What comes to mind when we talk about investing in properties? What can you do with a property? Buy, sell and rent? It might sound simple enough but there are multiple ways to do it if you explore deeper. Chris Tan gave a talk during the recent PropEX 17 where he highlighted the ways one may acquire, sell and use property in different ways. He categorized property usage into Buy, Sell, Use and Borrow. To become an informed and successful real estate investor, you must be able to lay down your options and pick the right fit.
"Never invest when you are hungry" says Chris, advising people to not bite off more than you can chew and see the larger picture and project into the future for the long term when it comes to investing. Do not be in the spur and make rash decisions is what Chris is saying. Do proper research then decide. "It is about affordability, buy within your affordability" says Chris.
It is not about finding the cheapest
It is about what you can afford. A high income does not always necessarily mean your loans will be approved. Calculate your expenses, then think about investing. "In a storm you have a palm tree and an oak tree, the palm tree sways violently while the oak is firm and strong. Who will be able to weather the storm?â€ Chris asks, "The palm tree will endure because it is very flexible but the oak tree will break and fall because it doesn't have any space to move.â€ His point, be flexible and have your options open and not become too rigid. This is a reason why one must have options to be flexible and be aware of them when needed.
Multiple ways of buying
There is more than one way to own a home. Basing this on Chris' presentation, he is of firm belief that a good property investor explores all the avenues available to him or her. One of these facets is group buying or multiple ownerships. Having two names or more instead of one on the loan application greatly improves the chances of approval and helps to ease the monthly repayments.
Auctions are also a great avenue to explore when looking for some great deals, although there are inherent risks involved, buying a property below market price is always a good thing. "You should have a diverse portfolio to reduce risk and speculation" says Chris.
If you have too many loans under your belt and you are ineligible for a new house loan. There are ways for you to resolve this issue. Banks look for a clean and reliable track record. This could mean your children as well, rather than waiting for them to get their own, you can jump start their property journey by buying under their name instead of yours. Joint ownership is also practical as their record might be too clean, so add in your name to firm up the bank's confidence.
You may also want to ask friends and family and on how you can help with their repayments. If you do this you may and opt for a certain percentage of the property the bought, based on how much you will be paying. It is an easy outlet to property ownership but it might backfire so make sure to bolster the deal with an agreement in black and white.
Multiple ways of selling
Having an option-to-purchase clause in your tenancy agreement is a good way to lock down a buyer or if you're a buyer, lock down a property at current market price. Keep this in mind the next time you rent out your property, you may also get higher rentals as part of the deal to lock down the property at current market prices. The structuring of these deals may vary and can be complicated, so best to have an experienced real estate agent or lawyer handy.
Another way to create value is to change it up by repurposing your property from a residential to a commercial unit. Be careful as it may make sense if it is strategically placed along a busy road but not so in quiet neighbourhoods. Have a look at your property, if there is high foot traffic and potential for visitors, you know what to do.
If you want to sell but not ready to let go yet, partial-selling may be a good idea. As a seller, you benefit by still owning the property and not be burdened as much by the monthly financing. How about swapping properties? Let's say you have a property in Kuala Lumpur but you are based in KK while another person is based in KL but owns a property in KK. It would make perfect sense to swap these properties and just pay off the difference. It works better if the properties are in similar price ranges. Both parties are now satisfied and can manage their portfolio better.
Property investment isn't always black and white. You have many routes to choose from heading to a goal. Make sure to be flexible and not be discouraged when the conventional doesn't work. There might just be another way, so explore.
This article is based on a talk by Chris Tan, Founder and Managing Partner of Chur Associates, entitled "What Can You Do with Your Properties in These Tough Times?â€