70% Loan-to-Value Ratio for 3rd house onwards

An update following my previous post 80% LVR?
It has finally happened overnight. BNM announced quietly, with immediate effect, a 70% LVR for the 3rd property onwards. See Support for BNM's LVR cap move.
As I have mentioned, this will result in much difficulty for small time property investors like us. However, Renesial Leong, the property guru, had mentioned that we can look at 2 bright points:
1. Property prices may stabilize for a while, or even drop because of urgent sales by investors who want to get rid of their property quickly since it is unlikely to appreciate in the longer term.
2. People who are speculators without sound backing may be out of the game for awhile, resulting in less competition.
So, fellow investors, collect your seed money and be patient, we are investors of the long term and we will be in this game, until the next policy change!

Getting Started in Property Investments Seminar

Sara and I spent an amazing day at this seminar, held at the UEM academy in PJ. Although I have attended such seminars before, we still learnt a lot from the 2 gurus, Michael Tan and Dr Peter Yee.
One of the important lessons I learnt from Peter Yee is to have a support group. Meeting with like-minded friends once a month, and sharing and mapping your goals out during the monthly meetings will help. Dr Yee himself had the support of his close friends who are property enthusiasts like himself, and they all managed to make good progress along the way. That is because if you don't have a group with whom you could discuss, and which would prod you along the way, it was very easy to slacken and forget about your property goals while you are caught in your daily job.
Another important lesson I learnt from Michael Tan is "What's your number?" which is the amount of lump sum money (pension fund) that one must have at retirement in order to comfortably live out the rest of the years. While he admitted the calculation method did not originate from him but from an insurance company, he still stressed on the importance of realizing the big figure that we need at retirement. He showed us how this principle can be applied using rental properties as the desired income vehicle, and how to work backwards to know how much is the value of the property to be invested now.
Let me illustrate the formulas here:
Pension fund = (Desired monthly income) X (Passing on Age - Retirement Age) X 12 months
Example: Let's say you need RM10k a month to live a comfortable life post-retirement.
This person retires at 55 and projects that he will live till 80.
So his pension fund at retirement is 10k X (80-55) X 12 months = RM3 million
In order to have this pension fund through properties, what is the property value that he must buy now to get this monthly rental income? Assuming this person is able to get rental yield of 8% per annum and there is no capital appreciation of the property.
Property value = (Desired income) X 12 / (0.08)
which is 10k X 12 /0.08 = RM1.5 million
In other words, if this person buys a property worth RM1.5M now which he can rent out at RM10,000 per month, this person has already set up the rental cash flow that he needs.
This is really a very simplistic rule, however the lesson learnt here is valuable nonetheless.

Internet application for SD Tiara

I applied for Streamyx internet broadband via the reseller at the SD Tiara apartment about 2 weeks ago. Last Saturday, the reseller informed me that they were unable to get into the application system for me because I have another telephone line pending. I was quite surprised, and when I dialled the 100 line, I was told that I still had a pending application in Cyberjaya.
I went to TM point on 3 separate occasions to settle the problem. The first time was on Monday lunch time to cancel the Cyberjaya telephone application. The 2nd time was on Thursday to try to apply for a new telephone line for SD Tiara because the reseller still couldn't get into the system, but there was such a long queue I gave up.
This morning (Friday) I arrived TM point early to be one of the first ones to get into the outlet which opens daily at 8.30am. There was already a queue formed outside the door.
When I got in and waited for my turn, I was told that the problem with Streamyx was there was no port again at SD Tiara, and same old story, they did not know how long we had to wait. So Unifi was introduced again, but this time no more free installation and unlimited downloads. Installation fees were RM200, to be billed in 5 monthly installments. And no more the good service that I experienced at the Domain (installation within 3 working days), now I was told I have to wait until Nov 15 before installation. I asked them why and they replied, "It's because of the high demand."
TM's philosophy, I think, is when you have good business, it's ok to sacrifice customer service. My tenant said he is getting used to the Malaysian culture of slow service.

Furnishings at SD Tiara Apartment

Continuing from my previous updates on SD Tiara, here are the pictures of the kitchen. The kitchen cabinet was put in years ago when we first got the keys to the apartment.
This time we only updated the wall shelf and the rod with hangers.
The previous tenant also left behind a water filter, so I just replaced the inner cartridge.


