lwb,

<<the quote is hidden in a book i once read.>>

It is from "Rich Dad, Poor Dad" by Robert Kiyosaki

Dreamer

It doesn't bother me if I can find a tenant that pays RM2k per month.
30 years later, you own the house without paying and get paid every month.

that's why a house, particularly.. own residence(home) is not an asset... it's a liability!!

the double up (200k loan, pays back 400k to bank) only happens if the maximum leverage is taken.. MOF 90% onwards.

i thought about paying huge amount of money for own home.. perhaps MOF of less than 30% (or the minimum available loan amount allowed, e.g 100k)

doing so, should i eventually sell the house at 400k many years later, i'll pocket the rest because of huge equity put into the house.. but then again, i think about opportunity cost.. of forgoing this amount of money set aside for the equity and accrued over the years.. will that gain be marginally larger than would i have place it onto another investment (for the risk that i assumed)?

how ever i put it.. own residence(aka home) is such an expensive/costly acquisition..

This post has been edited by lwb: Apr 30 2009, 12:24 PM

hi dreamer,

what ways to entice people to read than a one-liner catch phrase?

i found out that the particular lack of reading that is one of the major contributor of such low financial intelligence amongst the mass crowd today.. the resources are there (cheaper too, if one gets pre-owned paperbacks copies, like me).

if one studied carefully both of these phrases; "profits are made.." & "buy low.." they share similar philosophical structure.. the subtle difference would probably lies in the mindset at executing it.. and the level of certainties one conjured.

i'm not equally well versed to debate them(the nuances between the 2 phrases).. but benjamin graham, warren buffet or kiyosaki all profit from it..

This post has been edited by lwb: Apr 30 2009, 12:26 PM

i think to wait further to buy a house.. would be to miss the boat lah.

i just bought a house somewhere in my dream location.

previously the house around that area is put on offer for RM420k.. , but now i got it at RM380k.

i would say it's a good deal then.., since the buyer also bought it at 400k.

don't wait lah.., if you got money, and you plan for own use and long-term stay there .. go and grab the bargain now.



psst.. you can wait more if you're hoping few millions of human will be wipe of from the world due to this Swine-flu pandemic..! maybe there's panic selling?

where's the location if you do not mind telling.

Dear sir,

Debating whether a condo or landed is better is a falacy. It depends on one's personal investment philosophy.

Your arguement presents a very simplistic view and is not wholistic in nature.

Personally, I prefer a multi-pronged approached of having both landed and non-landed properties. Both are complementary and synergistic in nature. Let me give u one of many examples of how they are complementary.

Please note that the numbers below are just for illustration purposes only, and I'm not bragging about my own portfolio. Nothing much to brag about anyway.

1. Have 3 condo's which produce positive cash flow. In the meantime - buy a landed property 20% below market. Rent out the house for a slightly negative cash flow (if u get a positive cash flow on a landed prop with 10% down in the KV - it's the deal of the century). Overall, your condo's will still offset your negative carry. Depending on how you structure your deals - you may still be in an overall net positive cash flow position. You then hold on to the landed property for 5 years, and build your equity. Sell your landed prop for a nice tidy profit. Your holding cost during the 5 years is zero.

That's just ONE variation. Don't nitpick. There are plenty of other combo's even better than the one above.

good luck.

P/S - who says your own house is a liability? Pls give some thought on what u can do with your own home. Don't read Kiyosaki at face value. There are other more learned authors out there that present other paradigms of thought.

You are half correct, ie on the opportunity cost part. When cost of borrowing is low, BORROW! If compounding is the eighth wonder, then leveraging is the ninth!

There is only ONE reason people invest, that is to make money. That means positive cashflow, AND/OR positive equity build-up. Apply this to your investment, and you can see why it CAN be a liability if one is not willing to learn. You don't get 9 of 10 millionaires become rich from properties by them thinking it's a liability!

Im gonna make this as my sig

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Added on May 1, 2009, 10:52 amBro, I think he meant that own stay properties have to be regarded as a liability, as its not income generating asset.

This post has been edited by Pai: May 1 2009, 10:52 AM

hi,

am really lost as to what you're trying to harp on here.. reading from what you've elaborated, i guess that's an over simplified assumption.. amplifying "ceteris paribus".. this is the greatest fallacy and achilles heel in modern economics today.

a case in point.. selling a property in 5 years' time doesn't absolutely guarantee a profit (an assumption right?)..

am old enough to read critically on a given subject, thus i don't read blindly as far as any author is concerned.. i've read over 50 books to date to help me better understand financial intelligence.. and it's by the basis of accounting that i'm assuage to see the difference between asset and liability..

i agree with you regarding variations.. my variations do not rest in properties, the bulk of my assets are invested in papers.. it'll be an area that i'm more comfortable with.. i spent alot of time learning about properties, from various angle.. even to the behavioral nuances of a buyer.

so, i hope it's not about your words against mine.. just refer to the accounting aspect of it.. i believe if you're able to interpret your own numbers accurately.. a shrew investor is born you nailed one correctly; "cashflow".


p/s - who knows, your 3 condos may have to sell at a deep & biased discount, 5 years down the road, right?

I know what he said.

