets, and a hotel and convention centre, is built on 9.77 acres of prime freehold land. There is also Maisson – a new development in Ara Damansara that was completed in July 2016 and was revived by Newfields. The spokesperson at
Maisson by Newfields TRANSACTION SALE PRICE OF LANDED RESIDENTIAL PROPERTY (2-STOREY TERRACE HOUSES) No.
Scheme
LAND AREA (SQ.FT)
BUILT UP AREA (SQ.FT)
TRANSACTED PRICE IN 2014 (RM)
TRANSACTED PRICE IN 2015 (RM)
TRANSACTED PRICE IN 2016 (RM)
% CHANGE
TENURE
1
Ara Impian Jalan PJU 1A/25 – 25E
1,780
2,076
1,235,000
NA
1,340,000
4.25%
FH
2
Ara Impian Jalan PJU 1A/23 – 23D
1,780
2,061
1,100,000
1,175,000
NA
6.8%
FH
3.
Ara Idaman Jalan PJU 1/32-32C
1,780
2,076
1,235,000
NA
1,340,000
4.25%
FH
4.
Ara Permai Jalan PJU 1A/43 – 43H
1,647
1,887
1,020,000
1,133,000
NA
10.8%
FH
5.
Ara Putra Jalan PJU 1A/1C – 1J
1,647
1,848
1,288,000
1,300,000
NA
0.9%
FH
6.
Ara Putri Jalan PJU 1A/3B – 3H
1,780
1,964
NA
1,230,000
NA
NA
FH
Source : NAPIC/VPC Research
TRANSACTION SALE PRICE OF LANDED RESIDENTIAL PROPERTY (SEMI-DETACHED HOUSES) No.
Scheme
LAND AREA (SQ.FT)
BUILT UP AREA (SQ.FT)
TRANSACTED PRICE IN 2014 (RM)
TRANSACTED PRICE IN 2015 (RM)
TRANSACTED PRICE IN 2016 (RM)
% CHANGE
TENURE
STOREY
1
Ara Vista Jalan PJU 1A/29 – 29C
3,875
2,519
2,220,000
2,580,000
2,812,500
9.0%
FH
2
2
Seri Pilmoor (Bayu Timur)
3,864
5,124
3,390,000
NA
NA
NA
FH
2.5
Source : NAPIC/VPC Research
44 | AUGUST 2016 www.propertyinsight.com.my
Maisson says, “One of the key reasons we chose Ara Damansara is because of the surrounding established neighbourhoods such as Tropicana, Bandar Utama and Subang Jaya – that drew our attention and interest in reviving this development. We also strongly believe in the development’s value and opportunity.” The spokesperson adds, “Hence, we enhanced and improved the entire layout of the development to feature both serviced apartments and retail space. The upgraded design, plan and concept of the development was inspired by the multi-generational family units and community living of yesteryears with a secure landscaped deck to encourage connectivity with nature and people – i.e. ‘Bring Traditional to Life’.” Maisson is designed to suit the needs of all kinds of potential buyers, with sizes ranging from 500 sqft studios up to 1,300 sqft three-bedroom units with allocated car parks and facilities such as a gymnasium, a 50 meter swimming pool, children play area, 24-hour security and more. The spokesperson points out, “Besides major highways such as NKVE, Maisson is also just a stone’s throw away from
TRANSACTION SALE PRICE OF LOW AND MEDIUM COST APARTMENT No.
Scheme
BUILT UP AREA (SQ.FT)
TRANSACTED PRICE IN 2014 (RM)
TRANSACTED PRICE IN 2015 (RM)
% CHANGE
TENURE
1
Sri Ara
758
270,000
345,000
27.8%
FH
2
Seri Jati (Seri Meranti)
659
88,000
100,000
13.6%
FH
3
Vista Subang
657
75,000
80,000
6.67%
FH
Source : NAPIC/VPC Research
TRANSACTION SALE PRICE OF CONDOMINIUM No.
Scheme
BUILT UP AREA (SQ.FT)
TRANSACTED PRICE IN 2014 (RM)
TRANSACTED PRICE IN 2015 (RM)
TRANSACTED PRICE IN 2016 (RM)
% CHANGE
TENURE
1
Puncak Nusa Kelana
1,328
550,000
600,000
NA
9.10%
FH
2
Puncak Sri Kelana
1,023
420,000
468,000
525,000
12.18%
FH
3
D’ Aman Crimson
850
365,000
400,000
440,000
10.0%
FH
4
Ara Hill
1,928
1,280,000
1,350,000
NA
5.5%
FH
5
Eve Suites
1,065
NA
750,000
NA
NA
FH
6
Pacific Place
933
480,000
520,000
NA
8.3%
LH
7
AraGreens Residences
717
NA
600,000
NA
NA
FH
Source : NAPIC/VPC Research
www.propertyinsight.com.my AUGUST 2016 I 45
AREA FOCUS two LTR Stations – Lembah Subang LRT Station and Dataran Prima LRT Station. Maisson is priced from RM660 psf, which is 15% lower from our competitors in the surrounding area who are promoting their properties from RM850 psf onwards.”
Ara Damansara show a marginal increase of about 0.9% to 6.8%, except for Ara Permai (Jalan PJU 1A/43 – 43H), which it is located near the LRT Extension Line. The latter show double digit appreciation.” “Low and medium cost apartments like Sri Ara and Seri Jati apartments are showing an upward trend, ranging from 13.6% to 27.8% due to its affordable pricing and close proximity to Oasis Ara Damansara, Taman Perindustrian Jaya and
PROPERTY TRANSACTIONS James Wong, the managing director of VPC Alliance (KL) Sdn Bhd, says, “Overall, the performance of 2-storey terrace houses in
the Ara Damansara commercial area. As for Vista Subang, the capital appreciation is stagnant due to its less visible location,” he adds. Wong further proves his point by saying, “Owing to the fact that most of the condominiums in Ara Damansara are located in close proximity to the LRT Extension Line, Citta Mall, Oasis Ara Damansara and the main road that is Jalan Lapangan Terbang Subang, the overall
NEWLY LAUNCHED RESIDENTIAL PROJECTSW No.
Scheme
TYPE
BUILT UP AREA (SQ.FT)
DEVELOPER PRICE (RM)
PRICE PSF (RM PSF)
TENURE
1
H20 Residences
Serviced Apartment
449 - 974
From RM409,450
807 - 939
FH
2
Maisson Block 1 to 4
Serviced Apartment
500 – 1,594
RM360,000 – RM1,151,000
720
FH
3
Maisson Block 1 to 5
Serviced Apartment
595 – 1,294
RM454,469 – RM991,088
764
FH
4
The Potpourri
Serviced Apartment
525 – 2,440
RM557,800 – RM2,498,000
From RM800 psf
FH
5
Urbana Residences
Serviced Apartment
807 – 2,033
RM678,600 – RM1,532,250
841
LH
Source : NAPIC/VPC Research
COMMERCIAL TRANSACTION (FROM JAN 2015 TO MAR 2016) BUILT UP AREA (SQ.FT)
PRICE (RM)
PRICE PSF (RM)
VOLUME TRANSACTED
Min
Max
Min
Max
Min
Max
Shop-lots
8,540
2,859
800,000
1,550,000
350
900
28
Offices
1,400
2,800
110,000
2,000,000
500
1,200
23
Offices
1,400
2,800
110,000
2,000,000
500
1,200
23
46 | AUGUST 2016 www.propertyinsight.com.my
Source : NAPIC/ Henry Butcher Real Estate Sdn Bhd
condominium market saw an increase in capital appreciation ranging from 8.3% to 12.18%, except for Ara Hill.” A senior negotiator from Suite Trade Properties, Zoe Ong, says, “Due to the current depressed economic situation, some of the properties are being transacted at a relatively low price compared to the market value and also to its developing status. There is still a lot of potential for the township as major developers like Sime Darby is planning to launch mixed-use development projects in years to come, making the township even more colourful and vibrant.” I personally met one investor who bought a property in Ara Damansara. He is keeping it to himself, neither staying nor renting it out. So why did he buy it in the first place? He knows it is just a matter of time before the property price and value will escalate. He just needs to be patient.
Scan here for aerial view video of Ara Damansara
AGENTS SPEAK SUZANNE TANG, Real Estate Negotiator, J A Valley Properties I started focusing on Ara Damansara six years ago. The properties were not easy to market, mainly because of the traffic congestion along Jalan Lapangan Terbang and also the lack of amenities in the surrounding areas. But in just two years, Oasis Square has successfully established its brand to the public and, at the same time, attracted many foreign and local investors to Ara Damansara. The selling price of condominiums has risen rapidly to approximately RM800 psf. Although the market has slowed down a little bit, the price of these properties remain largely unchanged. Thus, I foresee and believe that the next property developments such as hotel, auto city, shopping mall as well as the new completed LRT lines at Lembah Subang and Glenmarie, will bring in more newcomers and investors.