The master bedroom


The middle bedroom


The 3rd bedroom

Replacement of Room Door Lock

While I was busy at work today, the tenant of the master room at The Domain called. He had accidentally left his room keys inside the room, and then locked the door. He asked if I could come and rescue him with a spare key.
And today of all days, I really cannot leave the house even after work, as I have to look after the kids while J is doing the finishing touches to the SD apartment. So I asked the tenant to go to the hardware store downstairs for help, see if they can do a lock replacement. He managed to do it and luckily the store was not closed yet.
Now, the question is, who should bear the costs of the new lock and replacement? The tenant has not asked me yet, but I will collect the spare keys from him one of these days and he might ask. Any of you experienced landlords out there can give your opinion?

Photo from Phoenix Locksmiths

CIMB duplicate bank-in slip for Domain management office

On 1st Oct, I went to one of the CIMB branches and made a cash deposit over the counter for the Domain management account - Laketown. It is for the payment of service charge of the Domain. Fully intending to keep the bank-in slip and fax it over to the management as proof of payment, I lost it the next day. No matter where I looked I couldn't find it.
So I called the Domain management office anyway, to let them know that I have made a cash deposit, the amount and the date, but I had lost the slip. However they insisted that they could not issue a receipt to me just like that, I still need to fax or email the bank-in slip. They told me to get another copy from the branch.
With no other choice, I went to the bank 5 days later, to inform them that I need a duplicate copy of the cash deposit transaction. To my pleasant surprise, the CIMB staff and manager there was very helpful. In less than 15 minutes, I was given a duplicate slip. Very easy and no trouble at all.
There is good customer service in our Malaysian banks, after all....

Updates on SD Tiara

The past 2 weeks had been a whirlwind of activities for both work and also fixing the apartment. There were just so many things to do, with one problem popping up after another. Finally today, the apartment is more or less settled, and the first tenant has moved into the master bedroom. Here are some pictures of the work.The living room completed, during the day and night (curtains installed).

The handymen installing a new fan with light, replacing the old flourescent lamp. It can get hot in the dining area without a fan.


The Dining area with a glimpse of the kitchen.

Coming soon in Part 2, the bedrooms ;-)

Wall Colour at SD Tiara

Actually we chose a color called Spiney Green from Nippon Paint, but to save cost we use KCC (paint from Korea). Since KCC didn't have that colour, I then asked Faizul and company to change the colour to blue instead. And this colour, even J and I have never seen before, hehehe. We just entrusted it to Faizul to choose a colour representing "biru terang" (bright blue), white for the grill, and for the doors and skirting - mahogany.
Here's the result. This is KCC Littleton. No feature walls, Anie, only plain blue.

What do you think?

SD Tiara Apartment

Last Sunday my tenants handed over the keys of our very first apartment. They finally moved away after 8 years. Actually J and I bought the apartment when we were getting married. By the time the apartment was completed, we already had Baby Wei, and then we found that the apartment was too far for our family needs, so we rented it out.
The condition of the apartment was dirty to say the least. The wall had watermarks and paint was peeling off. And it looked like the tenants had not been staying there for some months already, they were just slowly moving the things out while they stayed at their new home.
Since they handed the apartment 4 days early, we quickly took advantage of the 4 days to repaint the house. J and I couldn't do it ourselves, because during month end it is almost impossible to take leave from our companies. So, we decided to find professional painters and pay them to do it.
I went through many phone numbers before I found my painter, Faizul and company. That is because he was sincere enough to want to view the apartment condition on Sunday night itself, and gave us an offer on the job. The rest of the painters cannot be bothered to reply my SMS for quotations.
Faizul came and gave us a quotation and J negotiated with him. Finally we agreed on a price, and the painter promised to finish the job in 4 days (Mon to Thurs). Sneak peek of the paint colour coming soon!

TM Unifi e-bill

After the free installation of the Unifi on 11 Aug, I got my e-bill on 8 Sept. If you opt for e-bill to be delivered to your email, it is free. If you want the hardcopy posted to you, then they will charge a fee.

In the bill, there is a stamp duty charge of RM10. Besides that, 2 months of service is charged. The first month, Aug, is prorated from Aug 11 to Sept 6. The 2nd month, the service fee is billed from Sept 7 to Oct 6. This internet fee is prepaid every month.

