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Sabah Property Magazine #25 - The Real Deal 2nd Article

by Enoch Khoo Hartanah on Wednesday, 30 November 2011 at 00:39 The Real Deal Enoch Khoo Here I am contributing my first of many future articles to Sabah property. I thought it would be appropriate to share a little bit about myself for you to get to know me better.

I was born into a family of 3 siblings in Sandakan, Sabah to a family of Educationist. My Dad (Ronnie) was a Head Master and my Mum (Kathryn) a primary school teacher. Both my Brother & Sisters are Top A Students and Ex Head Prefects of their respective schools. As for myself, I am an Average Joe Student and the best I could have achieved for myself is to be a Head Librarian and that was in primary 6!

Both my elder siblings did exceptionally well in their studies to obtain a Sabah State Scholarship to study abroad. As for me I have to scheme my way to get a FAMA Scholarship (Father Mother) to study in the UK. Thank God I graduated with Honors Degree otherwise my parents would have disowned me!

Ironically, the best education I received was not from university but was from a graduation gift which my mum Kathryn gave me. That book is Rich Dad Poor Dad by Robert Kiyosaki. I could relate very well with that book because for those of you who have read the book, Roberts Dad also used to be a headmaster.

To cut the long story short I started investing in properties at the age of 21 while working in different corporate / multinational companies and 2 years ago I decided to resign from my senior regional position to go full time in Real Estate. Today I am only 31 years old.

However I am not going to share only about my successes but I think more beneficial to everyone would be my sharing on the miss opportunities and the learnings during my short 10 years journey in property investments. Most people would be good in sharing their successes but I think I am better in sharing about my shortcomings because I have plenty of experience in that!

There are 3 key observations I would like to share in my personal journey the last 10 years:

1. The Books you read and the people you associate with are important in property investment. When I started out in 2001 there werent really a lot of books or seminars that I could attend to learn about property investment. My Mentors were Rich Dad Books and Coffee Shop chats with Uncle & Aunties! Malaysians has one of the lowest reading habits and if I got the statistics correct, it states that Malaysians generally only read 2 books in a year and that includes magazines! I strongly suggest that before you start investing in properties, its important you invest in yourself first. You must purchase property books and attend property seminars as frequent as you can.

I still remember in the earlier days at a coffeeshop at foh sang, I asked an uncle whats the difference between a Freehold & Leasehold land and he explained it this way to me: Nok (My nick name), Freehold Properties is like your Wife. Once Committed Forever is Yours. Leasehold Properties would be like your Child. Once reached a certain maturity age they would be gone! One last thing. Your Neighbours Wife is Behold Property. Only can see but cannot touch!

It is important we associate ourselves with the right people. More often then not, when you first have the intention to invest in a property, suddenly your friends / relatives around you are subject experts in it! Even your friends / Relatives who is without a job also suddenly become property experts overnight!

I always find it amusing when I first invest in properties, my friends / relatives would inform me of how hard it is to get a mortgage loan, find tenants and all sorts of horror stories would crop up. After thanking them for their well meaning advises, I always asked politely do they actually own any properties and personally experienced what they have shared with me? In my experience 70% of them do not even own a property and most of their sharings is from someone else hear say. I always appreciate advises as I believe they all meant well but be wise in who you listen to. I am pretty glad I did not listen to any of them and today the same people who gave me those advises are asking my point of view on property investments!

Key point: Invest in yourself first and always associate yourself with positive people who are already actively investing in properties!

2. Be Committed To Your Job But Be Even More Committed To yourself. In my experience marketing new or secondary properties in Kuala Lumpur, it is unbelievable how many of my friends / associates simply miss out on great investment opportunities due to the fact that they are too tied up with their job. Now I am not saying you should slack at your work but all I am advocating is you should set aside time and prioritize the important things in life. Lets be honest, taking one day off from work to attend a property launch would not be the end of the world. However, that one day could potentially bring you a RM100K profit in the future and that is what I believe more important for you & family.

My ex boss used to share with me, Nok you can never finish your work. It is only finish the day you are 6 feet under! Key point: Do what matters most first!