ZOE ONG, Senior Negotiator, Suite Trade Properties Ten years ago, Ara Damansara used to be a low-density township and is still striving to join the league of preferred neighbourhoods such as Kelana Jaya and Subang Jaya. The rapidly expanding and improved infrastructure, along with new project launches in the past few years – have enhanced the township’s value and appeal to many investors and home owners. The price of a terrace house that costs around RM1.1 million today was actually launched between RM360,000 and RM400,000 back in 2006. In addition to that, the township is currently undertaking the initiative to comply with the ‘Safety City Initiatives’ standards, so you can spot a guard house at every point of the precinct – offering peace of mind for the residents.
www.propertyinsight.com.my AUGUST 2016 I 47
PERSONALITY OF THE MONTH
THE SOUND OF SUCCESS Pensonic has set its sights on bringing the ‘sound of Penang’ to the world BY: FARA PETIAL
V
incent Chew, the group managing director of Pensonic Holdings Bhd, is changing the common perception people have for those who come from the second generation of a family run business. Although he climbed his way up the corporate ladder on his own effort, he thanks his father for bringing him onboard in the first place. Chew graduated from the Eastern Michigan University in the United States with a Bachelor’s Degree in Business Administration in 1995. He then joined Pensonic as its marketing manager in February the following year. Subsequently, his involvement in the company expanded to include various departments including manufacturing, human resource, sales, operation, administration and finance. He was promoted to his current position in November 2014, and is in charge of the overall management of the group, fully focusing on the domestic market and the various brands under the group. BABY STEPS “When I returned from the United States, the company had only been operating for five years. There were many areas that needed improvement. At that time, we did not even have a human resource department and was not even doing any branding. We only concentrated on manufacturing and selling,” says Chew. In addition to his responsibilities as a marketing manager, he was also put in charge of the production line for about a year. He took on the role of the human resource manager as
48 I AUGUST 2016 www.propertyinsight.com.my
PERSONALITY OF THE MONTH
www.propertyinsight.com.my AUGUST 2016 I 49
PERSONALITY OF THE MONTH well and started establishing policies for the company. Two years later, he went to Kuala Lumpur to setup an office there. “I’ve been based here ever since then. At that time, one of the reasons I came to Kuala Lumpur was because we were sponsoring the 1998 – XVI Commonwealth Games. I had to liaise with many people – SUKOM 98, the organising committee for the Kuala Lumpur 98 - XVI Commonwealth Games; the marketing agency and many others,” says Chew. “That was also the time when we decided to buy and setup our headquarters in Petaling Jaya. I still remember my father saying this to me, ‘Since you’re going there, why don’t you just stay put for a while and setup an office there?’ So here I am,” he says. TURNING POINT Although the brand was first launched in 1982, it had no proper branding concept. Chew says, “Even when we sponsored the Commonwealth Games, we only did it because we wanted the country to be aware of the brand, not so much because we saw the value in the brand. After all, those were the days when people perceived Pensonic as a brand that produced ‘cheap’ appliances.” Things only started to change for Pensonic when Chew engaged the wellknown Dr Paul Temporal from Temporal Brand Consulting. Dr Temporal guided the team on how branding works and how to actually inject value into the brand. For the next two years, the top management as well as employees of Pensonic underwent training on how to build the brand. Chew explains, “The top management needed to believe in it first before we could actually train and pass the knowledge on to the lower management. We also took the effort to educate our dealers on who we are and our brand promise.” HOW IT STARTED Chew recalls the company’s humble beginnings. His father, Pensonic’s chairman Dato’ Seri Chew Weng Khak, had been doing electrical repairs and wiring ever since he was young man living in Balik Pulau. Once he managed to save up some capital, he started a business selling appliances. He was retailing Japanese 50 I AUGUST 2016 www.propertyinsight.com.my
brands back then, and soon opened his second branch in Georgetown. Chew says, “Not long after, my father realised that selling other people’s brands shouldn’t be the long-term goal of his business. He knew there would come a time when the manufacturers realise that their products were actually doing quite well in our market and would want to open their own offices here. That could mean he would no longer have the right to distribute their brands; what will happen to his business then?” The elder Chew then decided to start his own brand and his first product was the radio cassette. This audio product, from the word ‘sonic’, was what inspired the name of the brand. Hence, Pensonic stands for ‘the sound of Penang’. DIRE STRAITS During the early days when he was trying to setup the Kuala Lumpur office, Chew faced a number of challenges. He says, “It
was a small office with around 15 staff and two senior sales managers. On my second day at work, the senior managers tendered their resignation letters. However, before they left, they managed to recruit many of the sales people. So I was left with a bunch of staff who I had never worked with.” “At that time, the whole team was new to the company save for an experienced sales administration staff. I also didn’t know much about the market here; I didn’t even know our dealers. Looking back, we actually kind of grew together. This was about 18 years ago, and half of them are still with me,” he adds. Chew emphasises that his teammates are the company’s real asset. “Without them, we are nothing. It’s a culmination of everyone’s effort,” he says. In Chew’s experience, he has observed how important it is to be trustworthy. He says, “You simply have to keep your word no matter what. Of course we need to have skills in public relations as well, but to have
PERSONALITY OF THE MONTH
You simply have to keep your word no matter what. Of course we need to have skills in public relations as well, but to have someone’s trust is more important; trust in our customers, dealers and even our employees” - Vincent Chew
points out.
someone’s trust is more important; trust in our customers, dealers and even our employees. If we promise you something, we have to deliver it. It doesn’t matter how rich you are. If you’re not trustworthy, you just won’t be of any value to anyone.” Chew believes in empowering his key people. “I have a few senior management personnel and senior managers who have been with me for years. We always have an open discussion. If the senior management cannot decide among themselves, then we’ll get the lower level management personnel involved. If you’ve been in the same business for a long time, you can be blinded from what’s really happening out there. It’s very important to consider the opinion of others,” he says. SUPPORT SYSTEM Pensonic has always actively participated in discussion with the Government to promote industrial development in Malaysia, especially in terms of offering
opinion and suggestions on the support of SMI/SME as well as assist the Government in formulating brand building strategies. Chew elaborates, “One thing that is lacking in our industry is the absence of a supporting industry. That’s why we need to help Malaysia’s SMIs and SMEs, otherwise our economy will not be as strong compared to other countries. For example, many people think we are the leader in terms of production. So with our volume, we can help support and ensure the survival of SMIs and SMEs. We can’t help everybody, but for those related to the industry, the support is there.” Other than that, Chew also serves as the chairman of the Malaysian Electrical Appliances Distributors Association (MEADA). “We work with SIRIM Bhd on the safety standards and regulations of appliances. This association gives us a bigger and united voice whenever we want to voice our opinions. We are also working with SIRIM to curb illegal imports,” he
PROPERTY INVESTMENT Chew has been investing in his hometown of Penang. “I am not one of those serious property investors. My partner is the mastermind and she has been investing in property for many years now. She is the one who will advice and recommend good properties to invest in so I will just follow her advice,” he says. “Every industry goes through ups and downs. There will be good times and bad times. I believe the property industry is the same. Every eight to 10 years, there will be a property boom and people be flipping their properties. But no matter what happens, property prices will generally go up, so property investment is quite secure, you just need time,” he adds. For Chew, there is no secret recipe to success. He concludes, “Sometimes, you do the right thing at the wrong moment and you fail. Sometimes when you’re not working that hard, but you’re in the right moment, you can become successful. What I believe is, if you believe in yourself and in what you’re doing, then you have to be very persistent. We have to put our heart into our business. If you show people that you are trustworthy, they will believe you. If you cheat, you won’t be able to stay long in any industry.” www.propertyinsight.com.my AUGUST 2016 I 51
FEATURED PROPERTY
A SAVIOUR FROM THE SOUTH Reviving abandoned projects is part of MB Group’s CSR programme BY: NATASHA GIDEON
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ocated in Peninsular Malaysia’s southeast coast, Desaru is poised to be the next high-growth epicentre thanks to the development of Desaru Coast and the industries around the area. Taman Desaru 1 and 2 are freshly developed residential areas targeted at buyers from all income groups who want to live among verdant greens and the embrace of nature. The latest addition to Taman Desaru Utama 1 is Arcadia, a new offering of upscale semi-detached homes and bungalows. The latter provides an ideal living environment with an abundance of trees and green terrain. Residences are designed and built to maximise practicality with a flexible layout to please even the most discerning of homebuyers.