Once the e-bill is sent to me, I will send it to the email of my "chief tenant". He will then collect the shared amount from the other housemates and remit the fees to me. I will then make a bank transfer through Maybank2u. If you want to do that, make sure you select the payee as TM Sdn. Bhd. - Unifi.
I like the e-bill because:
1. It is green. We save paper.
2. I get to see the bill and ensure the payment from my tenants. If the paper bill is sent to them, they may not pay immediately, and I may risk having an accumulated utility bill for a few months. In this way, I have one less utility bill to worry about.
I wonder if you could ask for the Streamyx bill to be emailed instead of posted to you, too.

Increasing the Rent

One of the lessons that I learnt from Renesial Leong's book is to increase the rental every year upon renewal of the tenancy. According to her (ahem!), do not be afraid to increase rental for fear of losing your tenant as long as the increase is fair to you and the tenant, and reflects the market rate. There is no need find an excuse to increase rental because majority of tenants know it will increase with time, especially upon renewal. She also said to make it a point to increase rental even though it is only a token sum upon renewal to set the trend. After that, there wont be an issue of whether there is an increase or not, but rather how much increase it would be!

As a background to my story, my husband and I actually bought a house in Kepong last year with the intention of moving in. Then along the way, I got pregnant with Baby Xin, and the kids' school was a big problem for transfer, so we decided to just cool down and not move. We rented out the house (at negative cashflow, because houses cannot fetch the kind of good rental like apartments) for a year.

This year, the tenant told me he wanted to extend the tenancy for 1 more year. So armed with the knowledge from my property Guru, I wanted to increase the rental. But what is the quantum to increase? The tenant has been a very good payer. Everything is on time and he is also not fussy. As for the market rate, that is almost impossible to find as there are very few houses being rented out, mostly people buy for own stay. Even my friend, Sara, the property negotiator, could not find transacted records, only asking prices, which seems higher. (Mind you, asking prices are not actual rent rates, my rental is not that far behind).

I was feeling very uncomfortable trying to apply the lesson that I have learnt. I know that the tenant is stuck there for at least 1 more year, because he has not found a house to buy (which was his intention when he rented the house from me). I wanted to increase only a token 5%, but Sara pushed me to ask for more - 10%. Sara has become very gung-ho after attending the Wealth Summit with me. She says I am not even getting market rate. Renesial's lesson, about the increase being fair to both me and the tenant, is very difficult to apply in real life. But I thought, it's ok, just discuss with the tenant first and see if he has any objections. If he accepts it, good. If he bargains, then settle for a small increase, or no increase - (Anie also said that your tenant is one of your best friends mah).

So I called the tenant, citing a reason for increasing the rent. Next year the housing area wants to set up a guardpost, and will collect guard maintenance fees from each house. So I told him because of this, I need to increase the rental, 10%. And I also cited that actually the rental rate around the area is also higher than what he is paying. And you know what he said? He said OK, as long as I am paying the guard maintenance. Wah, wah, wah! Such a good thing that I asked, thanks to Sara for pushing me.

And year end, must buy new year's hamper already....

Image from http://www.propertyinvestmentproject.co.uk

Q&A from Starproperty.my

Malaysia Property portal, Classifieds, Listings, News, Home & Décor

While I was reading more about the potential implementation of the 80% loan-to-value (LVR) implementation, I came across this article about a live forum Q&A with 3 property experts held in Aug 2010. I enjoyed it and hope you will too.

80% LVR (Loan-to-Value Ratio)?

Property investors should be constantly feeling the pulse of the market. One of the things that I feel will be inevitable is Bank Negara's potential directive in raising the loan-to-value ratio to 80%. According to the ministry of housing and local government, such a move should cool the speculation on property prices so that there will not be people who are putting out very little downpayment money, to flip their property quickly after capital appreciation, and thereby creating a property bubble that will burst and affect the economy later. In fact, according to the ministry, this move will not dampen the property market in the long run. See also "Loan mortgages move would not dampen market."
While many business analysts feel that this will affect the property market in the short-term due to knee-jerk reactions, small time investors like us will definitely feel the pinch in having to come up with a bigger downpayment to secure our next piece of property.
So, what do we aspiring property investors do in such a situation?
Well, go back to the basics, as the property gurus say:
1. Whatever the bank policies, we need to build up enough seed money. Practice delayed gratification, for example, if you are planning to take a family trip overseas for the year end holidays, change your plans to do Cuti-cuti Malaysia instead. It takes a bit of cutting back here and there to try to come up with the 20% downpayment.
2. Invest, not speculate. Do our homework to look for rental-income properties, not just buying for fast capital appreciation to sell. Let's look at the BNM (potential) implementation as something good as it will force us to do our homework well and not just follow the crowd and buy in a frenzy.

