Monday, 22 June 2015

Depreciating RM Currency - a boom for the leveraged investor

Generally, l advocate leveraging to get better returns. In the case of Malaysia property, I am so far able to get 90%, 80% and 70% loan. I am happy the currency falls as it meant my debts are lower vis-a-vis the falling of my equity. That is of course provided that the property price don't fall. When a currency falls without a fall in the economy, generally it will bring about imported inflation and hence the price of assets will rise. 

Eg, a RM1,000,000 
with a depreciation of 10% in currency, if you had put in 20% downpayment, it means you lose 2% of the asset value - RM20,000 in value. At this point in time, if you sell your asset, you lose RM20,000. However, taking a long term view, if the currency falls, generally asset price increases due to inflation. Say a 10% increase to RM1,100,000 This would counter the inflation. You loan remains 80% of which is RM800,000, your asset would have brought you gains of RM100,000 vs your deposit of RM200,000. This will offset any loss in depreciation of currency.

When in doubt, consult the spreadsheet.

Saturday, 20 June 2015

How to sell a house? a article shared from Mr Money Moustache

Mr Moneymoustache blogs about a frugal living and living with a purpose, I've read his retirement story at age 28 and have been an ardent follower since. Well he had retired from work but had not retired from working. You see, Mr Money Moustache loves his life and not his bosses lives, after he made enough to sustain him, he worked for himself, doing the things he loved and doing them with passion. He had spent enjoyed quality family time without going to the restaurants, movies, or spend huge money on holidays. Enjoy the article.

How to Sell a House

In the making since 2007
An event in the making since 2007
This is kind of a special moment for me. Since the year 2007, which is eight years ago or 20 percent of my time alive on this Earth, I have been stuck with a less-than-ideal real estate situation. And it is just about to be resolved with the happy CHA-CHING! of a cash register.
To make the long story short, my old house building company created a fancy, modern house just in time for the late-2000s housing crash. After two years of listing it for sale and dropping the price, I took it off the market. Instead of selling it into the void at 50% off, I put it on the backburner as a rental house. Since then, it has generated generous monthly checks in exchange for a low level of background stress in my life.
Finally, our local real estate market has recovered fully and the time has come to put this place on the market, and so that is where our story begins today.
And it’s not just my story – selling a house is a big deal for many people. It can be a stressful event, or a looming unknown for those who have never done it before. This fear keeps people stuck in one place while commuting to another, or locked up on top of a million dollars of equity, when they could easily use that money to retire young and live somewhere else.
Loosening up your feelings about selling a house can provide a surprisingly big life boost. As a side benefit, knowing how to do it well will add money to your life while subtracting stress.
With my habit of renovating houses and moving around a little plus a wife who is a licensed real estate agent, I’ve been through a few more house transactions than average. But my Honey Badger tendencies have gotten me stung plenty of times, so I have seen the cruel side of the real estate market just as much as the generous. Because of this history, I figured it would be worth peeking in on my current house-selling adventures as an example.
What Selling Means
At the core, when you sell something you are becoming a salesperson. This means finding out who your customers are and what they want, then figuring out how to make your product appeal to them. You can pretend this is not true, and in a hot enough market you may even get away with it, but in general you tend to get walked over if you ignore the realities of your customers.
Knowing Your Customer
When I bought and renovated my first house at age 25, I saw things only through my own narrow lens. I was an engineer, so of course I assumed that advanced network wiring to every room would be valuable to everyone. I was young and fit and had no children, so of course we didn’t need three bedrooms on the main floor, or guardrails to protect the basement staircase.
Eventually, I applied this self-centered vision to my housebuilding company in 2005 and built something the market did not value as much as I had hoped. I liked modern, open houses which worship the Sun. Big windows. Exposed structural beams. Welded steel. Stone tile that goes all the way to the ceiling. While I shared this housing taste with Dwell Magazine and Los Angeles thirtysomethings, it turned out that my customers at the time were non-coastal people two decades older than me, looking for traditional Victorian-themed homes with enough bedrooms for their kids. They didn’t care at all about how many square feet of South-facing glass a house contained.
Similarly, if you’ve lived in your house for a long time and are getting ready to sell it, you might find that the people moving into your neighborhood are a different crowd than those moving out. Blue carpet and flowery country-style wallpaper were homey touches in 1982, but have become quite destructive to resale value here in 2015.
The bottom line is that your house will sell better if it matches the desires of your ideal customer. A full decade later, people my age (who I find more likely to have similar tastes) can finally afford houses like the ones I built, which means the local market finally likes the same things I do. At last, we pass the Customer Test.
Becoming One With Your Local Housing Market
Almost ten years ago, I signed up for an automated email system that alerts me of every house listing and every sale that takes place in my neighborhood. Although I would not recommend this for people not interested in real estate, it has been fascinating to me. Over time, you develop a deep intution for spotting deals and ripoffs at the moment of listing, which you can refine by watching how quickly or slowly each house sells. Then when it comes time to sell your own house, you know exactly how to price it to hit the fine line of maximum profit.
In the case of the rental house I’m selling right now, similar homes were selling in the $550k-$600k range, so I set my price at $565,000.
Preparation for Sale
House buyers are in an amazing situation: they are making a spectacularly expensive purchase after only 30-60 minutes of touring the product. This means that they operate based on first impressions and rapid evaluation of the spaces. And thus your house needs to hold up well to this type of evaluation. It’s worth reading a whole book on this, but to summarize quickly:
  • Think Open and Airy: When buyers walk in, they need to be confronted with light, space, and charm. So eliminate anything that blocks this feeling – open the curtains, clean the windows, and remove stuff like baby gates or pet crates.
  • Renovations: In higher-end markets, strategic renovations including a modern kitchen, knocking out unnecessary interior walls, and (oddly enough) a great front door will return more than 100% of the cost in eventual resale. The key is in watching that cost: even hiring out all the work, a new kitchen with good cabinets, stone countertops and quality fixtures should total under $25,000 rather than the $75,000 many people end up forking over.
  • Stage the House: If it’s empty, hire a staging company. If you still live there, remove most of your stuff and have only sparse, tasteful decor. Selected artwork, a nice table arrangement with flowers, the perfect books on the shelves, and so on. Buyers will claim that they can look past a mess, but it just isn’t true. The well-staged houses get statistically higher and faster offers, which makes it a profitable choice – especially in higher priced markets. I spent about $1600 to hire Design Matters Home, which covered design plus all the furniture rental and moving.
  • Photography: this is critical, cheap, and yet usually overlooked. How many real estate listings feature blurry, dim pictures of the corners of rooms taken by the listing agent running around with an iPhone for a few minutes? To do it right, you need an SLR camera with a tripod and roughly a 10-22mm wide angle lens. Or hire an affordable pro – I was able to get a great real estate photographerto shoot my house, plus process and deliver about 50 digital images for under $100. Money well spent (and thanks Josh!)
    Let’s compare the effect of lackuster versus professional photography with a real-world example.
Figure 1: These are the actual pictures from a recent $425,000 listing in my area. Four hastily-taken pictures. Seriously?
Figure 1: These are the actual pictures from a recent $425,000 listing in my area. Four hastily-taken pictures. Seriously?

