question for sifus:

say i have little money at the mo (just enough to cover 6 mths of my mthly exps), but i can get 100% loan and all other fees are borne by developer & bank. pay nothing until completion. i could rent this f/h landed prop, but will get -ve cf, confirmed.
can i buy this for flipping? or is it too dangerous?

i took more than 5 years of learning on an asset class before i make my first purchase.. that's my "plowing" process.

yes, i'm a slow learner here.. so i don't deserve the attention of sifus/sifools/seafood/etc.. but i can highlight to you this;

you've yet to fully understand the meaning of "profits are made when you buy, not at when you sell".. stop short of being philosophical, this phrase encapsulate myriads other important lessons in regards to investment.

it took me 2 years to understand this phrase above.. i believe you've a reasonable intelligence given to you and you may grapple the meaning within 2 weeks and arrive to an answer to your own question above..


btw, "monthly expenses" is not a 1-size-fits-all.. thingy. i realized that, there're levels within that "monthly expenses" that can be further tweaked.. perhaps looking at the elasticity of that expenses in question.

some expenses are elastic..and hence can be taken out of the equations should the dire need arise.. if the majority of your 6mth expenses are full of such elastic expenses.. considered yourself great!!

on the other hand, some expenses are very inelastic.. failing to meet such expenses will immediately jeopardize a person's solvency.. which is one measurement of how 'free' are you financially? if a bulk of your 6mth expenses fall within this category.. you're walking a financial tightrope and wearing a shoe that says "financial fubar"

so, just lamenting that you've enough fuel to travel 6 months down the road is as good as superficially not saying much..

This post has been edited by lwb: Jul 14 2009, 12:54 PM

Then my question to you is, why you want to buy and flip?

Also, which is faster to flip?
Buy an under developing house, with the risk of abandon project, high vacancy due to it's in a newly develop area with very little amnesties etc?

Or buy a property which is run down in a good neighbourhood, fix it up and sell off?


Flipping is not investing, Rich dad call it rolling the wheel barrow.
You keep on rolling it and it gets bigger but gets you no where.

one thing i like about investment is.. there's no limit to it's creativeness..
the destination is one.. but the roads that lead to it.. are many.

and the same road you took last time, may not necessarily work again.. it's a continuous journey.

on this context.. to say that flipping is not investing is limiting. stop short of judging others on which road to travel, be it sustainable/legit/efficient/costly or otherwise.. there's a good saying

"you can do anything.. but not everything you do, brings good"

for example.. some of the investment maneuvers that you guys are adopting, frightens me.. but it may simply work for you (probably, i'm just too stupid to notice gua*lol*).. how long will it remains working for you.. that's another question about sustainability...

you're reading thing critically.. perhaps you're absorbing it wholesale? i did such silly wholesale absorption many times.. but learning is fun when i slowly apply a sense of understanding to it.

read critically.. it helps. there're lots of noises out there..

This post has been edited by lwb: Jul 14 2009, 01:45 PM

so true

---

Added on July 14, 2009, 3:26 pmerr.....actually in this particular scenario you dont have to flip to boost your net worth. In fact your networth remains the same before or after you sell.

The only thing that changes after you sell the prop is your liquidity level.....

This post has been edited by Pai: Jul 14 2009, 03:26 PM

Pai, got one question for you. For banks to access your affordability, do they normally use 40% or 33% DIR?

Under a difficult circumstances, you'll get killed.

For any flippers wannabe, ask yourself this :

Assuming you will get zero rental income, can you afford to keep the property for a minimum 2 years WITHOUT touching your reserve funds?

If the answer is YES, then by all means flip and gamble. But if you cant afford it, suggest you play the safe man's game. Honestly, I couldnt flip bcoz I couldnt afford my own rule. Suppose this explains why I never sold any of my properties to date.

my networth is measured.. not in 'promised' money.. but liquid and deployable fund. and i no longer need to periodically mark to market..

i can see your creative accounting there.. but i can't fool myself, can i?
i get a feeling that you're smart.. but not wise.

This post has been edited by lwb: Jul 14 2009, 03:46 PM

my fav bank use 60% DIR. I dont know about all banks, but I know few major mortgage players use 40%-50% DIR as a gauge.

On this subject, not all banks recognizes rent income as part of DIR calculation. So to be on the safeside, just use your gross salary to calculate DIR.

