INVESTING IN PROPERTY IS SIMPLE
by Lim Lay Ying
Property Times, New Straits Times
07th August 2004

You don’t need to be rich to buy properties for investment. In fact, you don’t even need much money to invest and it doesn’t matter if the purchase price is multiple times what you have in the bank.

Remember that banks want to lend you money to buy properties – so get them to put up the money. Then you’ll start getting the adrenalin rush…especially when you see capital gains and rental growth from your investment.

Real estate investment really is not as difficult as you think. It’s like a game of musical chairs – everyone can play. Just grab the opportunity early and you won’t be left out. You only start getting nervous when more “chairs” are being taken away.

Or even like the board game Monopoly which remains, to this day, the world’s all-time, best-selling game. The difference though is that, while Monopoly is about bankrupting one’s fellow opponents to emerge as the winner, in real-life property investment, victory comes when investment returns are maximized.

In addition, unlike Monopoly, the property investing game is not a game of chance. As property owners or landlords, we don’t sit and wait for someone to chance upon our properties to rent from us or make a one-time rent payment. We seek them out and sign them up for mid- to long-term leases. Plus, we don’t just wait and hope that they “land” there – usually unwillingly. Our tenants that we make deals with, would do so by choice – and on a “willing-owner-willing-tenant” basis.

Useful Tactics

Differences aside, Monopoly nevertheless could have honed our skills in real estate dealings in the real world. Those who have played the board game would probably remember several tactics when deciding on which property to buy, develop, or sell:

• Buying smart is crucial, as every market-savvy landlord will tell us. “Good buys” include:
  
  Vine Street (the Orange group) and Trafalgar Square (the Red group) are popular as they are the most landed-on properties.
  
  The Brown and Blue colour groups are cheap and though rents are lower, they can generate a great deal of volume because they are affordable.
  
  “Railroad” assets which fetch higher rental income when more are owned.



• Know when and where to build homes and hotels, and create a building shortage where possible. When more houses are built on a property, rents rise dramatically.



• Buy to trade and trade developable properties for properties with equal or greater value and for those that lie closer to Free Parking.



• Get the most out of mortgaging for this can help to raise money at crucial moments during the game.



• Be professional at all times. It helps ensure beneficial deals when trading.

It’s little wonder therefore, that Monopoly could have “maketh” many a real estate investor.

In Britain, individuals have flocked into the residential buy-to-let market where investment doubled between 2001 and 2003 with 400,000 investors carrying £39 billion (RM273 billion) in mortgages. Average total returns from the commercial property investment market, have exceeded equities and bonds for the last three, five, and ten years, and last year were 10.9 per cent.

Deutsche Bank expects German institutions to pump an additional 10 billion euros (RM46.26 billion) into property in 2004, and in the United States, pension fund weightings to real estate are projected to reach 10 per cent in the next few years after rising to 5 per cent this year from 3.7 per cent in 2003.

World’s Biggest Business

And waves of money are seen to continue to be drawn to bricks and mortar. Private investors who got their fingers burnt by the stock market crash in recent years have already made their move into property. Many are scouring the globe to find attractive returns, and are channeling their capital into property.

Property is in fact, currently the world’s biggest business, accounting for 15 per cent of global gross domestic product with assets of US$50 trillion (RM190 trillion) compared with US$30 trillion (RM114 trillion) in equities market.

Chief Investment Officer at London-based State Street Global Advisors, Alan Brown, accounts for this phenomenon by remarking that “it’s still tough to find anything that yields anything like 6 per cent that at the same time offers a reasonable amount of growth protection over the long run”. Property remains the best bet.

So just open your mind to the possibilities of investing in properties – even those which are located beyond the few miles from your home. There are always windows of opportunity. And right now, some spectacular opportunities do exist in Malaysia. The prospects of investing in properties in the fast-growing urban centres are tremendous.

Remember, property investing is not difficult. It can be played by anyone at anytime, anywhere in the world. No academic qualifications are required, no much money is needed – it’s that simple.