Friday, December 18, 2009

Properties: Hands-on learning Part 3 - Financing

Just got back from Ho Chi Minh City (thank you bosses). The historical tours were mostly quite depressing and eerie - deaths, killings, tortures - the "fun" of war, where no one wins except the politicians. Mekong river, Dong Koi street (wandering around with colleagues & alone) and food was great though.

Ah.... the rush (to ensure Seller wins by avoiding RPGT in 2010) in finalizing the S&P + Novation Agreement for the transfer of the existing rental contract is going on smoothly - thanks to the capable Ms. Chung Fui Yee of Ky, Lim & Churme.

While that's happening, I've already nailed down the financing options to:
HSBC's (BLR -2.x%) Islamic Flexi home loan
ING's fixed rate 4.85%

Why these 2? 
1. HSBC is not playing the bloody game that most banks in Malaysia are playing now - grouping up like a cartel and agreeing amongst themselves to limit home loans to BLR-1.65% (zero entry cost) or BLR -1.85% (non-zero entry cost).
Even my trusty Standard Chartered (SCB) Mortgage1 people are in that Cartel and told me it's non-negotiable even though it'll be my THIRD home loan with SCB if I execute with them.
Sigh... if this was USA, I think we can sue for the cartel for non-competitiveness & manipulating the market prices.

2.  ING's fixed rate of 4.85% and friendly lock-in terms beats its nearest competitor AIA.

Decisions, decisions
  1. HSBC's rates VS ING's is about a variance of 1.45%pa.
    HSBC: 1   ING: 0
  2. HSBC's rates are variable based on BLR -2.x%, currently 5.5% (crazily low compared to history)
    VS. ING's fixed rate of 4.85%
    Future possibilities:
    Depressed BLR will be climbing up - historical average is about 8%+/- based on 20yrs+ of data
    BUT the Malaysian government plans to implement GST in mid 2011, which will hamper economic recovery, thus may severely slow down the rates from climbing.

    In my opinion, paying a premium of 1.45% for 2010 to about 2014 to ensure manageable long term mortgage, thus, making my cash flow planning for Casa Subang easier MAY be worthwhile. However, ING's customer friendly lock-in terms are better if I wish to sell the serviced apartment within 5 years.
    HSBC: 1   ING: 1
It's currently a tie - I need to meditate on this. In addition to which loan, I've gotta mull over the loan amount to take - I've been offered more but based on my cash flow simulations, I should only be taking RM163K loan to ensure that 9 months rental can cover 12 months mortgage payment.

FYI - the remaining 3 months rental is to buffer for non-occupancy of 3 months per 2 years & annual costs like insurance/MRTA, quit rent/assesment, etc.

Decisions, decisions. Any battle-hardened property investor advice?

Monday, December 14, 2009

Shameless Plug: Personal Money December 2009 interview

Heheh - finally got my hands on the printed copy. Pure luck being on the same cover page with Dr. Mark Mobius of Templeton Asset Management Ltd. ;P

Wednesday, December 9, 2009

Properties: Hands-on learning Part 2

In my opinion, for the working stiffs like me, going into properties investment must be done ultra-cautiously as it is a long term commitment (>=5yrs), illiquid and most of the profits are locked into the property itself via mortgage payments from rental.

Thus, based on the these, hunting and picking only the really worthwhile rental properties - worthwhile in terms of quantitative and qualitative, must be done carefully. At the very least, the cash-on-cash returns must be over and above what I can get from paper assets.

In addition to getting the asset, I think, prudently I should have enough cash for:
1. At least 20% down payment to ensure the expected monthly rental can more than cover the monthly mortgage and monthly/annual costs
2. Legal fees, fixing up, loan fees
3. 3 to 6 months mortgage in case of occupancy issues

Yeah yeah - I'm a pessimistic optimist ;P - plan and work towards the best, be prepared for the worst. Let's see how experiment Properties 101 goes in about 1 to 2 years time ;P.

Tuesday, December 8, 2009

Properties: Hands-on learning Part 1

I've just started my hands-on learning in property investment after researching, quantifying  what is "worth it" and generally hunting + mulling over the idea. Hheheh - big commitment wor, unlike paper assets, properties are illiquid and are more like locked-in investments for a minimum of 5 years (mortgage loan minimum lock-in period).

Thus, just to share my adventures (hopefully not misadventures), I've detailed below the reasons why I took the plunge in this Casa Subang serviced apartment.

Quantitative Evaluations

Well, it meets 3 out of my 4 criterias and looking at the cash-on-cash returns.. (salivalating).

Qualitative Evaluations
The Good
1. Occupancy rate looks to be more than 60%, eventhough it is school-break, based on my night investigation to check how many lights are switched on.
2. Security.
3. Walking distance to MyDin, Giant, Summit, SEGI College and FUTURE LRT (hope only, not putting heavy scoring on this FUTURE LRT).
4. Within 5km of Taylors, Inti, Carrefour, Subang Parade, KESAS highway & Federal Highway.
5. The property comes with an existing renter - contracted for 5 years, with 3 years+ left.

The Bad
1. It is a serviced apartment - ie. usually considered commercial property unless changed/justified by developer and accepted by local council that it is residential. Thus, a lot of rates are based on commercial rate, not residential.

The Ugly
1. Holy cow - the jam at Jalan Kewajipan can be bad. The consolation is that once past Summit and turned into Giant/MyDin, don't need to suffer the jam further into USJ and Putra Heights.

Thus, based on the above, I think it's worthwhile to use this as my "hands-on learning tool" - having more options in investments is always better when hunting for "value". Any learned property investors care to share?

Monday, December 7, 2009

Personal Money Dec 2009 - whoa.. who's that fler on the cover page ;P

Heheh - my subscription arrived @ home only on the 6th of December 2009. No wonder some of my friends are poking me and jesting around for an autograph. I didn't think my mugshot will be on the cover (together with 5 others). Nice zit on the day of the shot though bwhahaha.