Secrets of buying from property developers

By Sherry Koh | Jul 13, 2010

Juanita Chin is one gutsy lady. Her property investment journey with her husband began in year 2003 and today, they own 13 properties in Penang worth approximately RM5.6 million. 12 of those properties were purchased from developers.

How do these numbers make her gutsy you ask? They don’t, but the following figures do; when she started, she was a bank teller earning RM400 and she had two young children. She had the courage to take action and the story of her journey towards financial freedom is as inspiring as it is heartwarming.

In a recent two-day property investment course titled Breaking the code: Discover the secrets of buying from property developers in Malaysia, Chin partnered with fellow property millionaire and close friend Michael Tan. This is not their first collaboration and certainly, will not be their last.

Even before looking at new residential developments by developers, there are many things that each investor must do and ask oneself.

• Research: Spend 80% of your time on research before placing any deposit. Make sure that the price per square foot and location is right. Chin shared, “There was an expo overseas and most of the buyers bought a property that was in the jungle, with beautiful scenery and all that. But these investors were not aware that the development would be 100km from the nearest town! By asking the right question(s), these investors would not have been stuck with their purchase.”

Energetic: Michael Tan “warming up” the crowd

If one does not conduct the necessary research, one could be stuck with a property that has depreciated from RM100,000 to RM50,000 and be stuck with the property after seven years (and counting!). That is another example that Chin shared. The unfortunate investor told her, “I should’ve invested in seminars. What is a few thousand (to spend on seminars), to save a RM50,000 mistake!”

• Set your goals: You need to know whether you are going purchasing to keep (for rental returns) or flip (buy-to-sell upon capital appreciation). It is also important to figure out who the target tenants or buyers are once the project is completed as that affects your goals. Ask yourself, “Would a restaurant or grocery store want to do business here?”, because future tenants or buyers will ask such questions.

• Set your budget: Decide on your property portfolio, whether it would be less than RM500,000 or RM100,000 and so on. For a newbie, it is advisable to begin with a smaller budget.

• Set your target location: Don’t run all over the place. Instead, be an expert in a particular area and keep farming (investing) in that area.

• Pick type of development: Would it be residential, commercial or industrial?

Once you have figured all that out, then you should analyse the developer. To evaluate, you need to find out these key information - track record, financial strength, reputation, past projects (completed / abandoned), end-financiers, workmanship, license approval and the individuals behind the project.

Chin also cautioned that it is important to find out if a developer has been blacklisted by the Ministry of Housing and Local Development. As reported by The Star on March 23, 2010, a total of 1,345 housing developers were blacklisted from carrying out projects the previous year. As at March 5 this year, a total of 1,120 developers were blacklisted and the highest number of blacklisted developers were from Selangor, followed by Kuala Lumpur and Johor.

To help residential property investors select the right project, Chin shared a list of positive and negative indicators.

Positive indicators	Negative indicators
Workmanship	Near sewerage treatment plant
Near amenities	Next to electricity sub-station
Location	High tension wires
Good property management	Graveyards
Security	T-junctions
Surrounding neighbourhood	Facing empty land
Developer’s track record	Garbage dumpsite
Property layout	Smelly surrounding
Specifications	Noisy
Facilities	High density
Car park
Landscape
Good catchment area
Growth potential

The second day – field trip 
On the first half of the day, all participants were ferried to two upcoming residential projects. They had to evaluate these projects based on the first day’s learning and decide which project (of the two) that they would purchase.

The second half of the day was a sharing session with two property investors – Prudence Wong and Nancy Ng, who are of course, property millionaires themselves. In fact, they are so successful that they are currently collaborating on a commercial project in Shah Alam. Both have attended many workshops and courses (property and non-property related) before finding their Midas touch in property investment. They actually met through an Internet course eight years ago.

Passionate about property: Juanita explaning the “property analysis” exercise to attentive participants

Read the interview with driven property investor-turned-developer Prudence Wong and find out about her property investment journey and retail-cum-business suite project, Qube.

Nancy Ng is the sales project director for The Qube. She began investing since year 2003 and has attained more than 15 properties within six years. This comical and cheerful Ng shared the following with regards to financing.

• Pay your taxes

• Refinance some of your paid properties or properties that have increased in value

• Be a member of banks’ priority or privilege clubs

• Pay all your loans on time

• Establish good working relationships with your bankers, lawyers and property agents

• Look out for discounts and promotions such as 5/95 (5% down payment / 95% financing from bank), 10/90 or 20/80 from developers

If you are new to property investment, she advised to take baby steps and invest in yourself by attending property seminars (or attend to get the latest updates if you are not a novice investor).

Upcoming workshop – Property Millionaire Challenge 
Juanita Chin will be co-sharing an upcoming seminar with Dr Peter Yee (academician turned property millionaire) and Michael Tan (property investment coach and professional mortgage consultant). The 3-day seminar, titled Property Millionaire Challenge, will be held from August 20 to August 22, Friday to Sunday.