Figure 2: Since the system allows up to 25 pictures, I provided 25. Each with a full text description (most real estate agents leave the description field blank).
Hire an Agent or Sell it Yourself?
Even Mrs. Money Mustache (an accredited agent herself) admits that there is no special difficultly involved in what real estate agents do. While there are surely some brilliant, talented and hardworking people in the field, the hard truth is that only a minority of the agents either of us have met would fit this description. Besides, the real work is making the product great and getting it in front of buyers. In the US, this means getting your property listed in the MLS (multiple listings system). Although it is an antiquated and proprietary system, it is still where most buyers are shopping so you need to be in it to win it.
Suggestion: hire an intelligent and dynamic agent if you can find one and are not interested in doing the work yourself. Otherwise, hire a discount fee-for-services agent, or just put your place on Craigslist and then pay separately to get it into the MLS.
Most of your buyers, unfortunately, will still be shopping with a buyer’s agent, so you should expect to fork over 2.8% of your purchase price to pay his or her fee if you want access to that big pool of shoppers.
Showings, Offers and Negotiation:
Once you get the place listed, you are off to the races. Buyers will find it on the MLS system as well as Craigslist if you listed it there. They book appointments, review your hard work, and if you are lucky, make you an offer.
There will be negotiations, an inspection, and various deadlines and hurdles to clear, and the level of stress all depends on what type of market you are in: in a slow market, buyers might ask you to replace the whole furnace or roof, and walk away to the next deal if you don’t comply. In a fast one, you can safely reject anything silly and the buyers will tend to give in, lest they lose yet another house to other competitive buyers.
Pro Tip: Normally, buyers can make an offer at any time and you have 24 hours to respond. But if you write something like “All offers will be reviewed on Saturday July 11th at 12PM”, you can wait a week or so to collect multiple offers and respond to everyone at once. This increases your chance at having multiple options and creates competition between buyers, which increases your leverage in negotiations.
So Should you Do it?
Selling your house is always going to take some work, no matter how you approach it. But if you do the math right, it can be some of the highest paid work around, and come with great lessons in human nature as well. I have never regretted a sale and have many good memories (and dollars) to show for the hard work of the past.
At the same time, you should think about the work of eventually selling any house before buying it in the first place. If you’re not ready to devote a few weeks at some point in the future, and potentially absorb a 20% loss if you need to move in a down market, you should definitely consider renting instead.
I started writing this article a few weeks ago, as Mrs. MM and I were working through all of these steps ourselves. We were ready at last on June 9th, finishing the last details and getting everything uploaded into the system just before midnight.
Just after breakfast the next morning, the phone rang with an incoming number from a Hawaiian area code. Some new arrivals to Longmont had studied our listing in detail and were very excited to tour the house in person. We agreed on an appointment time of high noon on that same day.
I biked down to the house to meet the prospective buyers, and we immediately got along like old friends. The house tour was more of a celebration of our shared tastes in home design, and they were full of questions about how every detail had been designed and built.
Before leaving, they gave me a verbal, full-price offer with no buyer’s agent to suck money out from the middle of the deal. In other words, $565,000 with no funny business, heading directly to our investment account in just a few weeks. We shook hands and I thanked them for their wonderful interest and the offer.
Following the Pro Tip above, we left the place on the market for a full week, collecting two more solid offers – but nothing quite as good as that first offer, because cutting out a buyer’s agent made their offer effectively 2.8% higher (about $16,000). So we sealed the deal, the house is under contract, closing will be next month, and all is well.


