Taking The Smart Journey

Strategising each purchase while capitalising on opportunities

Deep-rooted interest in research saw Kaygarn Tan holding a Masters in Science, exploring in the field of entomology. A scientist by profession and having spent 22 years in the academics, he realized life is not all about working 9-to-5.

“I felt trapped with my full-time job and I needed to do something different to turn my life around,” he says.

“That was when I started to learn how to invest in property, and to be out of the rat race and be financially free.”

Today, Tan has become a full-time investor, coach, entrepreneur and recently published his first book The Master Key Method to Unlock the Secrets of Property Investment. With a new goal in mind, Tan aims to inspire and help as many people as he can by age 60.

The journey

“I have enjoyed looking at buildings and properties ever since I was a boy,” said Tan, adding that bike rides with his father to survey property sites were among the most memorable moments.

He says investors have full control of their assets from the research, to minimizing all the risks in screening tenants.

“You are accountable and take ownership of the situation, unlike shares that predominantly depend on market force.

“I decided to invest in property because of the power of leverage. Property is an asset class that you can leverage and get a loan of up to 90 per cent which should not be taken for granted because Malaysia is one of a few countries that offer such a loan policy.”

Tan says properties will always remain as hedge against inflation as property value will double up every decade.

“Hence, we should utilise it as a tool to create wealth.”

Tan urges budding investors to set a property goal, saying it may provide a great advantage, considering his goal of acquiring a RM1.5 million property portfolio 10 years ago that has grown significantly today.

Exciting venture

“I never thought about investing, as initially the idea was to buy (a house) for my own stay,” he says.

“So I bought a medium-cost apartment that was within my budget. Today, the apartment is rented out as I’ve got a good paymaster.”

Fear of purchasing the wrong property may deter one from sealing the deal but Tan insists on investing in yourself first as he started his investing journey from his very own pocket.

Investment strategy

“Your property portfolio should have both for capital appreciation (flip) and for rental (keep). Before you buy any property, you need a clear strategy whether you want to keep or flip (your investment).”

Tan advises budding investors to start with residential units, because people are always on the hunt for a roof over their head. Commercial market is a niche segment with different target markets and highly reliant on economical factors and traffic flows within the area.

“Once you’ve started investing on residential units, only then can you learn about commercial properties,” Kaygarn says.

“A reliant system must be in place to save your money towards financial freedom. No money down is an advance strategy which can get you started with minimal capital, but will snowball your capital for your next purchase.”

Never skip research. Tan highlights that consumer demand involves several factors, including location and population.

“Therefore, make your purchase according to demand, instead of speculation. For example, if it’s a buy-to-keep investment, study the rental returns and buy at least 10% below market value in areas that have high population density.

Challenges and exit strategy

Among the challenges Kaygarn faced, was buying without much knowledge, especially when he ventured into commercial property without a proper exit strategy. Having purchased a commercial property during the global financial crisis of 2008-2009, he was unable to rent it out and ended up having a negative cash flow.

Asked about an ideal strategy, Tan says: “If you want to rent out the property, buying from a construction property may not be a wise choice as there is no gauge and you need to hold longer.

“Secondary market would be ideal but be sure to calculate rental return,” he says, adding that investors should not get a property that offers a return that is below 6.5 per cent “as you would not get a positive cash flow after deducting all the cost”.

To flip, the property must meet demands especially in access to hypermarkets, public transport facilities, schools as well as refurbishment of the property and surrounding areas.

Opportunities aplenty

“As opposed to popular belief that the current market is soft, the situation today provides a lot of opportunities,” he says.

“Now, it is easier to find below market value properties and discover more gems.”