A year ago I was marketing two office Lot and it was a good deal at a prime location. I called two of my associates in KL. One an Engineer who is a senior manager in a public listed company and the other a handphone shop operator whom I bought my handphone from. Engineer gave me his normal excuse he was in a meeting and only available on Saturdays. However the handphone shop operator drove all the way to hear me out and eventually bought the office lot. As we speak today, each of his office lot has appreciated by 40K. That simple act on one day has netted my associate a cool RM80K should he decide to cash out today. I believe you guys see my point. If anyone were to tell me that being rewarded RM80K for a days work is not important, I seriously would like to know what else does!

As for my own real life short comings. I was back to Sabah from Singapore managing the biggest milk powder agency as a Regional Sales Manager based in kota kinabalu in the year 2007 - 2009. By that time I considered myself pretty advance for property investors my age and even then I was too busy in my job that i failed to invest in a single unit of this project which we all know by the name Alam Damai from Wah Mie group. What a great miss opportunity for me! Capital wasnt an issue, I have the money to buy but I just did not find the time to make a booking because I was busy! Today I believe the project has done pretty well and each time I drive pass the project whenever I am back to Kota Kinabalu, it reminds me of a very expensive lesson.

Key Point: It is ok for EVERYONE to make a mistake. But it is a SIN if you repeat the same mistake!

3. Always Make Decisions Based on Data & Not Emotions I find it very interesting that some investors actually purchases property without doing the necessary due diligence on the investments. What it means is that we buy properties based on feelings and in some cases peer pressure. I have seen friends who have bought properties and when I asked them why did they invested in it they replied: My auntie has bought one, my younger cousin also bought one so I also buy one loh!

It is imperative that we checked out the population statistics of an area, developers background, what is the price per square feet, maintenance charges, future expected rental rates / appreciation, current rental rates at surrounding areas and a whole lot more fundamental questions before we invest!

If a company used to rear chickens as their main business and now decides to venture into property development, be very sure you know they have good people / consultants in their management team. If not your property design might be similar to a chicken farm!

Let me share some common calculations I do for my own property investments. *(Assume all these properties are bought as investment and not for own stay) *(For easy calculation sake and not taking appreciation into the equation)

Property A is bought at RM 100K and is rented out at RM700 per month. Property B is bought at RM1 Mio and is rented out at RM7000 per month. Both gives me a 8.4% Gross Returns per annum. Is there any difference?

Property A might not have sea view or nice amenities and might be a 20 year old property in a small town but to me if I take rental income as the objective of my investment strategy, property

A might be attractive because it requires lower capital, gives me just the same returns as Property B and possibly easier to find tenants too!

Property B on the other hand could be giving the same rental returns but the upside is the potential appreciation for this property could be very attractive! However a few fundamental questions we should consider: How many households can afford to rent RM7,000 a month in that specific location? Whats the population growth and if you are targeting expats what is the current expats housing allowance package currently enjoyed in the market?

Some might argue they have very strong holding power and would only want to enjoy the appreciation value of a property but I believe as smart investors we would want to leverage on every dollar and cents and not keep a property idle vacant for too long.

There are still plenty of hidden gems if you focus on sniffing out these properties. Every location has its potential and you really need to do the maths because numbers dont lie!

Key Point: Do not let the facade of a building determine your buying decision. Do your Maths before you Invest because numbers dont lie!

As I am writing this article, the world mourns for the one man who has changed the way you and me live if we happen to own any Apple products. Steve Jobs. Visionary. 1955 2011. One of my favourite quotation that came from Steve is

Your time is limited, so dont waste it living someone else's life. Don't be trapped by dogma -which is living with the results of other peoples thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary. Do something great.

I left a very high paying regional job to go full time in property investment because I believe I owe it to myself and my family to do it. Get out of your comfort zone and follow your heart. Whatever you are doing, whatever job or business you are doing, give your level best. Till my next article, All the best in your property investments!

Leaving you with a favourite quote of mine: Do your Best and Let God Do the Rest