Making Wise Property Investments
Savvy Investor Liek Lim who is also VR Lab Group Sales Director recently took time off his busy schedule to meet up with Property Insight to share his experience and views on challenges individuals face concerning finance and other matters while imparting some property investment advice.
Born in Raub, Pahang, Lim’s rise from a small town boy to Real Estate Investor has not been a smooth sailing journey. Lim recalls how reading Robert Kiyosaki’s bestseller book helped pave the way towards his first property purchase and subsequently, make good his investment journey into real estate which is still reaping him returns till today.
“I first discovered that there was a book entitled Rich Dad Poor Dad by Robert Kiyosaki while reading a magazine prior to the first publication of the book in 1997,” he relates.
“After purchasing the book, I grasped that investing is about getting smarter with your money, learning to spot opportunities, adjusting to changing market conditions and being agile when it comes to reacting to change,” he elaborates.
According to him, due to increasing inflation, many Investors are finding opportunities on how to make their money work for them to deliver positive cash flow and good returns that would outpace inflation. As such, investing in properties is a lucrative way to gain passive income and long term returns.
Lim shares that the guideline for investing in properties is generally centred on planning for one’s property investment according to one’s salary scale whereby one needs to have at least half a year’s minimum savings.
This is especially prevalent with the escalating property prices in the market.
According to the Valuation and Property Service Departments (JPPH), between 1999 and 2014, the House Price Index increased in all states particularly in Kuala Lumpur, Selangor, Penang, Negri Sembilan, Perak and Johor.
However, in comparison with other countries around the region such as Hong Kong, Singapore, Indonesia and even Thailand, properties in Malaysia still remain as among the most affordable in the region. On top of that, banks and financial institutions are also lenient towards first-time homebuyers by extending them a 90% loan in order to purchase their first or second property.
Yet, the common dilemma faced by many first-time homebuyers is that they do not have the seed money to buy their first property.
The First Step Is Always The Hardest
For Lim, he did not have sufficient savings to buy a property right after he graduated from university even though the cost of purchasing an apartment back in 2005 was only about RM 100,000.
“I needed to plan my savings at least six months in advance in order to accumulate and pay the down payment.
“Hence, I was initially hesitant to purchase any property and spent a longer time observing property prices before finally deciding to fork out RM500 as a down payment for a property purchase priced at around RM180,000.”
However, Lim actually pulled out from the purchase even though it had been approved by the bank because he was concerned that he would not be able to pay back the monthly instalments at a later stage.
After spending a few years working abroad, Lim toyed with the idea of having an office-based home and decided to buy his first property. He bought a Small office Home office (SoHo) unit at Old Klang Road in Kuala Lumpur for RM400,000 in 2010 which proved to be an astute investment decision.
Investing for The Future
As Lim opines, “Investing in property is something very interesting to venture into as there are many options available as to what you can do with your return on investment.”
For example, if you buy a property for RM400,000 and the price increased to RM650,000 after a few years, then there are a few available options that will open up for you to choose from.
For instance, you may choose to sell off your property to reap the capital appreciation or you may even consider refinancing your property to cash out some money. Thereafter, you can use the money to invest in other properties to make more income.
Today, the SoHo unit has been turned into an Airbnb unit.
Lim has since then continued on his property investment journey by purchasing other units in bulk with other fellow Property Investors. In 2014 for instance, he and a team of Investors transformed a property into a hostel for the purpose of students’ accommodation in Bandar Sunway, Selangor.
Lim opines that the challenge faced by most new Investors are a lack of knowledge on how to begin investing in property. They may also be clueless on how to weigh various considerations before purchasing a property for investment. For example, if one is looking into buying a property for the first time by just leveraging on one’s monthly salary, then the bank may reject the loan unless the prospective purchaser is able to present a solid investment plan to the relevant bank.
Despite the economic downturn, the property market is booming with more new and upcoming projects offered by way of attractive packages and discounted rates.
Therefore, Lim is agreeable that this is a good time to buy sub-sale properties although there is a risk of market oversaturation.
“Many new developments are rapidly coming up which will subsequently be completed in two to three years’ time,” he observes.
“This could result in many homebuyers rushing to sell off their properties upon completion which could push the selling price down lower and affect the rental returns as well,” explains Lim.
As parting words, Lim shares, “I believe that in order to be successful in any investment, one must be objective with the investment plan one may come
up with. Most importantly, one has to come up with an exit plan before deciding to invest in any property.”
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