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The project is currently spearheaded by Dato’ Abdullah Yusup, General Manager of MB Group. Abdullah’s core responsibility includes project management as well as project handovers. Together with the chairman, Alan Sim, he has led the group to become an established property developer in Johor. MB Group is a multi-disciplinary organisation with its roots firmly entrenched in property development, construction, landscaping, building materials trading as well as other industry activities. The bulk of the group’s portfolio lies in the south of Malaysia, thus it will continue to strive towards developing first-class properties in that region. The MB Group started as a building
contractor 30 years ago. They ventured into property development by taking over several abandoned projects in the early 2000s, and the group slowly diversified to more property-related business to become what it is today. INVESTING IN ARCADIA Due to its strategic location, there could be potential investment value when investing in Arcadia. The latter is nestled in Taman Desaru Utama, Bandar Penawar. This location is a gateway to famous holiday destinations, beach resorts, schools and colleges, as well as Kota Tinggi town and Pengerang via the Pengerang Highway. Arcadia is within an all-encompassing developing and vibrant area that can fulfil
one’s daily living needs. It also has the potential to be a holiday home or homestay lodge, as well as provide long-term stay for families and working population. Due to the scarcity of housing supply in the area, the development can help fill the supply gap, especially for the high income group. Desaru was chosen due to its ideal location at the gateway of the rapidly developing southeast Johor and possesses high growth potential catalysed by the Desaru Coast and PIPC project. The Desaru Coast project provides ample attractions as it is slated to comprise four world-class hotels, a theme park, a championship golf course, a water park and a river walkway. The PIPC project will create a massive workforce thus drawing a large number of professionals and expatriates to the area. POSITIONING FOR HIGH GROWTH MB Group carries out its corporate social responsibility through MB Boys Home (Pertubuhan Pelatih Maha Builders, Johor Bahru). Founded on June 15, 2014, MB Boys Home aims to create a better future for the lost youths, empower them to grow up as independent adults, able to progress in life and eventually contribute back to the society. Apart from that, the group has included reviving abandoned projects as part of their CSR programme. “Although it is tough rehabilitating some of these locations, reviving abandoned projects is less time and cost consuming,” says Abdullah. However,
there are bound to be complications when dealing with the stakeholders such as the owners and banks. “In spite of the difficulties, we take it as a challenge to revive these abandoned buildings and assist stranded purchasers to unfreeze their properties and add new value to it,” he adds. About 40% of MB Group projects were rehabilitated from abandoned buildings including the Skudai Villa Apartments and Pandan City Commercial Hub in Johor Bahru. The biggest challenge faced by MB Group is its lack of familiarity with the foreign market. “Therefore, we require a team of good consultants to assist us. We believe that we would be able to perform well with the guidance of our group chairman who has many years of experience in the real estate industry,” Abdullah points out. All of MB Group’s international developments are situated in Perth, the capital of Western Australia. “When we started our overseas venture in Perth, the market was not widely penetrated by the major players. Therefore, we believed it was an opportunity for us to start our investment in Perth,” he explains. “For the local market in general, we see a glut of middle to high-end condominiums and apartments, with considerable participation from investors across the Peninsula and Singapore. However, this interest is now slowing due to market sentiment and economic uncertainty,” Abdullah says.
He adds, “There is a huge room for growth in Johor Bahru in the long run. However, that depends on how soon the other industries act as drivers to liven up the economy within the region and increase the income of the majority of households.” For the near future of between three and five years, Abdullah believes that there will be a high demand for houses from the majority of the population in Johor Bahru. “Our plan is to build affordably priced homes at suitable locations based on the market situation,” he states. Besides Arcadia, MB Group is currently working on high rise developments in Johor Bahru, namely the Twin Danga Residence @ Sg Danga. The developer is also planning to build a commercial mall in Desaru and a mixed development in Larkin comprising two blocks of residential towers on top of a shopping mall. These projects are targeted to be launched next year, which would keep MB Group busy for the next few years. MB Group aims to be a leading developer in Johor and will strive to develop premium properties that seek to improve the quality of life for all.
PROJECT DEVELOPMENT DETAILS Project Name: Arcadia Type of Development: Upscale semi-detached homes, link bungalows and bungalows Developer: Continental Management Sdn Bhd Location: Taman Desaru Utama, Bandar Penawar, Kota Tinggi, Johor Land Tenure: Leasehold Title Status: Residential AMENITIES Education Hub • A clubhouse that features a host of premium facilities including a swimming pool, children’s playground, tennis/futsal court, sauna and gymnasium •
Close proximity to the Hill Park, a nature reserve complete with pathways and gazebos for residents to enjoy an exclusive natural environment
Medical Facilities • Clinic, Kota Tinggi Hospital Hospitality • AmanSari Hotel Desaru, Desaru Coast (Aman, Anantara, Westin), Pulai Desaru Beach Resort, Lotus Desaru Beach Resort, Desaru Tunamaya Beach & Spa Resort Shopping Malls • Desaru City Mall
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INVESTOR NEXT DOOR
TAKING CALCULATED RISKS
Chris Tan left a well paying job to start his own business and delve into property investment to achieve the financial freedom he was looking for BY: NATASHA GIDEON
54 I AUGUST 2016 www.propertyinsight.com.my
INVESTOR NEXT DOOR
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hen one meets property investors who are enjoying abundant returns from their investment, one cannot help but wonder just how long it took them to get to where they are. Chris Tan, on the other hand, proves that it is never too late to start as he only started investing in properties in his late 20’s. Tan started working as an electronic engineer in a renowned MNC up north, and climbed the corporate ladder to become a manager in just under three years. “I was leading a pretty comfortable life then, but was too busy with work and did not have enough time for my family. That’s when I made the decision to quit and started a renovation and ID company, Skala Bina Sdn Bhd, with my partner in mid 2013,” he says. In order to achieve financial freedom, property investing seemed like the most viable option at the time. Tan started out with the capital he saved from working in the corporate sector and managed to purchase two properties that appreciated greatly in time, which he then used to kick start his company. “I started all this at the age of 27 years old. Looking back, I wish that I had started sooner,” he says. Having to leave a well paid job for an unknown business venture, Tan says he is thankful for his supportive spouse who has been his backbone since day one. “My spouse was truly supportive throughout my property investment journey. We worked as a team; going to investment courses and property talks together before deciding on which property to purchase. There is truth to the saying, ‘Behind every successful man is a woman’,” he says, adding that going for Gary Chua’s talks had helped him a lot during his investment journey, in addition to all the other efforts he had to take to be where he is today.
years. Subsequently, I sold this property and that money was used as the start-up capital for my business,” he explains. Tan’s current investment portfolio consists of 10 properties ranging from RM500,000 to RM5 million. “The most adventurous purchase was a shop lot that was acquired together with fellow investors through an investment holding company,” he enthuses. For those who are venturing into property investment, bank loans will always be the number one hurdle. “There are multiple ways of getting a bank loan. One way is by applying individually armed with a good income and credit history. Another way of buying property is through an investment holding company or operating company. A bank will look at your company’s history, business credit, revenues, balance sheet, and your equity contributions. The key is to
Do not wait; time will never be ‘just right’. For those who wish to purchase a property for their own stay, explore the secondary market and look out for fire sale” - Chris Tan
show the bank that you operate a healthy business. For me, I have properties under
HIS FIRST PROPERTY Tan started investing in property when he was still living in Penang. He bought his first property five years ago – a condominium in Bayan Lepas. “It was an arduous process, but we eventually struck gold when we came across a condominium unit in Bayan Lepas which was not only strategically located but also slightly below market value and within our budget. The property eventually appreciated from RM300,000 to RM500,000 in just two www.propertyinsight.com.my AUGUST 2016 I 55
INVESTOR NEXT DOOR my own name as well as an investment holding company,” Tan says. Each investor has their own investing strategy. For Tan, having a diverse portfolio means he gets to execute different strategies for each property. “Each property was purchased with different strategies in mind. For example, for short term investment, I targeted strategically located high rise units which were below RM500,000 so that the rental yield will not only be used to service the loan, but also to confer a form of passive income. Landed properties will naturally appreciate with time and are rather resilient to depreciation. I also buy commercial property because they tend to appreciate faster and require less management in the long run,” he points out. On hindsight, Tan was able to make use of his managerial skills and apply it to property investing as well. “All my instalments are recorded on a tracker so that I can monitor it at a glance. I ensure payments are made in a timely manner via recurring payments. The renting of property is made easier by a few trusted property agents who not only secure but also evaluate the tenant’s profile before recommending them to me,” says the meticulous investor. TAKEAWAY TIPS How does one get good deals with so many properties and locations to choose from? For Tan, price is just one factor in identifying a good deal. Investors also need to investigate the physical aspects of a purchase – good location, easy accessibility to public transport and safety features, besides rental yield and capital growth. Extensive market research is needed to be able to spot good deals when they come up. Tan says, “Talking to property agents on how much properties are selling for and attending property seminars can sometimes lead to an unexpected deal.” For those who are interested to invest in properties, Tan’s advice is ‘no matter the age, do it now or regret it later on’. He lives by these tips: 1. Plan your financial goals 2. Do not spend money on books/ seminars and then put all the information on a shelf 3. View and be aware of promising properties in the market 4. Do not postpone your investment 56 I AUGUST 2016 www.propertyinsight.com.my
journey – the perfect deal does not exist 5. Do a proper financial analysis 6. Get started and take action! Tan says, “Do not wait; time will never be ‘just right’. For those who wish to purchase a property for their own stay, explore the secondary market and look out for fire sale.” For those who wish to purchase property for investment, he advises them to explore the primary market. “Hold on to the property till completion. With the depreciating currency coupled with higher labour and material cost, the property price will only soar with time,” he adds. “My next investment would be opening a F&B outlet in Sunway Pyramid in the upcoming months. With its concept of gathering and preserving the originality and soul of famous Malaysian cuisines under one roof, this is something exciting to watch out for,” Tan beams with pride. Despite the trials and tribulations, this investor cum entrepreneur has not only managed to persevere, he now has his eyes set on achieving more challenging goals.
