Hi Pai,

Thanks for your valuable info here.

Many things have been said by the sifus.

But there is none so far relates to Tax Plannings when one is considering to buy an investment property ( or am I the one who miss out ? )

Maybe some standalone discussions ( touching on tax ) here and there. Can one investment tool apply effectively on its own without touching the others ? If let say the tax law taxes 50% on your rental incomes, does it make any diff to your investment decisions ?

Secondly, no one compares property investments to REits ( any tax advantage ) ?

I agree, like what you say, more discussions are based on theories, less on actions.

Just my personal opinion only.

Mind to share more ?

This post has been edited by SKY 1809: May 2 2009, 12:06 PM

Hi Constant, you r asking all the right questions here :

typically a tenure of rent for studio's ranges anything from 6 month to 2 years, as basically my studio's r being rented to expats with short to medium term work assignment in Malaysia. These guys usually comes here to work alone and wont be getting a car, so studio's with LRT connectivity is exactly what they need.

Turnover rate is higher VS normal condo's, but demand or tenant liquidity is also very high. I've been doing studio rentals for 2 years now, and my units has never been vacant for more than 2 weeks. Most of the time my vacancy period is only 3 day The main reason for this excellent demand is due to the sheer fact that we r undersupplied when it comes to studios.

Lack of supply + high demand pool ---> Higher returns for the landlord

As for agent fee's, due to high demand, u dont need to engage agents to rent out your studios. I have yet to pay agent fee's for any of my rental properties todate (close to 4 years now). Advertisement in Star is more than sufficient.

Lastly, why buy cash when you can leverage?

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Added on May 2, 2009, 5:09 pmNo one discussed about tax probably bcoz there's no way evading it unless you dont declare.........hence no point discussing unless you plan to buy assets under a company.


as for REITs, just my 2 sens on why I wont consider REITs today :

1. One have no control if the funds bought over "turkey" assets to be paked under REITs.

2. No leverage.

3. Returns r mediocre compared to the realproperty investments.

4. While its more liquid VS buying actual props, but your dividend payout stops once you cash out your holdings. Properties today allows you cashout gains and still keep the property for recurring income.

Will start considering REITs once I have few million quids in the tank and wealth creation is no longer a priority.






This post has been edited by Pai: May 2 2009, 05:09 PM

Thanks Koopa ~ Can I get condo/apt for 1000sf and above? It is just a small family of 2 or 3 of us, but elders might be visiting from hometown from time to time. Space isnt an issue, but preferred 3-bedrooms and above...

While I agree with you that direct property investment is better than REITs, I'm not sure studios are the way to go. Short term tenancy translates into increased the wear and tear on the property as well as lots of active management effort.

There is a cost (in terms of time and effort) each time you have to advertise the property, screen prospective tenants, switch tenants, sign a new tenancy agreement, etc.

Also frequent investments is probably required to replace/refurbish furniture and appliances.

With short term expats, I suspect there is also an increased risk of them absconding with unpaid rental and utilities... which translates into more effort monitoring them.

With 1 or 2 units its probably manageable...once you have more units it becomes a near full time job!

I think shophouses are the best... you get capital appreciation as well as good cashflow (if you pick the right areas). You can enter into long term tenancies that require minimal management.

This post has been edited by gilabola: May 3 2009, 12:38 PM

My thoughts :

Studio's are not necessarily meant for short term. I know for a fact that 1 unit in Casa Mutiara was rented for Rm1.9k p/m and Maytower for 1.7k p/m, both on 2 years tenancy. One can always choose either way



Higher cost PROVIDED one goes for short term tenancy. Not a problem at all if you sign a 2 year lease.

Also pls note that studio's returns are generally significantly higher VS other bigger units. So even if you do short term tenancies, your cost could be easily covered by higher returns.

I beg to differ. You are talking about ppl who can afford to rent a studio for above 1.5k -2k p/m, and living by themselves. Its a diff standard, and tenants r usually very decent.

The odds of refubishment etc will be much higher when you rent to families with kids o students.

Agree, which is why I dont advocate short term rentals.

I have more than 2, and so does taikors like Phoeni, so far I have no complaints, especially when I look back at my returns (not my intention to brag, just to tell you guys that the 4-5 days spent on managing studio's in a year is well worth it)

This is absolutely right, and its my long term plan as well to get into commercials. Unfortunately all the commercials that Im eyeing today cost min 200k capital for d/p alone, and yields are at best around 7% only.

On the contrary, studio's min investment required is 20k only. For poor chap like me, its the only thing I could afford

My favorite author has a total of 1440 small rental units this year.
Not counting other big properties.


So, how can you do more with less?


Once you lean more, you would agree to start rental units first, not shop houses.

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Added on May 3, 2009, 10:06 pmDid I see wrongly?

This post has been edited by jasonhanjk: May 3 2009, 10:07 PM

Unlike gilabola who can afford to invest in commercials, I have no 200k to invest in commercials. So yes..........im poor

for those who think that leveraging is an entitlement.. don't really know what that entitlement really encapsulate.. below is the quote from the star[4-may-09].. no doubt you can leverage, but never have this entitlement mentality towards it. thus, if you think you're wiser than the guy who said it.. i'll let you be.

"I think the most important lesson is the world needs a whole lot less leverage," said Buffett, who is Berkshire's 78-year-old chief executive and chairman.

agree on that.. especially if you get a bank or a strong franchise on the lease.. the cashflow is akin to cash cows

semantics, semantics.

well - i didn't say that leverage was an entitlement......but I believe the guy who posted it said it was an entitlement - provided u know what the heck it is you're doing.