I wish you even better luck than I’ve had in your own real estate adventures. Own the house you truly want to own, sell any that don’t fit that description, and prosper.

Pawn Broking Business - passive income stream

I have always wondered how pawnbrokers work. Yesterday I passed by a pawnbrokers and curiosity finally took the better of me and I went in just a wee bit to take a look at a notice. They are offering 1% interest. hmm... as a leverager, 1% is good deal! I went on to read the entire notice. "1% for the 1st month and 1.5% per month subsequently. Wow.... Thats 17.5% per annum for money lending with collateral! Thats day light robbery I say!

Apparently this is thriving in many countries, where people live salary to mouth. A slight delay would mean cashflow disaster. One such country to highlight recently was Korea where electronics products from students were being accepted as collateral for some quick cash. Electronics would not have any value to a pawnshop and normally they would not want such products however, it became a thriving business in Korea where students could get fast cash by pawning their phones, guitars and other electronics for a few days to weeks to solve their cashflow problem, until their parents give them their allowances.

As I know, the way to mitigate the depreciation of electronics is to grant shorter terms and lower the cash value granted. Say 50% of the products current value and only 3 months to fully redeem the product. 

As I learn about this 'daylight robbery' business, it intrigues me. This could be a long term passive income source.

Wednesday, 17 June 2015

Update on Seri Bukit Ceylon

Competition has heated up in the Bukit Ceylon Market with the completion of Laman Ceylon, 6 Ceylon, Verticas, Suasana, One Bukit Ceylon, plus the already competitive market. 

Seri Bukit Ceylon still sits in a more enviable position, that is coveted by tenants. A Best has taken over the apartments ran by Somerset. I stayed for 1 week with them. The price on the web is not bad at SGD 69++ for a 1 bedroom, 591 sqft unit. They are apparently running at a 90% occupancy rate.

My agent told me they would like to offer RM 2400 for my unit for 2 years. Which puts me in deficit per month for RM 900. This is not a good place to be for long, however, as I blogged earlier, the capital gains have been about 3-4% gross per year and this is low. I think as long as the rent covers interest, I'm ok to hold on for a while longer. The MRT is going to be up in 2 years and I would have hit my 5 year mark with only 5% CGT. 

So, this market, at this time, the KL city centre market is weak. Do watch for the 1MDB issues to be resolved and see RM sliding further. At this time of writing, it has gone down to RM2.821 RM and at the time of purchase, my exchange rate in 2012 was RM2.5, a >10% drop in exchange rate.