Photo from Chinadaily.com

Post-note: As of Tues, 21 Sept, the PM announced that it is still 90% LVR for 1st and 2nd purchase, but no mention about what the LVR will be for subsequent purchases.

Is Your Personal Credit in Good Shape?

In my previous post entitled Property Investment Strategies in the next 6 months, getting your personal credit in good shape is the first strategy. Here is a story that I wish to share about my friend who did not do that.
My friend, G, has always been a good paymaster. Whether it is her house rent, car instalments, or credit card debts, she would just pay on time. She also has a long standing relationship with a certain bank, where her salary goes into, and her active transactions in the current account also show a great record.
G decided to buy a home, instead of renting. She had just got a good bonus from her company, and coupled with her savings, it was just enough to for the downpayment of a nice, cosy condominium in Kuala Lumpur for herself and her parents. She decided to apply for the loan from the bank (where her salary goes into) which she has good relationship with, and when the banker saw her good record from the bank's internal data, she was told that she should have no problems getting the loan for 90% margin of financing. So she went ahead and made the 10% down payment and signed the S&P agreement.
So, imagine her shock when she was told by the bank later that her CCRIS record was a concern. It showed lapsed payments in Jan and Feb 2010 for a car that she owned. Then only she realized what had happened. G had a car which she sold to a distant relative. As there were only 2 more years to pay for the hire purchase loan, the relative persuaded her to let him "sambung bayar" (continue to pay the instalments under G's name), so that he need not go through the hassle of applying for another loan. G agreed. She received a lump sum for the car, and the balance payment was through the relative bearing responsibility for the remainder instalments. But the hire purchase loan was still in her name. So her CCRIS record was damaged, and her bank declined her application for the home loan.
All other banks looked at her CCRIS record, and rejected her application. She had no choice but to apply from MBSB, which she was told could close an eye on her CCRIS record. She had the disadvantage of having to take up an unattractive loan interest rate. On top of that, for some reason, MBSB or its lawyers work very slowly (unlike conventional banks), thus delaying the loan disbursement to the vendor of the condominium, and the very irritated owner threatened to charge her interest for late disbursement.
What a lesson to learn. Just one small act of kindness, to a distant relative, resulted in so much monetary hassle for herself. And this has long term consequences, imagine being stuck with a high interest loan for 30 years!
G thought: "I have been a good paymaster all my life. The only thing I didn't do was I didn't check my relative's money habits and I brought all this trouble on myself."

Photo courtesy of Equifax.

Property investment strategies in the next 6 months

Lessons from my property role model, Renesial Leong, that we may already know, but it's good to remind ourselves now and again so that we can reach our financial goals.
1. Get your personal credit in good shape so that you are able to capitalize on opportunities should they arise.
2. Spend less, invest more - you need to build up seed money. So hold back before you buy that LV bag!
3. Avoid speculating on property with money you can't afford to lose - if you are buying to sell, don't risk it if you cannot hold.
4. Now is a good time for 1st time home buyers - mortgage rates are still low, high margin of financing and up to RM10,000 deduction on home loan interest rates for 3 consecutive years (for home purchased between 10 Mar 2009 - 31 Dec 2010)
5. Be extra careful with cashflow - factor in vacancies for 1-2 months, because it is a tenants' market right now - meaning that they have a lot of choices to rent from.
6. Be aware of upcoming mega projects. I for one, was amazed by the number of mega projects that is happening in KL city that will transform the KL skyline forever. KL International Financial District, Sime Darby Vision Valley, Sg Besi RMAF transformation, just to name a few. And I thought there was no more room for development in KL!

