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Malaysian Property Market 3 | Buying vs Investing! (Kuala Lumpur)

There must be a willing seller and a willing buyer! That's an economy.
Buyers don't create the market, they just act on the market.
Sellers don't create the market, they just act on the market.
That's the economy.

Developers are market markers and being a passive developer myself, I know value creation. I also know how much this economy is undervalued. Today, I am project managing an international school, my second such project and we have a plan to roll out another 23 over 5 years. Crazy isn't it? Well it isn't, coz I see an opportunity, and I know how to plug it. Cost of Education in this country is astronomical in terms of purchase power parity. With more schools, come more jobs, come more talent, come more competition, come more affordable, reflects our consumer price index and frankly, how we build a nation with good infrastructure. So maybe by the time I have kids and they grow up, I know I can ensure the affordability to the same standard of pricing vs quality that I enjoyed during my time. This is capacity building.

Now put agents and developers out the way, bubbles do appear and yes slime does hit the fan. However, one thing for certain, you always need to take a view on how you wish to profit. Profit can be in many forms, and the profit to me is real dollars and sense in appreciation of today's and tomorrow's capital inflation. You find your own definition and then go to market to see how its realised. But we don't go tell other people they are wrong la... other people too have their own requirements, definition and risk appetite. The man on the street is not bodoh, every man on the street has his different issues and knows how to play his money to his best and limit. Don't you?

Just because a property investor has bought one or two properties internationally doesn't really make that person a savvy investor, or knowledgeable in investment. To understand property investment is not understanding property, but finance, insurance, economics, portfolio management, fund managers, asset management, taxation and most important key indicators domestically and globally. Understand how money flows in and out of our economy, you will understand where people are taking profits. The property industry in Malaysia doesn't stand on its own. Its interdependent. Who controls it? The Banks and therefore effectively Central Bank.

The Banks lend your money to Developers and therefore a product is created. Before the product is built, it is sold to end buyers through a mortgage. The Banks have effectively converted a 3 year project financing loan with a developer to a mortgage financing loan of end consumers for 25 years! That's how banks build their balance sheet. Banks ought to lend 7% of their working capital for real estate project financing loans. How many national banks do we have? Do the math. Now Central Bank/Bank Negara controls all of this, and they are run by the most prudent savvy central bankers in the world. The economists at Central Bank are top rated and understand how to steer the economy. They know how to inflate and deflate the economy. Remember in property, you make money on asset inflation.

So now you know who controls your profit. Guess what? Central Bank recommends you to have upto 3 properties. One to live, One to rent, and One to trade in. Effectively a healthy property portfolio to manage. Banks have strict guidelines to lend suitable borrowers upto 3 residential properties with ease. You can afford to pay interest and principal repayment on 3 properties today at the same value as compared to borrowers 10 years ago servicing only 1 property. Why? This is economics! This is making things affordable and not necessarily cheap. This is capacity building. This is building a property infrastructure for the next 25 years or a generation or two down the line. So that your kids would be able to afford housing when its their time.

We are not Sydney. We are not Melbourne. We are not Singapore. We are not London. We are Kuala Lumpur, and its very different from Johor, Penang and the rest of Malaysia. Different from other Commonwealth, First World, Second World, Third World Cities. Different cities, different variations of economics. See where the wealth makers are, you will see trends. It was obvious that the member did not understand this master thread in its entirety. What was spoken was just one aspect, so yes its all true what he said. You can tell me the rainbow is red, if you point the red to me and tell me its red, it is red. I will agree.

Let me share a tip with you..... no one makes money when the economy is flat lined or stable. No one makes money when the economy is saturated with either demand or supply. No one makes money when you have a perfect infrastructure. Money is made when there is volatility. Higher the volatility, the greater the margins. Simple. You either take a bullish or bearish position. You will make money. You also make money when new infrastructure is being developed. RM163billion MRT project is not a small project. It will affect 6 million lives in the Klang Valley. This is not the only project happening today. We are growing the city to create more capacity.

Second tip, when you have already bought your property, you need to balance your exposure. You also need to know who you can pass the buck if something goes wrong with your investment, income and or losses. This is where Insurance comes into play and your other liquidity to back up your investments. Your relationship with your banks and tax manager. Even when you make loses, you can profit. Even when you lose value, you can make it up. Even when you have no faith in your property, it will have faith in you.

Third tip, you always find the rarest and highest grade of gems in property being sold when market peaks, because the seller knows he must cash in and realise his profit or risk to wait another cycle and burn his holding power. He too wants to move up the value chain. Thats when savvy investors move in to buy and add value to take that property to the next level. These are not ordinary buyers, these are very savvy and well informed buyers, who have their portfolios ready for purchase. We call them investors.

You can make small money, you can make big money, your can also lose everything and more. In any market there is a loser and a winner. Depends who chickens out first, or external factors that are beyond our control. If you understand this philosophy, than you are an investor. If you don't have this mindset or your risk appetite is limited, then you are just a buyer not an investor. You are just moving your eggs from one basket to another. Actually you are not investing, you are just moving the basket. Its like trading in/up your car. Do you call car buying an investment? The eggs are not hatching, moving, growing, etc. They are just eggs. Fragile and ready to break. Best to have them for breakfast with a bit of toast.

What brokers are saying is that the market is heating up, and transactions are on the rise for the choicest properties, and properties we would independently recommend products that have strong intrinsic value. Even if these prices come down, they have the intrinsic value to move up again on the next cycle. The question: are you prepared for such a scenario? Do you have the holding appetite? The views expressed by the other member essentially says he doesn't. Why spend RM2.5m for one bungalow, when you can spend that money to buy a whole street on the cheap and rehabilitate it? That to me is value creation / asset enhancement / portfolio management. What Agnes and I are saying is that we are seeing more transactions, for what ever reason a buyer or seller has for his transaction, the volume of transaction is high, and growing. These buyers can't all be wrong, can they? Surely some have been to Sydney too right?

What I am saying, if you are unsure of buying a specific property, at least buy a mortgage. The cost of mortgages are lower than the cost of inflation. Therefore, by buying a mortgage with a property attached instead of keeping it in cash, you are hedging off inflation. Simple profit taking in terms of savings.
What does "Buying a Mortgage mean"?
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Being Debt Free/Buying Property in Cash -vs- Getting a Mortgage;
and, A Healthy Portfolio Management explained:
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Thank you for reading this, please do share your thoughts below.
If you enjoyed reading this and wish to read more, check out:
Malaysian Property Market 1 | Economic Issues!
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Malaysian Property Market 2 | a Good Time to Buy!
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and feel free to connect with me on InterNations! Cheers!