PROPERTY INVESTMENT PROPERTY 1 Location
Setia Alam, Selangor
Property type
2-storey terraced house,1,400 sqft
Purchase value (2012)
RM560,000
Market value (2016) RM780,000 Price psf
RM557
Rental per month
RM1,500
Rental yield
3.2%
Loan margin
90%
Loan tenure
30 years
PROPERTY 2 Location
Sungai Ara, Penang
Property type
Condominium,1,100 sqft
Purchase value 2011)
RM330,000
Market value (2014)
RM550,000 (Sold)
Price psf
RM500
Rental per month
-
Rental yield
-
Loan margin
-
Loan tenure
-
ROOKIE INVESTOR
DO IT LIKE DIAU Diau Mun Chung has no regrets sacrificing his leisure time to save up for the seed money he needed to buy his first property BY: FARA PETIAL
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ROOKIE INVESTOR
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nything that is worth having does not come easy. No one knows that better than 25-year-old Diau Mun Chung, who worked really hard just to accumulate seed money to buy his first property. It’s simply not something that happens overnight. Although he is now generating positive income from his property investment, he continues to do the job that he likes the most – as a part time Mathematics teacher. “For me, it’s not a 9-to-5 job anymore,” says Diau. SEED MONEY Unlike many of his peers who tend to waste their money buying things they don’t need,
Diau was struggling – working three jobs – just to achieve his goal of buying his first property. Last year, he was working as a Mathematics teacher full time and teaching part time at tuition centres. In addition to that, he was also giving home tuition for the same subject. Diau comments, “Young people nowadays tend to spend more than what they can afford. I was quite surprised when I found out the amount of money they spend on frivolous things. They give priority to maintaining a fancy lifestyle and do not see the importance of getting themselves at least one property for their own stay.” He adds, “Many people ask me how did I manage to save money for my first down payment. They are asking as if this is something that is really impossible to achieve. It is not. First and foremost, you really need to cut down on all the unnecessary spending.” Diau believes in the saying, ‘when there’s a will there’s a way’. “I woke up at 6am every weekday to go to school to teach. When I’m done for the day, I go teach at tuition centres. I will only reach home at 10pm every night. Then I do the same on weekends – whether it’s tuition classes or private home tutoring. After a chaotic six months, I managed to save money for the booking fees and down payment – I even had some money leftover to do other things,” he says. “Since I dedicated quite some time to save money for my seed capital, I managed to buy four more properties in the same month when I was signing my first sales and purchase agreement. That was after I learn the know how and experienced the failure of my first attempt,” he adds. For Diau, it was worth the effort to sacrifice his leisure time and youth in order to enjoy the fruits of his labour later on. Today, he owns several properties that he bought from both the primary and secondary market. WHY PROPERTY? As we all know, there are many ways to achieve financial freedom, so why did Diau choose to invest in properties when there are supposedly faster ways to make money? Diau, who did not come from a wealthy family, says, “It is because of my mother. Growing up, she kept saying, ‘If your
father had bought many properties before, we would be living a better life now’. So I became curious and wondered what was so special about property investment?” At the same time, he had a classmate who also invested in properties. “I saw that she was doing quite well. So I become more interested in property investment and started to educate myself by attending several property investment courses,” he adds. FIRST PROPERTY Despite his best efforts, Diau actually failed at his first attempt at buying property. “I faced several obstacles during my first attempt – I even had issues with the owner as it was a secondary property. I also faced the common issue that every Generation-Y is facing right now, which is getting my loan approved. Therefore, I decided to change my game plan,” he elaborates. For his second attempt, he bought a property with help from a friend. “It was my money, but I was using his name, and I managed to get the loan approved. At that time, I focused only on buying low-cost houses.” Why invest in a low-cost house? Diau explains, “People invest in property because, compared to all the other investments, it is considered one of the more stable forms of investment. The house is there, you can touch it, you can add value to it and the value appreciates over time.” He adds, “But there will also come a time when the market is a bit cautious, like right now when people cannot get their loans approved. What do they do when they cannot buy a house? They rent; so there is definitely a demand for low-cost housing in the rental market, because most people cannot afford to rent the high-end units. In the case of low-cost units, people are queuing up just to rent one. If one tenant wants to end their contract, there will be five more tenants waiting to take over.” If you have trouble getting your loans approved, you might want to consider trying out different strategies. One way is to prove that you are a good paymaster. Diau’s method was to apply for a credit card, use it to pay for his monthly expenses and pay the full amount that he used every month. “Even if you already have a car or PTPTN loan, it is still advisable for you to www.propertyinsight.com.my AUGUST 2016 I 59
ROOKIE INVESTOR get a credit card to improve your credit report,” he points out. TIPS FOR THE GEN-YS Diau believes that before one ventures into property investment, the very first thing one needs is the right education. Is there such a thing as getting the ‘wrong education’? He doesn’t think so, but he does advice people to watch for speculations in property investment. For him, the most important thing is not to simply jump onto the bandwagon without any preparation. He says, “Although I attended several courses before buying my first property, I still failed at my first try – it happened because I wasn’t fully prepared. So my advice is to get enough knowledge and seek guidance from the right people so that you can consult and discuss with them ways to overcome the obstacles that you encounter.” According to Diau, the problem with the
younger generation nowadays is that they have trust issues. “I face this issue myself – my friends are impressed that I managed to invest in several properties despite my young age, and they said they want to learn from me. But when I call and invite them to meet up for tea, they would turn me down. They think the reason why I want to see them is because I want to sell them something,” he says. He adds, “They assume that I am either selling courses, seminars, insurance or some multi-level marketing products. Yes, I used to sell insurance in the past, but I was bad at it so I stopped. My point is, if you block yourself from getting the knowledge you need, how can you identify and avoid falling for property speculations?” For those who are ready to take their first step, Diau has this advice to share, “Before choosing the unit that you want to buy, you need to do a comprehensive research on the property as well as the
I woke up at 6am every weekday to go to school to teach. When I’m done for the day, I go teach at tuition centres. I will only reach home at 10pm every night. Then I do the same on weekends – whether it’s tuition classes or private home tutoring. After a chaotic six months, I managed to save money for the booking fees and down payment – I even had some money leftover to do other things” - Diau Mun Chung area. Who is your target market and what is your plan? Are you planning to rent it out or to flip it? Renting your unit is good for long-term cash flow, while flipping is good for refinancing and allows you to buy a few more properties from the profit you gained.” Going forward, Diau is planning to venture into entrepreneurship with the money that he makes from property investment. He says, “I’m planning to setup an online tuition program for Mathematics because my methods and tips are not something that students can learn in school. It’s my way of giving back – to help those who are struggling in the subject.” It is important for the younger generation who want to invest in property to open up to every possibility, hold fast to the decision they make, and only venture into it when they have enough knowledge about the investment. One shouldn’t rush when making an investment, instead one should rush to save money for investments while the market is still on their side.
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INDUSTRY INSIGHT
VIVA FOREVER
Chairman of Vivahomes Realty, Alvin Foo, believes in leading by example and aiming high; he wants his company to be an Asian real estate powerhouse in five years LBY: AVINASH SAGRAN
A
lvin Foo, chairman of Vivahomes Realty, began his career as a designer. It was his curiosity and desire for bigger challenges that saw him venture into real estate. Three years after joining the industry, Foo tried to setup numerous agencies on his own but with no success. In 2006, Foo and his partners established
Vivahomes Realty, guided by it’s philosophy to provide specific and tailored services to their clients. The entity prides itself as a very well organised company with a corporate structure that ensures its employees are able to maximise their potential, while its clients get the best value for their money. Vivahomes Realty celebrates its 10th anniversary in business this year and
currently has approximately 1,000 negotiators. With numerous branches spread across the Klang Valley, the company has established itself as an industry powerhouse. NOT YOUR TYPICAL AGENCY A real estate veteran of 18 years, Foo is always looking out for opportunities to www.propertyinsight.com.my AUGUST 2016 I 61
INDUSTRY INSIGHT
expand the horizon of his company and team members. Constantly providing training, be it soft skills or industry knowledge, he ensures his staff is well equipped to deal with clients with the highest levels of professionalism. “When it comes to business, the need to constantly reinvent and innovate is crucial to stay ahead in the market and ensure brand sustainability,” says Foo. That’s the reason why Vivahomes Realty has several divisions, to handle events such as launchings, seminars, recruitment dinners, annual dinners, gala dinners, award nights and property talks. The team structure comprises realtors, events and production, information technology, management, investment and academy. The clear division of roles allows 62 | AUGUST 2016 www.propertyinsight.com.my
an employee to follow their passion and not be limited by their career options. Foo shares his fondest memory of the agency. “Being able to achieve such a high amount of sales over the past 10 years is definitely a sweet success. We achieved a GDV of RM1.2 billion, and being decorated with numerous awards and featured in several publications are testaments to our success.” Foo credits his team for believing in the company and performing exceptionally well to achieve that staggering figure in such short span of time. UPDATING AND REINVENTING YOURSELF One of the challenges faced by Vivahomes Realty is to ensure that their agents do not
limit themselves to the real estate industry. Foo says, “I want them to be a strategist and dealmaker instead of just an ordinary agent. I encourage them to gain exposure by attending more events and meeting people from different walks of life.” Leading by example, he does not hesitate to guide and be on the ground to assist his staff. Learning something new can be a daunting task, therefore it is important to constantly provide the support they need, he adds. According to Foo, his team recently had a breakthrough in their corporate plans, and came up with something worth looking forward to. Once their new proposition is implemented, it would provide a healthier property structure in the current market. One way Vivahomes Realty keep their
“When it comes to business, the need to constantly reinvent and innovate is crucial to stay ahead in the market and ensure brand sustainability” - Alvin Foo
operation and family culture, and the staffs are known as ‘Vivahomers’.