Wealth Summit

Saturday morning, when other people are spending time at home with family, Sara and I went to attend Mastery Asia's Wealth Summit.
It was a charity event where one paid RM100 to attend (because Swiss Garden has sponsored the venue) and RM80 goes to National Kidney Foundation. I think it is great because 4 gurus in their own fields took their time about 1-2 hours each to share what they know about their fields. Of course they will also share with you their intensive upcoming workshops.
I wanted to attend because I wanted to listen to Renesial Leong's property investment strategies for the next 6 months, and I dragged Sara along because she was just starting out as a real estate negotiator and I wanted to encourage her by making her see the value in property investments. At the same time we both learnt something new and we are glad that the session actually raised RM15k for the NKF. Sara was so impressed with Renesial, she bought her book "Your Tenants, Your Jewels".
The other speakers of other fields were very impressive as well, and I learnt other strategies of making money work for you.
The founder of Mastery, KC See, mentioned at the end of the session that he will conduct another Wealth Summit at the end of the year, but on different topics. That's because he wants to raise enough money to get to RM50k which is the price of a dialysis machine.
I am thankful for people like him, doing their bit for charity and also teaching us. All of us aspiring investors should strive to be like them, doing their bit for the society when they already have enough for themselves, to make the world a better place.

Stamping the Tenancy Agreement

As today is a Selangor public holiday, I finally dragged my feet to do the tenancy agreement stamping for my rental apartment in Cyberjaya.
I went to the LHDN office at Jalan Duta at 9am. I learnt that there were 2 blue forms and 1 white form to fill for each room tenancy. So altogether I was filling in 9 pieces of paper which took quite a while. Then I took the number to wait for my turn. The officer checked the documents and calculated the stamp duty rate.
And I learnt a lesson, stamping must be done within 30 days from the date of the agreement, otherwise one is liable to pay a fine. And needless to say, I got fined. As there are 3 room agreements, I was fined 3 times because I was late by maybe 10 days. And not only that, due to the fine I had to send the original agreements for endorsement. I was told to come back for collection on Monday 2pm. I only took back the copies.
But I was still thankful that the whole affair was simple and easy, and I learnt something new which I will be mindful of the next time I rent out another property.

Unifi - Internet installation completed at The Domain

Wednesday morning, the TM contractors came as promised. The installation took less than 2 hours, the only problem being they had to buy a longer telephone line to connect the modem to the telephone port. The design of the apartment is weird, the telephone port is not located close to the power socket, so you'll either have to extend the telephone line, or use an extension cable for the power supply.
The whole package came with a free cordless phone (Panasonic), a free TV decoder (for internet TV with 21 channels) and a free modem. I checked the tv programs, it has some Australian channels, some Chinese channels, BBC Travel and BBC Life etc. A good free alternative if you do not want to subscribe to cable tv.
Besides that, I also got my free streamyx zone password, now I could use the wireless internet at any streamyx hotspotz.
I tried out the wireless internet on my computer after the installation, it was really fast. The contractors told me that this system is more stable than streamyx. Unifi is a great idea if you don't mind paying more than streamyx.

Joyride to Cyberjaya at 1am

Sunday night (well, actually Monday morning), 12am I received a frantic call from one of my tenants. He couldn't get into his room, there seemed to be some problem with his key. I asked him if he tried it before he went out, and he said he didn't. It wasn't locked when he moved in, and when he went out he just locked the door.
Then I realized what happened. I had given him the yard door key instead of the master room key. What a blunder! So there was nothing to do but drive all the way to the Domain and get him the right key. Serves me right for being so sure, and not testing the key first before giving it out. J and I had a 1-hour joyride to and fro, and finally got home around 1.30am. One of the lessons learnt as a landlord!

The Handyman Fixed All

I took leave today to go and settle the unfinished business. I went to Cyberjaya a little early to go to TM to settle the internet problem. I was told the same thing, there are not enough ports, and I have to wait, but they don't know how long. I asked to be given information, if they can give me a timeline, say 1-2 months, I could wait; if it's going to be 6 months, I might as well sign up with their fierce competitor, P1 Wimax. The officer said, "Terpulanglah...." (Up to you.) She said she cannot promise because this is the problem to be solved at their technical department, and sometimes they don't respond. So, no luck there. I am disappointed, to say the least.
Then I went to the Domain. As I was early, I went to the 3rd floor to explore the landscaped garden. It actually look quite good, but I would really like more trees.

At almost 3pm, the handyman with whom I had scheduled an appointment arrived. I needed help to fix the clothes hanger.
In less than 30 minutes, the handyman fixed the retractable clothes hanger in the yard with his power drill. Ta-daa!
The clothes hanger is fixed high almost above the door, so that the door can be closed even when there are clothes hanging on it. I tried it afterwards, and it worked. This is the solution to the limited space in the yard for the washing machine and for drying.