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Hard To Find “Good” Property Deals?

“Don’t be paralysed by fear even if you can’t find any “Good” deals to invest in!”

This is an article that touches on psychology, personal finance & property investment. For 17 years, I have been working as an employee (a career banker). I have seen many of my colleagues who barely had RM10,000 in savings. Sadly, they are living from paycheck-to-paycheck.  Some do not even have a property yet.

I’m sure we have come across statements like this before:

“I’ve been to a few property courses, but I have not bought anything yet. Things are just so expensive lah. Hard to find the property I want lah.”

“I have read 30 books on property investment, but I am still not quite sure what to do.”

“It is very hard to find GOOD deals that are 20% below market value lah. So, I never buy anything yet lor.”

Whilst I may be able to lend a listening ear, it is hard for me to be empathetic. Let me explain.

KNOWLEDGE ALONE DOESN’T MEAN ANYTHING

Many have complimented me for having a “knowledgeable mind” because I’m a nerd to the core. I consume about 2 to 3 books per week, as I have always viewed books as one of my most reliable mentors.

However, knowledge alone is overrated and doesn’t mean anything. You could gain tremendous pearls of wisdom from property courses, books and networking sessions. But it doesn’t count for anything if you do not APPLY your knowledge and take ACTION.

If all we needed was ideas and positive thinking, then we would all be living a Paris Hilton inspired lifestyle and zooming down the highway in a sweet Ferrari 488GTB.

MUST WE ONLY INVEST IN SUPER “ONCE IN A LIFETIME” DEALS?

Is it a great thing to buy Below Market Value (BMV) properties or super distressed properties? Of course it is it. Is it fantastic and fabulous to find once in a lifetime property deals? You bet.

However, I’ve seen too many investors who feel like a dilapidated pond scum just because they can’t source fantastic “winner” deals like the ones described above. They think that the path to investment riches has to be supported by fantastic BMV deals, thanks in part to “experts” that indoctrinated such philosophies to them.

Because they follow such inflexible and stringent “winner” criteria, they are often paralysed into inaction. Let me share a little secret. I have been fairly consistent in my property investments in the last 17 years. However, only 20% of my properties are BMV or super deals. If I abided strictly to “super deal” criteria, I would have a non-existent portfolio today!

Folks, the Malaysian property market has consistently returned close to 6% capital growth per annum over the last 20 years. Why, then, do you have to try and pick a “winner” all the time? Since this is the norm, being choosy is more about mitigating risk to make sure you don’t pick a loser, as the average “boring” property still performs remarkably well.

This is a point worth making – if you buy a boring condominium of RM400,000 at market value in an “aunty & uncle” middle class suburb – you would have to fork out a downpayment of RM40,000. Assuming your property appreciates by a conservative 3% per year and you took a 30-year mortgage, your net worth (market value of property – mortgage) after 10 years = RM 247,000.

Your return on capital is a cool 62% per year (RM 247,000 net worth ÷ 40,000 downpayment ÷ 10 years). Who says a boring condominium which appreciates by a pathetic 3% per year can’t create wealth?

OUR INTERPRETATION OF EVENTS MAKES OR KILLS US

Many new investors always come to me petrified and numb, they seem paralysed with fear. They are fearful that the market will tank. They are fearful about the shaky economy. They are fearful about the precipitous fall of the Ringgit. Consumer sentiment sucks. Lending policies have become tighter.

They are “fearful” of the “economic dangers” that persist. Do not misunderstand me. The dangers out there are very real. The world isn’t exactly full or roses and sunshine. However, fear is a choice. Fear is a product of our own thoughts and interpretation of events.

Victory starts in our mind. Think victoriously. I’m sure we all know some successful investors out there that seem to do very well in any type of economy. Are they natural born geniuses? Or perhaps they are just more resourceful, and dare to think differently from the rest of us?

Let’s be resourceful and logical. Properties will always be needed for shelter, and form a huge part of our net worth. Off the top of my head, there are plenty of “boring” condominiums worth less than RM450,000 in areas like Old Klang Road, Jalan Kuchai Lama, Overseas Union Garden (OUG), Taman Desa and Cheras in Kuala Lumpur. Am I endorsing these areas? Certainly not! Do your own due diligence and do not assume the prices will jump exponentially. My point is, even in today’s “difficult” market, some potential opportunities remain.

Moral of the story? Your mind is your greatest asset in wealth creation. The quality of your thinking determines the quality of your life. Secondly, the thought of finding the property deal of a lifetime is seductive for many investors, but be careful not to be paralysed into inaction just because you couldn’t find any.

Building wealth is like building a house. Lay the foundation and build your house “brick-by-brick”. The combination of “boring bricks” over time creates a beautiful house. It may not be necessary for each “brick” to be super undervalued deals. If not, your house may never be finished.

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