Let me quote u some spiderman...."With great power, comes great responsibility".....I'm sorry....i'm not so eloquent or learned to quote Buffett.

By the way, you shouldn't take the quote from Mr. Buffett at face value. Maybe your posting could intimidate some newbies....But I suspect u made some eyes roll.

1. Mr. Buffett was referring to leverage that was used in a very speculative manner, which fueled the sub-prime bubble. Here, we are advocating for leverage to be used in a responsible manner to increase our investment holdings and net worth. In that sense, one shouldn't fear leverage, but use it as an ally. Personally, I do not discourage ridiculous speculation in properties or unhealthy levels of overgearing.

2. Secondly, if u study Mr. Buffett's work - do u dare tell us that he only invests in companies with LESS debt? Hello???? Again, u r taking our Star newspaper quote at face value. A company with 100% cash and 0% debt - is an inefficient balance sheet which implies a more expensive cost of capital. He values efficiency in margins and does not advocate a reckless adoption of leverage. That's his implication. Look at Wells Fargo & Coca Cola - his 2 biggest holdings - I assure u that their gearing ratio is more than mine.

3. Lastly - whilst I do not claim to be as wise or intelligent as Mr. Buffett - I think one must always examine principles or quotes from a few angles. "Why does the world need less leverage?" Well - this is the context of the quote - America's consumers were borrowing against their homes to take vacations, go out for meals and to remodel their houses. Families were using debt to INCREASE their spending far faster than their incomes were rising. Hence, the bubble burst and the party ended. Yes, in that sense - the whole world needs less leverage.

Totally diff context. Warren Buffet dont buy/invest in properties. Period

you don't read wide, do you? i'm sorry if you're only good at comics..
you probably have a half-cooked understanding about what an "entitlement mentality" is..
but i guess, you shouldn't try to reply for the sake of replying.. a healthy leveraging is encouraged, but not without an entitlement to it.. i hope you'd allow your humility to see through this. or would your pride be?

do you realized that you're merely paraphrasing the counter intuitive towards an "entitlement mentality"..?

This post has been edited by lwb: May 4 2009, 04:01 PM

investment is investment.. which category of asset is a mere tool..
your respond reflect your lack of understanding of what inherently an investment is all about..

i'm referring to leveraging, and leveraging can applies onto alot of investment tools.. but leveraging is still a leveraging.
perhaps your investment is narrowly confined to properties.. then i'm sorry to diverge out of your limited context..

Pssst.

Again, Buffet doesnt invest in Malaysia properties. You quoting his advice in a property forum tells me how shallow your knowledge levels in prop investment.

Lastly mate, if u still think his advice on leveraging is relevant in the context of Malaysia property investment, give us some actual analysis and examples on how lesser leverage can be beneficial to the investor. For once in LYF, u should try to justify your thoughts thru actual examples instead of giving some general statement by quoting some popular chap

Somehow, knowing your level of understanding on property investments, I doubt u'll be able to come out with an example.................. but PLEASE prove me wrong

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Added on May 4, 2009, 5:34 pmOwning a property related firm is diff than buying a prop. Its a diff business altogether

This post has been edited by Pai: May 4 2009, 05:34 PM

Yes, I'm not as well read as you. I'll improve the quality of my replies by quoting the Star Newspaper tomorrow.

That's funny, chief. I was under the impression YOU were the one replying for the sake of replying. Secondly, your replies are only confined to what others have said at FACE VALUE. You do not present any maturity or analytical thought in your thinking. Even worse, I don't think u even understand this whole subprime crisis and its context.

Oh well - read Pai's post above. I'll be eagerly waiting for your CONCRETE examples on how lesser leverage is of benefit to investors. I'm also keen and eager to learn from your wisdom in property investment. Perhaps you could share your investment strategy, and what metrics of measurement you use.

It's time for you to substantiate your opinions, unless of course - u want to wait till tomorrow's Star Newspaper comes out, before posting your reply.

Let me quote your infamous word this time.. "semantics... Oh, nothing but semantics"

What's good for your pride is bad for your wisdom.

Still waiting for your concrete reply.

Oh wait - great come back I guess we all know what you are made off now....

enuf said.

.. say what? can speak up a little? concrete konon.. i doubt it's of use to reveal to you anything.. i doubt you'd learn a dig about it

hmnn

ok, instead of me posting a smart alec reply, let me use all my will power to reply rationally to you.

1. Why is it that using less leverage is good for an investor? Kindly elaborate and share from you own personal experience.

2. How were u able to secure a property going for "less than developer price"? A few people threw examples of areas which are "less than desirable" which caused the price to drop. I quoted examples on how u could find motivated sellers in the sub-sale market to push the price down further. Why don't you share your own personal experience? Since it's a done deal for you - I'm sure it's not a big issue in telling us the name of the development. I know both Pai and I post ours. Personally, I don't mind sharing where I got some good deals, as it's closed anyway.

3. How do you evaluate your target areas and what's your investment philosophy in term of properties? What metrics do you use? COCR? Payback? Cap rate?

By the way, i'd be willing to debate rationally Point by Point with you. I have no issues at all in answering any counter questions u may have after u posted your replies. I'm sure we'd be willing to learn from your experiences.

your move, chief.

This post has been edited by Phoeni_142: May 7 2009, 12:54 AM