agents and staff up-to-date with the latest market trends and requirement is by providing both theoretical and practical training, with an updated syllabus for negotiators with different levels of experience. The in-house academy provides training ranging from beginner to expert level. The training never stops as there is always something new to learn, Foo says. He also engages with external trainers in other areas to ensure each staff is wholesome in their quality and delivery. The company sponsors its agents for those who want to take up a professional diploma in real estate and property, and encourages them to attend investor talks and training classes to understand the market. It also practices a transparent
THE MARKET Although Foo acknowledges the weaker market sentiment and the tightening on lending by banks, he believes that these factors should not deter people from buying property during this time. He says, “There are all sorts of challenges all the time, if it’s not the economy, then it is something else. If people do not buy now, they will face bigger challenges when they want to buy a property in the future.” He also believes that obtaining the right services can be crucial to the success or failure of a purchase. For instance, getting the services of the right real estate can ease the burden of homebuyers and sellers in terms of the legal aspect, banking, paperwork, renovation, tenancy and many more. Foo encourages people to buy homes, but stresses that buyers should be furnished with the right information. Knowing what type of property to purchase and the purpose of buying it (to stay, hold or flip) is crucial to the outcome of one’s own financial and asset planning. TIPS FOR THE YOUNGER GENERATION: 1. Must consider the location – highest priority 2. Evaluate the size of the house – is it suitable for your specific usage? 3. Go for new projects initially so that you will have lower commitments
VIVAHOMES SOARING FORWARD The agents at Vivahomes Realty are constantly challenged to up their ante in order to achieve personal success. They are able to provide adequate information that is tailored to their customers and target market, based on the encouraging feedback they received. This has led to the company’s ability to expand as rapidly as it did. Despite its success, Vivahomes Realty continues to rebrand and reinvent itself to ensure its growth and further expansion in the real estate business. In fact, it has set a firm goal to be the ‘Asian No. 1 Real Estate Finance Powerhouse’ in the next five years. The true mark of success in business does not only lie in the statistics and numbers. It can also come from the smiles of its people and customer care has always been at the forefront of the company. Vivahomes Realty’s privilege card is aptly named ‘We Care We Share’, and it provides its members with discounts and privileges on selected F&B, children and educational items, healthcare, priority in selecting prelaunch property units, free participation in property seminars as well as various rewards and free gifts. Foo also provides incentives to his staff to ensure everyone is motivated and happy. Recognition nights held quarterly and annually help to boost the morale and inspire the team. There are also incentive trips and schemes which ensures ‘Vivahomers’ get to enjoy the balance between work and play.
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ILLUMINATING DESIGN FOR SMART PEOPLE Home owners who want to enjoy good lighting can select from the plethora of beautiful modern, unique and simple designs that Superbright offers BY: NATASHA GIDEON
K
nown for its plethora of outlets, from eateries to appliance stores to bridal shops, SS2 is also home to a home grown brand with a fitting name. Superbright is a carefully curated shop displaying all sorts of lightings for every corner of your property. With the tagline, ‘Created for Smart People’, and a great price tag to go with it, one would have hoped to find out about them sooner. Superbright is the brainchild of E.S.H Sdn Bhd, and renowned designer Eric 64 I AUGUST 2016 www.propertyinsight.com.my
Leong guided the setup of the store from scratch; from how to setup the shop to how the products are displayed. Although it has only been around for less than a year, Superbright has already made its presence felt in the industry. Offering modern, unique and simple designs that are made available at affordable prices, it is no wonder the brand is already making its mark even on the most discerning home owners. Designs that you may have come across in interior design
websites are sold at the store at a much more affordable price tag. These beautiful items come from Malaysia, Taiwan, China and some even from Australia, with a price range starting from RM20 to several thousands Ringgit, with options for energy saving bulbs. Kalvin Gan, a creative consultant for Superbright, points out that furnishing a property nowadays is all about simplicity and creating a good ambience. “I’ve seen units being rented out for high prices just
by adding good lighting. It isn’t only about spending a lot of money on good lighting, it’s about knowing what to invest in,” Gan says, adding that it is possible to replicate good lighting and effects simply by adding more light sources, instead of spending lavishly on just one light source. As an investor, if you are looking to decorate your own home to be rented out, Gan’s advice is not to use only one type of lighting, but instead set a theme with different types of lights. “You can have several similar themes, but the key is to vary the design to create a classy and attractive style,” he says. Lighting has the ability to capture the essence of a home or property, as well as affect human emotions. “This isn’t 1975 where every home must have one specific light i.e the long fluorescent light installed in every corner of the house,” he adds. The best advice he can give is not to buy lighting based on one’s mood, but instead to select those that goes well with the property. Gan points out, “If you buy a light according to your mood, it may not match the theme of the house. You can get one of our consultants to guide you if all else fails. It’s important that it matches your interior, but keep in mind not to overdo it.” For 2016, the design trend for lighting is gold. According to Leong, gold has made a number of appearances this year, whether it is the type of material used or the finishing itself, many designs have incorporated the colour this season. “Even in our store, you can see that on an all-black lamp with a simple design, the ring that holds the bulb is finished with glossy gold to add a sophisticated touch,” says Jason Tan, sales and marketing for Superbright. At the moment, many interior designers opt for an urban lofty feel with modern and minimalistic furnishings when designing a home. “I foresee that this trend will move towards a more Scandinavian theme in the coming seasons,” Gan speculates. The Scandinavian design is practical and liveable with white walls, cool grey tiles and clean lines from its architecture to its furniture. When you enter Superbright’s store in SS2, you will realise that the design is separated into different themes, from minimalistic lamps to wooden lamp shades and chandeliers. “Our target market is
practically everyone. That’s why our tagline says it is for smart people,” Tan says with a laugh. In one corner of their store is a long white table, decorated and designed for students. It is not an open concept meeting area, but rather a place for students to come and study for free. “We welcome students who want to do their final year projects here or simply want to learn more about interior design and lighting. We’re here to help in any way we can,” says Gan, who will be accepting a few interns in the near future. Students can come by and do their work as they wish, and they can even ask for guidance and mentorship from Gan himself, making this truly a remarkable
establishment. Although it has only been open to the public for less than a year, Superbright has already made plans to expand. “We want to focus on this store first before opening up another outlet, but it is something that we have envisioned for the brand,” Tan states. For now, Superbright is in the process of working with international and local designers for upcoming projects. Superbright is merely a brand, it is also a company that cares for its consumers and offers them great designs, affordable prices and good after sales services. They also made the effort to help out up-andcoming designers who are still in school and developing young talent.
www.propertyinsight.com.my AUGUST 2016 I 65
CONTRIBUTOR
T
he landfills in Malaysia are almost reaching their maximum capacity to hold trash. According to the Global Environment Centre, over 23,000 tonnes of
waste is produced each day in Malaysia, and this amount is expected to rise to 30,000 tonnes by 2020. The residents of Kuala Lumpur, Putrajaya and the Klang Valley alone are generating almost 290 tonnes of waste daily. Sadly, most of the trash ends up in our rivers. As a result, more than half of the almost 1,800 rivers in Malaysia are polluted. Although it has been two months since the new rules for waste
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AUGUST 2016 www.propertyinsight.com.my
separation were enforced, many people are still struggling to decide which trash should go where. The fact is, approximately two million people from several states in Malaysia are required by law to segregate their trash accordingly. As such, people living in these areas need to ensure that they dispose their trash properly or risk being fined. •
Johor
•
Melaka
•
Negeri Sembilan
offences, respectively. If the fines are left
•
Pahang
unpaid, the offenders can be taken to
There are, however, some people who
•
Perlis
court and charged with a maximum fine
believe that it is now or never. That it was
•
Kedah
of RM1,000.
an important first step for the government
•
Kuala Lumpur & Putrajaya
city councils to carry out the segregation.
For residents staying in high-rises, the
to kickstart this effort to reduce the amount
offenders will have to pay RM100, RM200
of waste going to the landfill, and make it
WASTE SEPARATION – RULES & FINES
and RM500, respectively for each offence,
compulsory for the public to segregate
Now the question that is on everyone’s
followed by legal action and fine up to
their waste until it becomes a common
mind is, how does this work? There has
RM1,000 for the fourth offence. For non-
practice.
been much confusion over the colour of
landed buildings, concessionaires will
When asked, one reader raised a
the plastic bags to be used, how should
supply recyclable bins at collection points
question on the use of multiple plastic
the waste be separated and even the
and each bin will cost roughly RM300.
bags. He asked, “If the government is so
number of garbage bins required outside
concerned about the environment, why WHAT THE COMMON MAN SAYS
are they encouraging the use of plastic
There are basically four categories; paper,
There are mixed views on this issue.
(garbage) bags? Now, two million people
plastic, others (aluminium, glass, rubber,
While many people believe in and want
will be using four times more plastic bags
ceramic, electronic waste, etc) and kitchen
to give their support towards this waste
than before. How can the government
and food waste. Although it is encouraged,
separation effort, they are not clear about
overlook this?”
it is not necessary nor compulsory to use
its implementation method. Some claim
This is a question that the government
different coloured plastic bags for different
that no proper notification was given,
has yet to answer. When the government
trash.
while others are simply unaware that it has
made waste segregation compulsory, they
become a requirement.
had only one goal in mind – to encourage
the house.
