So much has been said about property investment, why you should get your hands into it, how to avoid pitfalls, how to profit from property investment and others but is there really a magic formula or magic strategy to all this?

iProperty.com  feature contributor Chan Ai Cheng speaks to Asia’s Queen of Property, Ms. Renesial Leong on her latest released start-up guide to making millions in property entitled The Magic of Property Investment.

iProperty (IP): Interesting book title. What inspired its name?

Renesial (RL): Property investment is magical! It can magically supplement your monthly income, replace your monthly income, offer you financial independence, offer you financial freedom and offer you freedom of time and choice.

Not to mention the reasons why property investment is so magical. Property investment gives you cash flow on a monthly basis, leverage, capital appreciation, return of investment (ROI), control, hedge against inflation; and the benefit of usage. Property investments can even buy themselves!

IP: There are challenges in property investment. How have you managed to keep the magic alive through the past 20 years?

RL: You must know who the magicians in property investment are. 

Your tenants are your VVIPs (Very, Very Important People) making them our magicians! Tenants give us cash flow on a regular basis and with a system set up, it will make rental roll in ‘auto-magically’ as well as  will take reasonable care of our properties and help make our investment game magical. When you select correctly, you will eliminate many potential problems. This can include general upkeep, to receiving rental on time or simply to get along well professionally, maintaining good tenant-landlord relationship.   Without a doubt we should be looking for ideal tenants - tenants who demonstrate the ability to pay the rental, is gainfully employed, looks decent and communicates reasonably well. To establish these factors, make it a point to interview your potential tenants.

Play your part well as well, seek to become a good landlord, one who is fair, attends to repairs and maintenance, respects your tenants as they would to you, and play a mutually beneficial situation for the long term.

There are no perfect tenants, only good tenants. Go the extra mile to keep them happy. They will ultimately help you pay off the mortgage loan of your property!

You also need to assemble your own ‘success’ team. Property investment is a people’s game. Your ‘success’ team members are in essence your business partners, so set out to establish good rapport with them, and build good working relationships.  As your property portfolio of investments increase, you will be less interested in the day-to-day running of the operations and it is certainly advisable for you to spend time seeking out ‘star buys’ instead. 

You will need a mentor, banker, lawyer, real estate negotiators, tax consultants, plumbers and electricians, as well as interior designers.

One of the most important things to do before you begin your investment journey is to find out from your bankers exactly how much you are going to be able to borrow and how much the borrowing is going to cost you. Doing this in advance is not only smart but also sensible. It is advisable for you to work with at least two bankers. This way you can compare not just the borrowing rates but also the terms and conditions and choose the one that best suits your needs. Most bankers would offer their regular customers special deals.

Professional real estate negotiators are magicians in the business as well. They help you find properties to match your investment goals and also help you match tenants to your properties. Perhaps the most significant part of their job is their role as the intermediary during sale and purchase and renting out process. Many are proactive in marketing, provide high quality details and useful history of the property to make selection for you easier. Professional property negotiators would even help with ‘checking-in’ the tenant, and almost everything else, from arranging inventory check especially when your property is semi-furnished or fully furnished, to signing of the tenancy agreements. There are also others who provide management services, from rental collection to looking into repairs and replacements, payment of utility bills, quit rent, assessment, service charges, etc.

In truth, no property investor is an island!

IP: How about the money required for property investment?

RL: You basically need three types of funds: your investment fund or ‘seed money’, your cushion fund; and your reserve fund.

You need seeds to plant a forest. This is what I term as your investment fund or ‘seed money’. For beginners, you may begin with RM10,000 to RM20,000 seed money to pay for earnest deposit, legal fees, stamp duties, insurance coverage, etc.

It is recommended that you have three to four months equivalent of your monthly mortgage payments in your cushion fund just in case your property has vacancies for any extended period, or interest rates are revised upwards.

Depending on your age, if you are above 40, it is perhaps good for you to set aside three to six months of your monthly living expenses as your reserve fund. If you are younger, the less you require. This is to ensure that should there be any unforeseen circumstances whether it is health issue, business issue or personal issue, there are funs to take care of it.

Another good way to have more standby funds is to get a bigger loan than you need. The extra will act as a buffer. There are two advantages to having this extra loan. It is to buffer you just in case your property is vacant longer than anticipated but more so because this excess fund can form part of your crisis-buying fund. This means that should you come across an excellent deal, you can use this fund as your down payment right away and not miss the opportunity. In most deals, time is of the essence.

You must ensure that you, the investor and your investment properties are adequately insured against any unforeseen circumstances. In property investment, the money to be made is in the market, so don’t be penny-wise, pound-foolish and save on the wrong things.

IP: There is a section in your book on how to ensure that the magic does not fade. Can you elaborate on it?

RL: Yes it is very important that the magic does not fade. This is where protection comes in. Protection for you and your properties.

It is vital that you protect your earning ability and take insurance coverage for death, permanent or temporary disability, hospitalisation and critical illness. This is to ensure that in the worst case scenario where your earning ability is affected temporarily or permanently, at the very least the financial aspect of your worries is being taken care of.

You should either buy MRTA or term insurance to cover your mortgage loan to ensure that your outstanding loan will be paid off and your beneficiaries will still have a roof over their heads under any unforeseen circumstances.

There is also protection against lawsuits. Here I mean if you are in a high risk occupation group, instead of buying under your own name, you might want to consider buying under your spouse’s or your children’s name. Get them to sign a Power of Attorney and a Trust Deed that will enable you to maintain some control over these properties. Another alternative is to invest in a property-holding company or under a trust structure but you need to understand all implications including tax and legal implications.

You also have to protect your properties against all risks such as fire, flood, explosions, bursting and over-flowing of water pipes or water tanks, landslides and subsidence, earthquakes, storms, riots, strikes, lightning and others for all your properties.

Review your insurance needs at least once every two years, preferably once a year to ensure that your coverage is still appropriate.

There is another magical bonus to all these, as they are are direct expenses and are tax deductible.

Chan Ai Cheng
General Manager, S. K. Brothers Realty (M) Sdn Bhd Registered Estate Agent with the Board of Valuers, Appraisers and Estate Agents Malaysia (LPPEH), Member of the Institution of Surveyors Malaysia (ISM), and the Malaysian Institute of Estate Agents (MIEA), Registered Financial Consultant with the International Association of Registered Financial Consultants (IARFC), For any feedback on this article, please email aicheng@skbrothers.com