I am a ACCA student from TARUC , Setapak. Last week, I went to a kopitiam for breakfast with my bf and heard someone next to our table were discussing property stuffs. "Accidentally , I heard some of their discussion....they are couple and the female was planning to buy a property with her bf at Puchong.

But, they have some debate about it. The case was the woman wanted to invite her immediate sisters to join the "party" and they will sell the property after 5 years or once it appreciated to 20% over the original price. The guy seem have a lot of concerns about this. After that, I quickly finish my plate and pay the bill, as worrying my bf will....


I understand a lot of news and experts saying that 2016 is the good opportunity to purchase a property in Malaysia. All of us want to be part of the "party member", including me of course. I wonder what kind of challenges would a group of 5 peoples( family members or strangers) face if they are going to purchase a property and have drafted an agreement to sell it after 5 years or once other conditions have been met?

1) Loan approval?
2) Loan installment?
3) and what?
4)
5)

What will happen if one or two members don't contribute their share of loan repayment for whatever reason?

In the unlikely event that you break-off with your bf, how you intend to settle repayment made and future installments?

The more members you have, the higher the risk for failure.

Whenever any market attract students, da ma, obasan to invest mean the price crash is near.

This post has been edited by icemanfx: May 1 2016, 02:00 AM

Agree with u for the first time.

this is a major red flag

if 5 person's name as the property owner, what would happen is some wants to sell but some not willing? what happens if one person got into financial problem? will all willing to sell in lost or less profit? what if kena bankrupt? what is relationship issue happen? what is someone not able to pay loan?

there are just too many factors to coz a havoc

Will this work ?

1. Setup a co. sdn bhd
2. 5 are director of the co.
3. Buy the prop with the co.

The foreseeable challenge would be getting loan under co. to buy the property.

it cost you a few thousands to maintain a sdn bhd per year. unless one of the share holders is a qualified accountant & company secretary that agrees to do it free or super cheap.

but then if the house is under company then need to check what are the fees & tax rate, it might be much higher.

1. Company got not full financing. I think is 70:30 only.
2. Sell within first five years get hit by real property gain tax of 30%.
3. Loan may be granted based on a few persons credit worthiness. Meaning there r some in ur GRP may not be eligible.
4. Risk of someone defaulting need to pick up the tab.


This post has been edited by aurora97: May 1 2016, 09:48 AM

Ya, you guys are right and I quite agree with you .I have thought of that, the risk of default and so on. Of course, I do not mean buyers are students. It's a group of 5 adult who earn RM 4 k or above a month.
Non-technically speaking, if I am wrong or if it is not feasible, please correct me . IF there is a legal agreement was set at the outset and lay down all the condition to tackle all the possible risk. For example,

1) If anyone of the member don’t contribute their share of loan repayment for 3 month over the total period of loan repayment, the fella would have to “out of the party” automatically and immediately. He/she can sell “his share of the property” to someone at the amount of he/she had paid or below/ higher than that amount. The person can be from the “insider of the party” or “outsider of the party”.

2) For sure, in order to be the member of the “party”, we would have to filter the applicants’ ability to pay.


3) Agreement also set the rental of the property must be used to pay the loan instalment.
a) The rental amount is set at the market value and would be increase 2 % from years to years.

4) The shareholder couldn’t or could stay at the property provided he/she pay rent.

5) The agreement also laid out the condition to sell, for example :
a) sell the property once it appreciated to 120- 150%
b) sell the property when the shareholder reduce to 3 people
c) sell the property after 6 years no matter whatever the price




From the technically point of view [legal side and the bank (i.e., loan transfer?)],

6)is it possible that an agreement is set to override the S&P agreement for including all the above condition? And,

7}what is the other risks that might cause this investment to fail?

This post has been edited by ZapZapk: May 1 2016, 12:09 PM

Ya, you guys are right and I quite agree with you .I have thought of that, the risk of default and so on. Of course, I do not mean buyers are students. It's a group of 5 adult who earn RM 4 k or above a month.
Non-technically speaking, if I am wrong or if it is not feasible, please correct me . IF there is a legal agreement was set at the outset and lay down all the condition to tackle all the possible risk. For example,

1) If anyone of the member don’t contribute their share of loan repayment for 3 month over the total period of loan repayment, the fella would have to “out of the party” automatically and immediately. He/she can sell “his share of the property” to someone at the amount of he/she had paid or below/ higher than that amount. The person can be from the “insider of the party” or “outsider of the party”.