Also, you only need one garbage bin outside your home. The bin is used for
Many are of the opinion that the
people to reduce, reuse and recycle –
throwing non-recyclable waste such as
government has failed to adequately
and to cultivate this habit in the current
kitchen and food waste. The other three
educate the public. In the given one year
generation and all the generations that
bags of recyclables should be placed
grace period, some claim the government
come after.
beside the bin.
should have conducted more awareness
Despite the public confusion that resulted
campaigns to inform the public on how to
over the implementation of the new ruling,
tackle the matter.
there is a general agreement that it was
It is not necessary to label these plastic bags as ‘plastic’, ‘glass’ or ‘paper’ as it will be opened at the waste collection
In a news report, an environmentalist has
about time the government enforced what
centre and segregated accordingly. The
suggested that the government is being too
other first world countries have been doing
recyclables will be collected once a week
ambitious. They should instead authorise
for a long time.
and the non-recyclables, twice a week. Last year, the Urban Well-being, Housing and Local Government Ministry began enforcing Act 672 of the Solid Waste and Public Cleansing Management Act 2007. As such, effective June 1, 2016, anyone who fails to separate their waste will be fined. According to Solid Waste Management and
Public
Cleansing
Corporation
(SWCorp), offenders staying on landed properties will be fined RM50, followed by RM100 and RM500 for the first three This article is contributed by PropertyGuru.com.my, Malaysia’s leading property site
www.propertyinsight.com.my AUGUST 2016 I 67
INTERNATIONAL MARKET: AUSTRALIA
THE BEST STRUCTURE FOR PROPERTY DEVELOPMENT IN AUSTRALIA A
s Australia’s property market continues to grow, especially in the capital cities of Sydney and Melbourne, more people are turning to property development as a means of investment. Due to the nature and scale of activities involved in property development, it’s important to choose the right legal structure to set up. However, there is no standard or perfect structure for development as each project is different and is dependent on individual circumstances. RISK When choosing the right structure for your development project, there are a number of factors to consider. The most important factor to consider is probably
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DESTINATION - INTERNATIONAL INVESTMENTS Different types of structures are subject to different taxation and compliance, so before setting up your structure, you should be aware of the obligations. This becomes particularly important when the project is completed and you decide on what to do with the property. The type of structure you choose could have a major impact on how much tax you are obliged to pay. PARTIES INVOLVED One of the key determinants in choosing the right structure depends on who will be involved in the development project. As some structures are only appropriate when related parties are involved, having correct structures and agreements in place at the start of the development will prevent you from running into problems down the road. It is also important that each party is aware of their own obligations and responsibilities when setting out a development project. Once you have taken all these factors into account, as well as your own personal circumstances, you will be best placed to choose the right structure for your property development project. Here are some common structures:
Image Courtesy : http://newsaffectsstocks.com
the risk involved and asset protection. The nature of activities involved in property development involves a number of risks with workers on site, money invested and equipment used. While insurance may be able to cover some costs, it is important to limit the potential liability you may face in the event that something goes wrong. TAXATION As with most business activities in Australia, property development and the proceeds that arise from it are subject to taxes.
TRUSTS – FAMILY TRUST & UNIT TRUST Where the property development activities are being undertaken by a group of family members, a family trust can be an effective way of protecting assets and distributing the income. A trust is a legal mechanism whereby the trustee looks after the trust’s assets for the benefit of the beneficiaries. This means that the assets of the trusts and beneficiaries are protected from being sued to a degree, as the trustee is generally the one liable. A great way to extend the protection under a trust is to have a corporate trustee through a proprietary limited company. Using a trust is also the most effective form of tax planning in property development, as the income received from the sale or rental
of the property is able to be distributed to beneficiaries at the discretion of the trustee. A unit trust functions in a similar way, however, the parties are not related and the benefits that the beneficiaries are entitled to are determined by the number of units held. PROPRIETARY LIMITED COMPANY In Australia, a company is considered a legal entity that can buy, sell and be sued in its own right, so the main benefit of carrying out property development as a proprietary limited company is the limited liability for members to the value of their ownership. Whilst you don’t want to plan for things to go wrong, it’s important to limit yourself and your business partners where you can. A company can be a good option where the individuals are not related as any profit received from the development can be paid out as dividends to shareholders. PARTNERSHIPS Partnerships are a straightforward option for a development structure, as this may not require any registration or formation other than a partnership agreement. However, as individuals in a partnership are not protected by anything other than insurance, their liability is unlimited in the case that something goes wrong or the development is sued for any reason. This also means that all the costs of the development are incurred by the partners and any profit made is considered taxable income and thus taxed at the marginal tax rate. DISCLAIMER: This information was produced as a general information and should not be taken as advice. Individuals should consider their own circumstances before choosing an appropriate business structure and it is best to seek professional advice before making any decisions.
ABOUT THE CONTRIBUTOR Justin Ng is an accountant at Garber & Associates Pty Ltd based in Melbourne, Australia. His Australian and international business knowledge has helped many startups grow and expand internationally. Ng travels frequently to KL and can be contacted at justin@garberassociates.com.au. Paul Harrington is a marketing and law specialist at Garber & Associates Pty Ltd. He specialises in helping startup businesses expand internationally by running marketing campaigns and providing advice on business structuring and trademarks. Harrington can be contacted at paul@garberassociates.com.au.
www.propertyinsight.com.my AUGUST 2016 I 69
FINANCE
THE BEST STRATEGY TO FINANCE YOUR PROPERTY
I
nvesting in real estate is all about financing. Even if you are cash rich, it is unwise to acquire a property with 100% cash. Likewise, if you need to pay 100% cash for a property, it is most likely not a good investment as it foregoes the most powerful tool in property investment – i.e. leverage. In order to get the most out of this tool, you have to employ the right financing strategy. So what is the best strategy to finance a property? The best financing strategy gives you the highest return on investment with the
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lowest risk. When you apply this strategy on the right property, you will see that the more you borrow, the higher returns you get, and the sooner you will get back all your capital. At the same time, the risk is relatively lower since the invested capital is lesser. A property that allows you to do so is called a worth-financing property. Let’s use an example to demonstrate this. A WORTH-FINANCING PROPERTY Say you buy a studio apartment for RM200,000, and you spend another RM19,000 on renovation, legal fees and
brokerage. After furnishing, you rent the apartment out for RM1,350 a month, while the monthly maintenance cost is around RM150 (maintenance fee, sinking fund, quit rent, etc.). The total invested capital for this investment is RM39,000 (RM19,000 plus 10% down payment). If you finance 90% of the property price with an interest rate of 4.6% for 30 years, the monthly loan repayment is around RM923. Thus, this property is generating a net cash flow of RM277 every month, or RM3,320 every year, before deducting for possible vacancy and repairs.
POWER OF LEVERAGE From both cases, you can see that a worth-financing property, like the studio apartment, delivers a higher return, thus allowing you to take back all of your capital sooner when you finance more. There is no magic behind this. It’s all about the power of leverage. We are not talking about overstretching your financial situation or risking your money in a gamble. We are talking about how to maximise your return and reducing your risk by making use of the ultimate investing skill – i.e. leverage. However, do remember that NOT every property is worth financing, just like not every property is worth investing. The careful calculation shown in both examples is necessary before you can easily spot one.
This investment effectively gives you a yearly cash-on-cash return of 8.5% (RM3,320 divided by RM39,000). In other words, within 12 years, you would be able to take back all your capital (RM39,000). So if you continue to hold and rent out the property, it will become a free cashgenerating machine. Now, if you don’t take a loan from the bank at all, will it become a free cashgenerating machine earlier? If you buy the apartment with cash only, the total capital required would now be RM219,000 instead of RM39,000. The total monthly net income would be RM1,200 (no more loan repayment), which equals to a yearly income of RM14,400. Though the total yearly income is now higher, the return on investment is only 6.6% (RM14,400 divided by RM219,000). That means you need more than 15 years to get all your capital back, instead of 12 years for when you get 90% financing. How can this be? You invested more cash yet the return on investment is lower.
Johor Bahru, a double storey shop house is selling for RM810,000 with an existing monthly rental income of RM4,150. The estimated monthly cost of maintenance, insurance and tax is about RM200. If you finance 90% of the property price with the same interest rate and loan tenure as the previous example, the monthly repayment will be RM3,740. Although the shop house is generating a monthly cash flow of RM200, the return is only 2.2% because the total capital required is almost RM117,450 (estimated legal fees and brokerage at RM36,450). If you buy the shop house with cash only, the returns would increase to 5.6%. Obviously, you can get a higher return without financing this property.
THE BEST STRATEGY TO FINANCE A PROPERTY Nevertheless, if you find a property worth financing: 1. Go for the maximum mortgage loan amount available (if it’s not worth financing, do not borrow at all or borrow the least amount to invest); 2. Select the interest rate package with the lowest monthly repayment within its lock-in period; 3. Try to get the longest loan tenure available. This strategy minimises your major holding cost – monthly loan repayment, in order to maximise the potential return of the worth-financing property. When the property market is softening, you may be able to find more properties that turn out to be worth financing. Look for properties where the price drops faster than the rent. Even though, in the same market, you may find it more difficult to get a mortgage loan, the reward is unquestionably worth it.