On this DIR subject, think Phoeni should be more qualified to advise.......

aww.. both of you are just like skid and mudflap.. *lol*

This post has been edited by lwb: Jul 14 2009, 04:03 PM

Theres no creative accounting, not being smart or wise either. Its the basic definition. For those who dont know the real definition of net worth :

Definition of net worth --> Net Worth




Hence why I said, your networth never changes when you sell a property, but your liquidity level does

if i didn't sell.. i wouldn't have knew how high a price it can go, would i?
we're not talking about normal appraised value here, skid.. it goes beyond board.

to some extend, i do enjoy your differing views.. no offense, but most often time, i sense that you worked within a predictable parameters.. so when i've acted on something that goes beyond your operating parameters, you have difficulties grasping it.. (asking for prove this la, prove that la.. if i show you my transacted numbers/percentage.. you might choke.. that's why i refrain from doing so)

This post has been edited by lwb: Jul 14 2009, 04:33 PM

thanks for all the advice, really appreciate it.
i can maintain <30% DIR and should not touch my reserve funds, IF within the nxt 2 yrs:
-my salary stays the same; can still hang on to my job
-my apartment can at least cover mthly installment (projected to be higher)
-we don't need another car

still a risky move, as i think these 3 can easily be on the wrong side.
thanks again.

this doesn't solely applies to flippers..

this goes the same way about leveraging.. treat it with a mentality as though it's an entitlement and perpetuate to unlimited level of wealth.. one needs only to take a reflective pondering of what's written by yourself.

your d.i.r also enforces the idea that leveraging is not a given, but to be treated with cautious and respect.

This post has been edited by lwb: Jul 14 2009, 04:56 PM

You are right. I always play CashFlow 101 and I notice that no matter what job we are in, we can get out of rat race with proper investment and loan.

I am in Electronic Engineering too but I am still a student. I am in my final year now and I am going to find a job soon.

Thanks for the long spoiler. I read it and I think I already read about it.

I can't find the audio book. How do you get it?

If you didnt sell, then median valuations (minus 10%) becomes your prop value. Anyway, the doubt the diff between the median valuation and transacted price is gonna make significant diff to your total networth (unless your networth is dem small lah).

Look, we all have "thought parameters", and its only normal for one to be curious and starts asking questions when we see something that goes beyond "normal". Plus, it was never the issue of "grasping", its a question of "believing". Its hard to believe you when you claimed to bought something 30% below market value and manage to rent/sell way above market value when you cant even provide :

1. Development name
2. Purchase price (approx will do if you need to maintain your identity)
3. Selling/Rental price (approx will do)

Chief, I've personally know ppl who have made conservatively 2mil profit solely from properties before he reached 35. A fren who's starts from nothing 5 years ago and made conservatively 0.5mil from properties, and he's only 27. Having fren's with guys like these, lets see if you can still make me "choke"?

Perhaps you should expect a chuckle instead.........

Pai kor -
Anyway I doubt that we'll get choked that easily - especially after wondering around in this forum for some time, seeing the same names appearing in many many threads (they practically parang everything that they find good), and having friend who's only 28, quit his job cause he has several properties in Aussie making him thousands of Aussie dollars a month + he's venturing into development in Aussie...

Anyway educational debates are welcomed - we all have plenty to learn. But let's just try not to get too emotional with our achievements.

By the way, the whole point of this forum is to share - so why don't you share with us which development helped you to make that good profit?

This post has been edited by Backkom: Jul 14 2009, 06:01 PM

i can identify with that accounting perspective and that's why i said.. you're probably smart, but you're not wise.. which is way better than me (i'm neither smart nor wise)

put it this way, you probably don't talk/mingle around with people who "cari makan" in the properties' business, agents, etc. (very much a diy person)

otherwise.. you'd know.

This post has been edited by lwb: Jul 14 2009, 06:15 PM

I am not interested in taking sides. However, I believe in talking frankly and accurately about specific investments made.

1. lwb - if u find something 30% below market - and manage to sell it at market price - your net worth doesn't change. Only your liquidity levels. It's a fact, and we're not hiding behind accounting rules either.

2. If u manage to sell the same mentioned property - 30% above market - then your net worth will change. Simple as that.

3. Congrats if u have managed to do so. Having said that, would be great if u shared which development, and some of the figures, considering it's already a done deal? This forum is about us learning from each other - so please share your success as an ideal case study. Unlike some of our esteemed guests here, I have no issues with choking.

4. I have no qualms sharing some of my own specific deals and figures as well. And I believe some of us have before anyway.

5. In response to a question raised by another gentleman earlier - With regards to the LRR or DIR ratio - banks are even willing to go higher than 100% for deviation cases. In general - 70 to 80% is the norm for most banks. However, please do not take what I hv mentioned as a fundamental law. For the sake of prudence - i'd like to humbly suggest maintaining a DIR ratio of 50% or less when u go into properties.

This post has been edited by Phoeni_142: Jul 14 2009, 07:42 PM

You may need to check with success resource or visit richdad.com.
It's not going to be cheap.

Remember to take your time, don't rush into it as it may burn you out.