I just think the saying your house is a liability is so cliched and overdone.. Is it? Never mind, no point debating on semantics. When u bankroll your landed prop........the classic definition of a liability does not hold water anymore. I think u know what I mean.

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Added on May 1, 2009, 11:54 amHi,

time to apply what u have learned then. Sometimes, strategy and talk is cheap. It's execution that matters, ain't it? OK, have to run now, and won't talk so much. Good luck.

p/s - I'm glad you brought that statement about the condo's selling at a steep discount in 5years. Yes, anything could happen. And I'm glad u think that way. It's not arrogance by the way. But I do admit that I take advantage of people that have your mentality. I hope there's more like you. Makes life easier for me.

This post has been edited by Phoeni_142: May 1 2009, 12:14 PM

spot on.. i guessed it's easy to get carried away thinking that one is nearly invincible when it comes to investment.. as though leverage is an entitlement.. as though profits are perpetual.. that'd make a complacent and arrogance investor wannabe.

i hope you don't fall into that mentality trap yourself as well..

yeah, talk is cheap.. however, what is revealed here is only the tip of the iceberg.. the bulk is on the execution.. i'd rather not say much on how i build the pieces..

a point well taken from your postscript.. i do like to test, even my own assumptions when it comes to plausible and profitable ideas.. and the best yardstick is to refer it with something measurable.. thus i refer to numbers and hence, accounting.. it's a financial map (or report-card to some) showing one's heading/bearing in his/her financial well being.

on the other hand, i have debunked my very own assumptions on many occasions.. and have eversince set my perspective straight as far as properties are concerned.. it's not easy to charmed me into believing that quantity supercede (e.g how many condos one have, how many rentals one have.. i doubt today azizi ali earns more in property than his seminars, books and other ventures.. same goes with kiyosaki)

This post has been edited by lwb: May 1 2009, 12:17 PM

Ahh, finally something I totally disagree with you.

A house can be an asset or liability, determine by how the cash flow.
Rich dad definition of asset and liabilities:

Assets put money in your pocket, liabilities take money out of your pocket.
Asset feeds you when you're not working and liability eats you when you're not working.



So who is really right?
Actually there is no right or wrong, just the different point of view people put on it.
I uses solely on Rich Dad definition in my investments analysis.

If I want to get a loan, all the property I own is an asset.
The bank allows me to declare my house I stay in as an asset.

This post has been edited by jasonhanjk: May 1 2009, 12:27 PM

I beg to differ :

1. Leverage is an entitlement, when one qualifies and knows how to utilise it.

2. Profits are not perpetual? Dunno about you or others, but Im getting >25% returns on my investment in properties EVERY YEAR for the past 4 years. I suspect I could get more in 2009, and bare in mind we r in bad times

3. Its not arrogance. It actually confidence, built from few successful n not so successful experiences, learning one has got from others and own mistakes.

Confidence is not something you can get purely by reading lots,lots of books .............

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Added on May 1, 2009, 1:20 pm

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Added on May 1, 2009, 1:22 pmchief, that is not wrong...........its just conventional wisdom. However, there r other who do things beyond what books can tell you, and that doesnt mean that these unconventional guys are wrong.

but having to know Phoeni, he has succesfully creates a cash-cow from his own-stay home, so by definition his own house is no longer a liability. Explains why you both cant understand what he was trying to convey. I've always say this --> A blind man cant see a beautiful girls even if she's standing right infront of you.

So both you and lwb, isnt exactly wrong, but the difference in experience levels confines your thoughts to what it is today.

This post has been edited by Pai: May 1 2009, 01:23 PM

Yes, my experience is still not up to par.

When the times come.
My answer will change again.

At first I disagree why phoeni re-finance his own house, after a few months later. I agree with him.

There are good assets, bad assets, good debt, bad debt, good income, bad income, good liability and bad liability.
A house you pay every month is a liability. Good or bad, depends.

This post has been edited by jasonhanjk: May 1 2009, 09:17 PM

wow that's a lot more things to know before getting a hse... but I could only get 50% of what you all discussing here. pai seh.

How can one get 25% return on property like what Pai said? Maybe it's from the capital invested? And for such high yield, maybe 7-10% unleveraged, is it almost ALL from studios/serviced apartments like Maytower?

Thats simply means that you've grown and learnt something new

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Added on May 2, 2009, 1:36 amYou'll be surprised to find out that the more you know about something, the more you realised that there's so much more to learn. But whats more important is action, as knowldege alone wont make you any richer. Action does.

Act once you've learnt the basics, then pray that things will fall in place

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Added on May 2, 2009, 1:40 amU r right, its based on capital invested. To know more, google COCR -> Cash On Cash Returns.

And yes you r also right that these returns r generated mainly from my studios.






This post has been edited by Pai: May 2 2009, 01:40 AM

Hi Pai,

From your experience, how long normally does the tenant stay in a studio? If the turnover rate is high, then might have some vacancy period and drive down the yield. Not to mention higher agent fees. After factoring vacancy, renovation and upkeep, agent fees, maintenance, what is the yield based on the market price of , say Maytower? That is assuming one buys cash, what is the rough attainable yield? My estimate is maybe 5 - 6%. is that correct?