ABOUT THE CONTRIBUTOR KCLau is a financial educator who has published 6 books and co-created more than a dozen online financial courses. His popular personal finance blog is one of the most visited websites in the financial blogosphere. (www.KCLau.com) Dr. Ong Kian Leong (commonly addressed as Dr. OngKL), is the creator of GoFinanceTM, a tool that allows investors to accurately evaluate if an investment
A NOT-WORTH-FINANCING PROPERTY Now let’s look at another example. In
is worth investing as well as worth financing for maximum returns. (www.REIJB. com)
www.propertyinsight.com.my AUGUST 2016 I 73
LEGAL
JOINT VENTURE IN PROPERTY INVESTMENT
P
roperty investment is both an interesting and exciting journey. Property investors commonly start the journey by searching for a target property which fits their investment strategies and requirements. It can either be a long term investment where the investor is looking at the rental yield, or a shorter term where the property is ‘flipped’ for capital gains. Nevertheless, one of the major obstacles in property investment is the issue of affordability. This may be due to insufficient fund for a down payment or the tightening of borrowing policies by the banks. Under such constraint, many investors
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are unable to proceed with their investment plan even though they come across properties with great potential. One creative way out is by entering into a joint venture (JV) in property investment. WHAT IS A JOINT VENTURE AND WHY? A JV is a collaboration between two or more parties who agree to pool their resources/ funds for the purposes of accomplishing a specific project. It can be in the form of a business activity or even the acquisition of immovable properties. There are many reasons why investors should enter into a joint venture. All parties
in a JV make contributions, share profits and returns in the agreed proportion. It creates a new investment opportunity where one single party may not penetrate if they were to do it alone. Besides sharing financial resources, JV parties can also share expertise and knowledge. This will create a better synergy to undertake the JV project in a more efficient manner. INVESTMENT GOAL It is vital for a JV to have an investment goal. All JV parties must have a clear expectation and the same understanding
towards their goal. If a property is intended to be ‘flipped’, then the next question would be – ‘What is the target selling price within a specific time frame?’ If a JV plans to acquire a property at the price of RM500,000, all JV partners may set a target that, after three years, if the property value increases to RM600,000, then all partners must agree to sell when that happens. If the targeted value is not reached in that time frame, JV partners may need to decide whether they should sell or to hold the property for a longer time (depending on the circumstances and market sentiment then). If the property is intended to be rented out, then the next question would be – ‘What is the target rental within a specific time frame?’ If a JV plans to acquire a property at the price of RM500,000 and targets a 5% return on investment (ROI), the rental shall be at least RM2,084 per month. However, in the event the property is unable to fetch that monthly rental within a specified time frame, the JV partners may have to decide either to rent at a lower rental or to hold the property for a longer time without any rental income. It is extremely important for JV partners to discuss and agree on the above matters. Once agreed, all partners must carry out the property investment plan in accordance with the agreed terms. It is not advisable for any JV to acquire property and ‘see how it goes’. Different JV partners will have different expectations, holding power and priority in life at any particular time. Unclear or uncertain goals in any JV may lead to potential disputes between the partners when a partner insists on selling (to cash out for other financial commitments) and another decides to hold the property longer (hoping for better capital appreciation if he is not in need of cash at that moment). JV SALIENT TERMS Before any party enters into a JV, these are several salient terms to consider: 1. Target property: A JV must carry out a proper feasibility study on the target property. Generally, that should include its location, pricing, growth potential,
who is the developer and/or the property management company, etc. 2. Joint venture partner: Due diligence on all JV partners is a must. JV partners can either be an individual or a company. All parties must know the background of all other partners involved in the JV. 3. Cash injection: A JV must set a clear understanding of cash injection capability in terms of down payment, legal fees and stamp duty, outgoing payments (maintenance fees, quit rent, assessments rates, insurance etc.) and loan repayment. 4. Borrowing capacity: A JV must also examine the borrowing capacity of each partner, which depends very much on the existing financial commitment of the partner. This is important as a JV needs to know the estimated loan size, loan margin and tenure before committing itself into any property investment. 5. Cultural consideration: A JV must also take into account the cultural consideration of the future buyers of a target property. Directions, house number and layout of the property are among the few common factors a property buyer is usually concerned with. These factors may directly or indirectly affect the value of a property. However, the above list is not in any way exhaustive. Each JV may have other concerns or considerations which may be unique to each JV. All parties in the JV must address those issues well ahead before making a commitment in any investment to avoid any potential conflict or dispute. GET LEGAL After going through all the salient terms, it is advisable for the JV partners to put their terms into legally binding documents. Very often JV partners do not think that legal documents are necessary, especially between parties who have known each other for a long time (for example, family
members, relatives or close friends). In such circumstances, a certain level of trust would have been built amongst the parties prior to the JV. It should be reminded, however, that the non-existence of any legally binding document may give rise to potential disputes in the future, which may also jeopardise the existing relationship between the parties. All JV parties should enter into a Joint Venture Agreement, to record the goal, expectation, liability and mechanisms of a JV. There is no fixed or standard format for a Joint Venture Agreement so long as the parties address their intentions and the salient terms are agreed upon between all parties before entering into a JV. Whenever necessary, JV parties may also enter into a Trust Deed and/or Power of Attorney. Once the JV arrangement has been finalised, the parties may then acquire the target property and carry out their respective obligations in accordance with the provisions of the Joint Venture Agreement. CONCLUSION To conclude, JV in property investment is a good strategy of combining resources from various parties, in order to achieve a common goal, particularly when one single party is unable to acquire a property alone due to limitations of financial resources (for example, cash injection or borrowing capacity). Although it is a good strategy, it may give rise to potential disputes due to conflicting priorities or interests of the respective JV partners at any time. Therefore, it is vital to consider the above salient terms and record clear intentions of the parties into legally binding documents. This will certainly make the property investment journey a much smoother one. Happy investing.
ABOUT THE CONTRIBUTOR Datin Ong Yee Shyun is a Partner of Messrs. Teh Kim Teh, Salina & Co., Advocates & Solicitors. She has been admitted to the Malaysian Bar since 2005. She has extensive experience in the areas of property and banking laws. She can be contacted at yeeshyun@tehkimteh.com.
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STRATEGY
CAN ONE ACHIEVE FINANCIAL SUCCESS AS AN EMPLOYEE?
M
ost of us are employees our whole lives. However, there seems to be a stigma against employees. Some people call us losers while others label us as lazy sloths that are a drag on innovation and entrepreneurship. Some may even look down on us with condescension. For the record, I truly respect entrepreneurship. My two closest friends are successful business owners. The truth is, you have to know yourself. Some of us may not have the aptitude or gumption for entrepreneurship. As such, there’s no shame in being an employee. There is no dishonour in taking pride in your job, climbing up the career ladder and being a successful investor at the same time. I was 25 years old when I met a young
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and successful business owner named Stan (not his real name) through a mutual friend. I explained my aspirations of doing well in both my career and my investments. To my surprise, he responded almost patronisingly, “Mark, no one ever got rich working as an employee.” (Let’s assume being ‘rich’ here means to be financially independent, where your passive income or net worth more than compensates for your salary.) I felt great anger and humiliation at that arrogant and dismissive statement. I responded with a simple answer, “Wanna bet?”, and politely excused myself. Some years have passed since that fateful encounter. At the age of 33, I was promoted to a fairly senior position in a foreign bank,
and managed to build a property portfolio that I was comfortable with. Today, I work because I want to, not because I have to. Was it an easy journey? Hell no. Yet, I hope my story can inspire some folks and make them realise that one can achieve their dreams as an employee. I’d like to share some ‘painful truths’ in my journey as an employee. Do forgive me if my views appear offensive or sweeping. A GREAT CAREER DOESN’T HAPPEN BY CHANCE For those who have been following my FB posts, I have written about my career lessons at length. In short, you have to dedicate yourself to your chosen craft and invest the time to excel in your job. I
STRATEGY spent countless hours seeking mentors and advocates, reading manuals, bugging my seniors with incessant questions and mastering the technical skills of my job. Many of us spend hours being obsessed with investments. We attend property seminars, buy lots of books, go for networking sessions and look for great property deals. Yet the cruel irony is that we do not spend an iota of effort in improving our careers and earned income. Instead, we complain about how we hate the rat race and wallow in self-pity about how we are constantly a victim of office politics. YOUR SALARY WON’T OPEN DOORS. IT IS YOUR BONUSES OR STOCK OPTIONS THAT WILL To be honest, a person earning RM20,000 per month doesn’t really enjoy a tremendous lift in his quality of life versus say a person earning RM10,000 per month. Sure, the one earning RM20,000 can leverage more, drive a nicer car and dine out more often; but he isn’t the next Warren Buffet. It is that RM200,000 or RM300,000 annual bonus or stock options (numerical example only) that one garners as a high performing employee that sets you apart from the masses. This provides a great avenue for you to put down payments on landed residential units, and the financial buffer for you to replicate more deals. Is it easy getting that big bonus? Of course not. A dear friend cum property guru always say, “Nothing worth having ever comes easy”. Do your best to position yourself in an organisation and industry that rewards performance based on merit. Get mentors and advocates that reward you for a job well done. IN GENERAL, IT IS NOT YOUR PROPERTY CASH FLOW THAT WILL SET YOU FREE. IT IS THE EQUITY FROM CAPITAL APPRECIATION THAT WILL We tend to build our portfolio with residential properties. I have met many new employees cum investors who want to quit their jobs and live off the rentals from their properties. Let’s be pragmatic, folks. I think that 99% of us can safely agree that getting a single RM500 positive cash flow property (rental minus mortgage) is pretty challenging in today’s market.