2) For sure, in order to be the member of the “party”, we would have to filter the applicants’ ability to pay.


3) Agreement also set the rental of the property must be used to pay the loan instalment.
a) The rental amount is set at the market value and would be increase 2 % from years to years.

4) The shareholder couldn’t or could stay at the property provided he/she pay rent.

5) The agreement also laid out the condition to sell, for example :
a) sell the property once it appreciated to 120- 150%
b) sell the property when the shareholder reduce to 3 people
c) sell the property after 6 years no matter whatever the price




From the technically point of view [legal side and the bank (i.e., loan transfer?)],

6)is it possible that an agreement is set to override the S&P agreement for including all the above condition? And,

7}what is the other risks that might cause this investment to fail?

Do you know where I could get the detailed information on how to buy property using company?

you can have what ever side agreement or even have it drafted & stamped. but those are your closest relatives, do you think if the agreement is used and enforced on them you relationship will still be good after it? your problem now is not just about $$ and the property, its also about your relationships.

I have been through such shit before and my advise for you is as long as it involves $$ especially huge sum of $$, don't get relatives involvement. the aftermath will be longer and deadlier than your full house long term.

Basically you are asking for trouble.

Property is not the only investment opportunity available. Why must invest jointly and severally?

The "shareholders" can have legal binding agreement among them but from the financier (bank) perspective it is not a party to the shareholders agreement and if loan is not serviced on time then it will take the necessary action to protect its interest.

I would involve my relatives when it come to money. My family experienced thousand of these kind of shit before.
Set aside the relative part, what would be the case like if it is you, me and other eligble lowyat members?

hahah.Is troublesssssssss.

Ya. I know property is not the only investment opportunity. But , from the conversation I heard and I figure out everyone want to invest in property but they are not able to do so individually. Therefore , I try to figure out is it possible to carry out as what I mentioned and what kind of challenge I would face.

Btw, any other good lobang to recommend?

Yes. Of course , bank won't "layan". I am just trying to figure out how to " work' it efficiently and effectively with bank side legally.

When you overheard any good investment in kopitium, it is about time to sell or keep away from that investment. If making money is easy, there should be more than 10% of people with over us$100k net worth.

Property game is not newly invented or discovered, if it is a great investment, every da ma and obasan would have invested years ago.

The main problem is the legal owner side of property registration or in other word, the property is registered under whom.
If register with 5 person name, then you need to have 5 person so sign off the transfer of property when selling the property time.
Either one doesn't want to sign, it is a standoff, no transfer can be made hence no S&P can be proceeding, disregard what kind of other legal agreement signed.

Also, you can't draft another legal agreement (fail to pay etc) to "force out" any legal owners from the property.
It violates the existing land code/property ownership law, which may result in the agreement made can be considered null and void.

Loan also cannot be transferred simply by drafting "another agreement".

Never ever "joint name" to buy property, it potential asking for trouble in the future only. Even husband and wife, my personal view, also no.

If really want to "joint name", use a company or holding company to own the property.

well if non relatives, friends will turn to enemies. that would be much easier since you can just stop contacting.

but then don't forget they could still file a dispute in court and you will go through a long court case with time & more $$ involved. so are you sure your property is going to worth more than that??

from your post I would guess you are still quite young, so not sure if you will have that much $$ lying around to hold on the property and a court battle at the same time.

I think we have a bit out of topic. My post was not discussing what investment is a good investment or should I join an investment that was being discussed in kopitiam .

My topic is : is it doable if there is an agreement govern a group of 5 same mindset/goal stranger to buy a property and dispose a property? And, what kind of risk would we face? how could we solve it?

I agree with you that it is the best time to realize the investment when everyone is discussing it.

I think we have a bit out of topic. My post was not discussing what investment is a good investment or should I join an investment that was being discussed in kopitiam .

My topic is : is it doable if there is an agreement govern a group of 5 same mindset/goal stranger to buy a property and dispose a property? And, what kind of risk would we face? how could we solve it?

