Time to Dig In and Reassess Your Investment

The new year 2015 has brought a new landscape to the investment scenario, either to the property market or the investment market as a whole.

2014 can be called as the year where most investors had expected to make less money but surprisingly, most can claim it was not too bad of a year after all. Most investment funds such as Amanah Saham Bumiputera, real estate unit trust, unit trust and Employee Provident Fund have declared good returns more than what were expected from them. The stock market had climbed to new heights. Property market did return to a semblance of the good old days.

Alas, it didn’t last. By the end of the year, the stock market had turned southward, the oil prices started its sharp decline, the property market started to go soft and the fun is lacking in funds. If statistics are to be trusted, we are expecting 2015 to be a bad year. To add salt to the wound, we are expecting a period of ‘adjustment’ due to the introduction of the Goods and Sales Tax (GST) starting this 1st April 2015 in Malaysia. The words ‘uncertain’, ‘not going to be much impacted’ and the favourite ‘…going to pick up’ are keywords which are being used extensively when the experts are asked what lies ahead. No one will commit that we are heading for a bad time.

For those who had lived long enough, they recognised the next few months as the time to dig in and to reassess their investment. It’s not as if they have never seen it before. Right?

How about the young ones? The ones who had just start their work lives and are just starting to invest in places they thought were good enough for them to get good returns? Should they keep on investing? Should they cut their losses and wait until the market stabilised? Is property still a safe bet?

The answer is simple: It is time to dig in and reassess your investment. It is good to do this every once in a while. You need to understand the concept of holding power and the time to cut your losses.

There are a few rules all property investors or any other type of investors should always keep in mind:

1) ALWAYS RESEARCH WHAT YOU ARE INVESTING IN

Understand the concept of investment, know the product, and know how much you are spending and what your exit strategy is. Before jumping into the water, you should know whether it is cold, warm or hot.

2) ALWAYS KNOW THE SELLER AND MANAGER THOROUGHLY

One of the lessons I’ve learned about investing in property is how important it is to know the seller, be it the property development company, the bank auctioning the property or the seller of the property. Most people do not research properly the seller especially if they buy a property from a housing developer. Past success (or lack thereof) does not ensure future success.

3) RESEARCH THE PRODUCT YOU ARE BUYING

This advice is redundant of the advice No. 1 but this goes to the specifics. This is when you research the place and the type of property you are buying instead of knowing about how to invest in property. As an example, if you shunned areas such as Nilai or KLIA a few years ago, it might be of interest to you to know that the property investment landscape in those areas has changed. People are starting to buy in those areas. If you are looking for deals, this may be a good time but not for long.

4) UNDERSTAND THE COST (APPARENT OR HIDDEN)

People who buy properties should ask a lot of questions until the sale person who handles the queries starts to hate you. In all my years of being a lawyer, I find people are indifferent when it comes to the fees a lawyer can charge and why he/she is charging that much. They only look at the total amount and only care about how much discount they can get from the lawyer without asking why there’s a separate cost for disbursement and what each disbursement is for. I also find people are surprised at the idea of paying monthly charges, quarterly charges and annual charges for their strata properties to pay for monthly maintenance, sinking fund and assessment rate, respectively. When they sell their property, they are again ignorant of the fact of the Real Property Gain Tax that they will have to pay.

5) THERE IS NO SUCH THING AS A QUICK RETURN

Everyone wants to make a quick buck. As PT Barnum had allegedly said, “There’s a sucker born every minute.” These two rules have made a few enterprising spirits into crooks. The modus operandi maybe different but the rules have never change. There is no easy money. Period.

6) READ

Read the news, read about the change in law, read about the change in the interest rate regime, read about the debate on the implementation of Goods and Sales Tax, read about the debate on lowering of the prices of goods and, finally, read the fine print. Read every single thing. And understand it.

7) YOU CAN ALWAYS EXIT ANYTIME YOU WANT

If you have invested, surely you have read the fine prints and you have planned your exit strategy. Even if your debt is as simple as a credit card, as you aged, wouldn’t you want to close all those cards that are eating up your disposable cash and start to be smarter? If you had bought a property which you planned to rent but it is giving you negative cash flow, shouldn’t you check the market value and see if you can sell it for a good price? Why must you have debts that are not helping you to gain more money?

8) THERE’S ALWAYS OPPORTUNITY EVEN DURING THE BAD TIME

Yes, the oil prices dropped, the ringgit is at its lowest and the economy is going to be bad. Foreign investors are leaving in droves. People are not buying as much as they did a few years ago. If you have kept some money for such times, this is the time to buy properties. There are so many choices in the market. People rather rent than buy. If you had wanted to rent your property, you can start now. If you get good rental, don’t sell the property yet. Check your tenant properly, make sure you have an ironclad tenancy agreement and make sure you can sell the house when you get a good offer.

9) DO NOT STOP INVESTING. THIS TOO SHALL PASS.

As you reassess, exit your investment, recuperate, change tactics and reinvest your money somewhere safer, try to look for opportunities that are less risky. I’ve met so many people who insist in investing in properties but do not have any investment at all in safer portfolio such as ASB or unit trust. They rather take the high risk, high return route as if the winner-takes-all attitude is the only way for investors to live.

10) HAVE MULTIPLE SOURCES OF INCOME

Remember the time when even the government allows for its staff to have business? This happened a few years back. As much as you rely on your salary and allowance for your livelihood, why don’t you make money from what you do in your spare time? If you are a traveller or a cyclist, invite others to join you and you can charge them for organising the tour or event. Make sure you really know what you do and do it well so that the word of mouth will spread. It might just be your next career move.

This was first published as an article with Property Insight Magazine, March 2015 edition http://propertyinsight.com.my/time-to-dig-in-and-reassess-your-investment/