Now, try getting 10 units like that. Even if you could muster all the Jedi Knights in the property realm to help you, your positive cash flow would only equate to RM5,000 per month (RM500 per unit x 10 units). Yes, RM5,000 may seem decent or modest, but it isn’t exactly screaming financial freedom. I could be wrong, but most successful investors that I have met achieved financial freedom by building a portfolio of properties that had significant capital growth over time, typically over a 10-year cycle. They let the magic of leverage, compounding and time generate a portfolio which has a high composition of equity and capital appreciation. The direct translation is – you become financially free from a portfolio that increases say, from RM2 million to RM6 million over time, versus building a RM5,000 cash flow per month portfolio. THE WINNER ISN’T THE ONE WITH THE BIGGEST DEBT, BUT WITH THE HIGHEST NET WORTH I notice that many of us are enamoured with learning the various ways to leverage. Some of us are keen to learn about multiple submissions. We are impressed with people who ‘game’ the financial system to get >100% Debt to Service Ratio (DSR), and are obsessed with Below Market Value (BMV) or Zero Down Deals (ZDD). I have no issues with this per se. However, does it make sense to have lots of assets,
coupled with tonnes of liabilities as well? In all humility, debt alone doesn’t make you a winner. Rather, it is the person who builds their net worth most efficiently who wins. (Simplistically speaking, Net Worth = Market Value of your Assets less your Liabilities) Critics say I am foolish for not engaging in ZDD or multiple submissions. They say that I am not building my portfolio efficiently. However, I believe in being prudent in the management of my liabilities. To build my portfolio ‘efficiently’ – I did it the old fashioned way; I worked my ass off to get those great bonuses to fund the down payments of my properties. Today, most people tend to be surprised at my Loan-toValue Ratio. Using conservative estimates, it is approximately 37%, which augurs well for net worth creation. So what’s the moral of the story? Success comes to those who do not waste time comparing what they are doing with what others are doing. Know yourself and stay true to your path. There is no shame in being an employee. There is no dishonour in wanting to have a stellar career. In all humility, most employees do not achieve financial success because they put money ahead of the job. Put the job first, and the money will follow. Then invest well ahead of your peers due to your higher earned income. No one ever got rich working a 9-to-5. Wanna bet?
ABOUT THE CONTRIBUTOR Mark Chua is a Senior Vice President (SVP) in a financial institution. He is living proof that one can be successful in both our careers & property investments. He can be reached via markchuamy@hotmail.com or www.facebook.com/ MarkChuaMY
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EOI & ROI CONSIDERATIONS: A LOGICAL & FINANCIAL COMPARISON
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hen it comes to defining real estate investment success, there are various determining factors, from the aspects of location to financial returns. Since it is subject to each person’s personal experience, everyone can claim their own version of a success formula – as long as it consistently works for them. In essence, real estate investing can be very lucrative and rewarding if one plays by the rules of the game and invests responsibly. There has never been any lack of information in this digital era. Wannabe investors can do their homework by reading and researching online on the 76 I AUGUST 2016 www.propertyinsight.com.my
‘how-to’ for property investment. To add to that knowledge, it would be best for them to network and learn from experienced fellow investors who are generally willing to share their trade secrets. After all, property is a big ticket item which requires due diligence before one parts with their so called hard-earned money. Other platforms where like-minded individuals gather are property related events such as seminars, expos or conferences, where property education is aplenty based on the experience and winning formula of each educator within their respective field. All in all, property
investments require extensive headwork and legwork. RETURN ON INVESTMENT For beginners and seasoned investors, the most often used financial investment indicator to measure whether an asset class is performing is return on investment (ROI). The latter can be used to gauge an underlying investment vehicle’s prospective return from the onset. From a financial perspective, every Ringgit invested in a cashflow producing real estate must yield a considerable sum of return via monthly returns to be
annualised for a percentage of the property price. The formula is as indicated:
Return of Investment (ROI) = Annual Returns x 100% Property Market Price While the formula is generic in nature (some ROI calculations are based on nett annual returns or even actual cash invested), it is a handy measurement tool to manage one’s expectation when investing in properties. Naturally, when the formula is used as a benchmark for returns, many people will equate investing as a numerical and financial consideration as it makes logical sense for every Ringgit ‘spent’. Having been a property investor for a while now, I often ask myself whether financial consideration, solely for the purpose of benchmarking returns, is sufficient. What if there are other factors that can give us an assurance in the investment through first mover advantage, i.e. detecting favourable returns beyond numbers? ENERGY ORIENTED INVESTMENT Welcome to a new paradigm shift in the property investment success approach: Energy Oriented Investment (EOI). In my article published back in April 2016, I mentioned that EOI is the ultimate approach in real estate Investing. The EOI model is about harnessing natural energy for a prosperous and liveable space, and the consideration where energy flows dictate a progressive and harmonious growth for occupancy. In essence, energy is everything. Since properties are built in a natural environment where energy exists and must first be observed, we can either choose to respect the energy and live in harmony with nature or miss the abundance that it provides. Being a practical property investor, I find value in the logical assessment of a property by performing a quick check on the surrounding area of the property site. I am sure many are aware about avoiding certain angled properties, i.e. those facing T-junctions or with a nearby pylon. What makes such properties non favourable has nothing to do with being superstitious; it’s all about logic. Imagine a house where the main entrance faces a T-Junction; it is almost unavoidable
for the occupants to havethe headlights of vehicles shining into the property each time it passes by the house, especially at night. The occupants would also have to deal with the amount of dust and noise pollution, especially for houses located at busy intersections. To illustrate the comparison between ROI and EOI in a simple manner for real estate investment, let us look at how asset and liability is defined in each context.
energy affects the property and subdues the inhabitants’ capacity to prosper in their livelihood when they occupy the property.
ASSET & LIABILITY In the context of real estate, an asset is defined as a property of value that can meet the financial obligation of its owner by generating income and yield future benefits. Likewise, liability is a non performing property that requires the owner to fulfil his legal responsibility to meet repayments or future obligations which usually presents a non favourable financial state for the owner. While there are countless references one can use to define an asset and liability when it comes to property, the simplest definition for ROI is:
While we can decide who to rent the property to and how much to charge for the rental, the capacity of the property itself has been decided by the natural environmental energy surrounding it. It is therefore imperative to factor in the EOI approach when considering a property before calculating its ROI. When there is positive energy flowing into the property, the owner will rake in higher ROI from renting it to good quality and long term tenants. This is a win-win formula for all parties.
RETURN ON INVESTMENT ASSET Property that brings CASHFLOW INTO the bank account LIABILITY Property that results in CASHFLOW GOING OUT from the bank account
This clearly shows that a property that is worth investing and is considered an asset when it produces positive cashflow. The latter refers to the nett absolute amount from monthly rental returns after deducting all financial obligations to the bank and other recurring expenses. An asset makes our bank account richer whereas a liability drains our funds. The EOI approach has a different definition altogether. A property is considered an asset when the property has positive energy flow, thus producing a better capacity for its occupant to prosper and grow. The opposite is true when less than positive
ENERGY ORIENTED INVESTMENT ASSET POSITIVE ENERGY FLOW affecting the property LIABILITY NEGATIVE ENERGY FLOW affecting the property
ENERGY MATTERS, JUST LIKE CASHFLOW Ideally, an energy producing property infuses its occupants with the capacity to perform and absorb the positive energy to make it prosperous for them. Be it owner or tenant, a good energy flow property will be sought after without much problem, whereas a negative producing energy property will be subdued in bringing out the best of its occupant and therefore creates unnecessary vacancy, or worse, the homeowner’s capacity to grow and live in harmony with nature becomes less than positive. When we sort out the energy flow, the cash flow will automatically sort itself out. Now you see how the EOI approach can benefit its subject while increasing ROI as a desirable outcome. If you decide to choose to implement EOI in your property assessment ventures, you will be having an unfair advantage over others who don’t. The choice is yours.
ABOUT THE CONTRIBUTOR Alan Poon is a real asset value investor, who focuses on tangible and undervalued assets, specifically real estate, as his choice of investments. He founded Superior Wealth Mastery, an organisation dedicated to the mastery of wealth education as the cornerstone of success and happiness in life.
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WHO DO YOU WANNA DO BUSINESS WITH?
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ho do I want to do business with?’ This question often gets overlooked in favour of ‘What property do I want to buy?’ or ‘What property can I afford to buy?’ What you need to remember is that the type of property you choose will ultimately dictate the type of people you will be dealing with. Customer types vary, and I can tell you from experience that it’s very difficult to be ‘all things to all people’. Trying to please everybody is a strain on resources; a more effective use of time and money is to identify and target a type of customer, such as families or students, and get to know them and their needs – better than they know them themselves. The most successful investors I know are those who focus on one or two market segments. They specialise in building a focused portfolio and a body of knowledge that leads to enhanced market understanding, improved properties and specific management systems. If you speak to many long-term and medium-size investors, you will find that most have identified a segment that works for them and that they stick to. Having targeted market knowledge means you can focus and maximise resources, which, in turn, leads to better property investments. To find your niche, you need to think about your goals and find a strategy that fits in with who you are and how you want to make your investment work. Not everybody wants to be hands-on and not everybody wants to build an empire. 78 I AUGUST 2016 www.propertyinsight.com.my
Knowing your core strategy, the types of people you want to do business with and what factors are important to you, means you can define which properties that are of interest. Once you know what you are looking for, you can set your search criteria, give agents clear briefs and set up automatic alerts. A clear and focused search means you can make quicker and betterinformed decisions that will enable you to grow your business more effectively. Over time, you will become more skilled in dealing with your market sector and will understand the product and service levels you need to provide. This creates confidence and expertise, which means you can compete on a higher level because you know what your market needs and wants and can cater specifically for it. Investing this way is not only more effective, it is also more satisfactory and enjoyable. And while, over time, your strategy may change and evolve, the most important thing is to have a strategy to start with.
ABOUT THE CONTRIBUTOR KK Chua is the strategic advisor & managing director of Armani Media. He is also a registered real estate agent and an investor with more than 10 years of experience in the industry. He can be contacted at kkchua@propertyinsight.com.my
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