I agree with you that it is the best time to realize the investment when everyone is discussing it.

yes I hear you..

of course you can have 5 or more people sharing but a really really tight partnership/JV agreement has to be in place to cover
ALL scenarios should one or more default on payments, should one passes away suddenly, should one decides to withdraw midway , and all issues with regards
to rental and or disposal, etc...I know of groups of investors who have done it..the key is to get a very very
tight agreement in place by getting a good and experienced lawyer to put the agreement in place.

for eg..if one partner misses 2 instalments, he /she will automatically be kicked out without compensation..

Hi cherroy. Thanks you for your reply. Really informative and valuable. That is what I am looking for.

If it's not workable to draft another legal agreement to "force out" any legal owner, is it possible if the 5 people including all the conditions in S&P agreement? (ie: the one who failed to pay the installment have no right share the profit of share and have must sign off the transfer of property when selling the property time?)

How does a company or holding company work to own the property? and what is the different compared to individual?

It would be worth the cost, rather than risking fallout between the 5 individuals.

Should there be any dis-agreement among the 5, it can be settled within the sdn. bhd. without affecting the property ownership, since the property is under the co.

That's just my 2 cents, unless we are looking at significant return and also picking up additional property down the line with the same co., the cost and hassle may not worth it at all.

ZapZapk wouldn't investing in REIT better and more hassle free ?

There is no such thing of S&P of 5 people that can force out 1 owner if he/she fail to pay the installment.

S&P is between the purchaser and seller to facilitate the sales of property, once executed and the property title being transferred to the buyer, that's the end of the S&P function.

While, ownership right of the property is on the property title registration.

If hold through the company, the subjected to company law, you just need to get more than 50% approval during the resolution of the company to sell off the property, then the property can be sold already, instead of need all 5 people to sign off the sale of property.
And the proceed of property selling is back to the company, instead of individual.
By then how to distribute the money, then it is under company regulation.

terms of an agreement has to be accepted by all before it can be executed so meaning everyone is going in with their eyes opened..the same term of being "forced out" applies to all...so don't see why cant this be legal..only way to know for sure is to get the advice of a real lawyer..

But I do agree that buying it under a company is the best route to go in the end but all possible scenarios still need to be covered ..

This post has been edited by nookie188: May 2 2016, 11:19 AM

S&P is a legal document to facilitate the MOT of the property, aka between purchaser and seller issue, (not among purchasers themselves)

Why seller want to care to sign such an S&P in the first place, as it may complicating the MOT afterwards.

Somemore, the being "forced out" owner may able to challenge the legality of the agreement in the first place.

When a property already registered under his/her name or 2 names, then the property cannot be sold without all the signature required, except through bankruptcy liquidation, which is another story.

A lot of dispute arised on the joint name property, is because the property transfer need all joint owner to sign off before the property can be sold/rent, not simply any 3rd party agreement that can already make the property being transferred/sold without the need of real owner to sign off the MOT/S&P.

ok ok lah..I was not referring to the SPA ..
got such thing as presigned POA..

already said ma - best way is to use company via shares ..

It is always good to have counter argument in such issue, which only raise awareness and benefited to all.

POA also not workable in this situation.
You have A,B,C,D,E 5 people.

You have 5 people to sign the POA (which required to be endorsed by high court), mean 5 donor.
Who is the donee then?

If A is the donee under the POA, mean A has full in charge on the property.
By then, A can do whatever on the property, as BCDE already gave POA to A to act on behalf.
A become like "boss to others".

Why BCDE want to sign such an POA in the first place?

Also POA is intended to act on behalf only, aka it may settle the sign off the signature related to the property issue,
but it doesn't settle the "force out" clause the intended for this case.
The proceed the selling the property still need to go back to the original owner.

Still a very messy situation.

This post has been edited by cherroy: May 2 2016, 12:15 PM

donee can be the appointed lawyer..?

I know this so called "false out" clause has been used before but by a Spore investment group - ok I don't have the full details but the "guru" said this is the route they will take if any partner defaults..i did not pursue as I was not interested at that time.

last time i wanted to buy a house from a lady. the house have 2 names, the seller and her friend.

her friend demanded that the seller give her the share of her money upfront and she will only sign the S&P. the seller don't have that amount of money upfront and asked me to give her the money in advance before signing the S&P.

i disagree that money shouldn't be transacted unless the S&P is signed.

The deal was called off.

even buying a house with 2 names can cause problem. what more 5 names?

This post has been edited by juicyliana: May 9 2016, 05:13 PM