City&Country: My Space-- Lessons in real estate

Would you pay thousands of ringgit, on top of skipping what you do for a living for several days, to have the inside track on real estate investment?

Many of us wouldn’t, but there are those who do not baulk at such investments because of the potential returns from bricks and mortar.

A real estate investor, fresh from attending two recent property seminars in the Klang Valley, found himself in the company of avid property buyers with varied profiles. Whether they were medical practitioners — doctors and specialists are known to really fancy property investment — budding entrepreneurs, professionals or college leavers, they were united by a common goal — to get rich (or richer) the real estate way.

Property seminars and talks are nothing new really, although the recent surge in value in selected addresses has helped fan interest.

A good friend who paid more than RM600,000 for a typical intermediate 1-storey terraced house in Kuala Lumpur’s Taman Tun Dr Ismail (TTDI) earlier this year still laments her decision.

Consider this: The standard version of the first batch of bungalows in TTDI cost only about RM110,000 — that was in June 1976. In that same launch, the standard semi-detached homes were sold for about RM90,000.

Excluding TTDI Hills, there are now 437 bungalows and 396 semidees in TTDI. In the launch of the final batch of bungalows in 1984, the 156 units cost RM413,000 onwards each. In September that year, the last batch of 162 semidees were put on the market for RM330,000.

And stop blaming your forefathers for not having had the ability or foresight to accumulate landbank that would now make you an instant millionaire. It is too bad if you do not belong to the famed See Hoy Chan group or Eng Lian group of Bangsar.

When the times are good, it is easy to forget those who lost their pants in property deals that went awry when the going was tough. The impact of the 1997/98 Asian financial crisis brought even the so-called giants of property development to their knees. Then, the US subprime crisis threatened to cripple the global economy, although Malaysia got off relatively easy.

But as property diehards will acknowledge, there is money to be made in real estate whether in good times or bad. Ultimately, apart from having an healthy appetite for risk and luck thrown in for good measure, one has to look hard, which explains the continuing quest for knowledge on property.

Interestingly, common sense and keeping an open mind can be counted as the best ingredients of a sound property investment.

Sentiments and ego are taboo because a shrewd investor must maintain a balanced view devoid of emotions. Sure, go ahead and listen to what your best friend has to say about a property sale or lease, but stay true to your own course. Nobody knows your investment threshold better than yourself.

Be open to criticisms about a piece of property you want to invest in because human nature is such that we tend to shut out negativity and focus on the positive aspects of something we are inclined towards.

Take care not be swept away by a sense of euphoria. The most knowledgeable and cautious of investors have been known to make overstretched commitments on the strength of a show unit alone, and of course lived to regret the decision.

Like in any other form of investment, it is imperative to do your homework. Map your cash flow and keep your ears open to not only what the developer or owner is telling you, but also what you are not told.

Fraud is a real threat in any property deal. A seemingly official-looking document such as a sale and purchase agreement can be tampered with, as can tenancy agreements. Never underestimate the extent to which the unscrupulous will go to achieve their dubious goal. So, it pays to always ensure your investment is protected in the eyes of the law.

Some quarters have bandied about ways to circumvent the taxman, but that is not something we will discuss here.

Whatever the case, common sense must prevail before a document is inked. For many, all it takes is one bad real estate decision to bring them down.

In the final analysis, not everyone can be Li Ka-shing or Donald Trump.

Au Foong Yee is The Edge Malaysia’s chief marketing officer. She has been tracking and writing on the Malaysian real estate sector for close to two decades, but continues to be amazed by its dynamics

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 837, Dec 20-26, 2010