How How YouYou Can Become Can Become a a Multi-Millionaire Multi-Millionaire Real Estate Investor!!Real Estate Investor!!
by Milan Milan DoshiDoshi Best-Selling Author &
Independent Financial Trainer
Mastering the 6Mastering the 6 GoldenGolden Success Success
Rules in LifeRules in Life
11stst Golden Rule Golden Rule
In order to In order to
EARNEARN & INVESTINVEST MoreYou First Need to
LEARNLEARN More
22ndnd Golden Rule Golden Rule Another Way to
LEARN & GROWLEARN & GROW is by
NETWORKING NETWORKING with other like-minded with other like-minded
peoplepeople
EARNEARN As Much as You Can,
As FASTFAST As You Can
33rdrd Golden Rule Golden Rule
SAVESAVE (not necessarily min 10%) As Much as You Can
44thth Golden Rule Golden Rule
BORROWBORROW (always ensure Potential Returns >
Borrowing Costs) As Much as You Can
55thth Golden Rule Golden Rule
INVEST WISELYINVEST WISELY
As Much as You Can
66thth Golden Rule Golden Rule
In the Long Run, it’s not How Much Money You Make that will determine Your Future.
It’s how much of that Money You Put to Work
by SAVING It, & by
INVESTING It (wisely)~ Peter Lynch
RISKS RISKS versus versus
RETURNS RETURNS of Various of Various
InvestmentsInvestments
Where Does Where Does REITs REITs andand PropertiesProperties stand vis-à-vis stand vis-à-vis
Other InvestmentsOther Investments
Offensive InvestmentsOffensive Investments
Potential
Return
Risks* Fixed Deposits (3% pa)
* Endowment Policies (2-4% pa)
* Bonds/Bond Funds / REITs (6-8% pa)
* Property * Equity Funds (10% pa)
* Stock Market (20-30% pa)
* Hedge Funds (>30% pa)
* FOREX/Options/ Commodities/etc
Inflation
A-REITA-REIT(listed Nov’02)
Appreciation of = 45% pa over Appreciation of = 45% pa over
1 year (Rights/Divids excluded)1 year (Rights/Divids excluded)
Appreciation of = 21% pa over Appreciation of = 21% pa over
10 months (Rights/Divids excluded)10 months (Rights/Divids excluded)
KLCCP BhdKLCCP Bhd – the – the closest to a REITclosest to a REIT
Benefits of Investing in REITsBenefits of Investing in REITs
Portfolio Diversification - REIT’s own Multi Properties,
Diversified Tenant Pool, Different Lease Lengths, etc
Income Distribution - 90% of Net Income is distributed
to unit holders as dividend. No Tax on Rental Income.
Benefits of Investing in REITsBenefits of Investing in REITs
Participation in the Property Market
- You can own small stakes in big properties
Professional Management
- No worries about Tenant and Property Management
Benefits of Investing in REITsBenefits of Investing in REITs
High Liquidity
- Can buy and sell as normal shares
Low-Risk, Stable Investments. Low Correlation profile against other asset classes
Low Transaction Costs
- Same as per shares
Market Capitalization of REITsMarket Capitalization of REITs
Singapore: 2% to 3% (S$4 billion)Singapore: 2% to 3% (S$4 billion)
Australia: 8% to 9%Australia: 8% to 9%
Malaysia: High Growth ProspectsMalaysia: High Growth Prospects
Upcoming REITs:Upcoming REITs:
Axis (Offices + Warehouse) Axis (Offices + Warehouse) - listed- listed
YTL (Hotel + Shopping Center), YTL (Hotel + Shopping Center),
Sunway City, Landmarks Sunway City, Landmarks (Sg.Wang), MRCB, KPJ (Sg.Wang), MRCB, KPJ HealthcareHealthcare
Official Inflation Rate:
“Unofficial” Inflation Rate: 6-10% pa
2 - 4% pa
Official Official versus versus ““Unofficial” InflationUnofficial” Inflation
Types of Types of
Property Property
InvestmentInvestment
StrategiesStrategies
1.Buy from Developers and Resell Upon Completion
Important to Buy the …From the Right Developers
Right Property Type in the Right Location
at the Right Time & Price
Sell on Completion
2-3 years at
20-30% higherRepeat the
Formula!
Book Apt @ 500K
D/P = 100K (-)
Loan = 400K
ExampleExample
Sell @ 600K (?)
Loan @ 6% = 435K
Profit = 165K (+)
Sell on Completion 3 Sell on Completion 3 Years Later …Years Later …
GrossGross 165K – 100K165K – 100K
ProfitProfit = ------------------ %= ------------------ % = 65% over 3 yrs = 65% over 3 yrs 100K 100K = 18.1 % pa = 18.1 % pa (compound)
Price is Cheap but the RISKS you take are extremely HIGH
Makes Sense to Pay Slightly More to Buy Ready Made. You know exactly what you
are getting + the Risks is much lower
Disadvantages !!
Structuring
Your
Property
Portfolio
5. Raw Land/Development
4. Commercial Properties(Shops, Offices, Factories, Warehouses)
3. Ready Made – Buy for Appreciation(Landed Houses)
2. Ready Made – Buy for Rental Returns(Medium Cost Apartment)
2. Buy Ready-Made Medium Cost Apts – Buy for Rental Returns
Rental Returns: 7-9% pa
Appreciation: Poor (< 2% pa)
Easy to Buy with Zero D/P and +ve C/F (suitable for beginners)
Tenant Mgtm will be challenging
3. Buy Ready Made Landed Houses – Buy for Appreciation
Rental Returns: Poor (3-5% pa)Appreciation: Good (3-5% pa)Total Returns: 6-10% paWith minimum D/P, you will have –
ve C/F (Rental < Installment)
Timing is very importantHIGH RISKS due to –ve C/F
4. Buy Commercial Properties
Rental Returns: 6-8% pa
Appreciation: Good (3-5% pa)
With minimum D/P, possible to get Zero C/F (Rental = Installment)
Location extremely important
Possible to get “Lifelong” Tenant
Suitable for Wealthy Individuals
5a) Raw Land – good way for the super wealthy to “park” their surplus funds for their future generations
Tip: Buy in Areas where the growth is heading towards
b) Plantation – expertise needed
5c) Homesteads
d) Property Development – your ultimate aim to make profits of 30-50% per project
6. Buy Basic or Run Down Properties, Renovate, Sell Off
Example: Garry bought a run-down bungalow in Bangsar @ RM1.5m
Tear Down + Rebuilt + Furnish = RM1m
Sold 6 months later @ RM3.3 m
Gross Profit = 800K for 1 year work
7. Specialize in Abandoned or Haunted Properties
…. if you can find the owners. Restore the property back and sell it off.
8. Specialize in AuctionsAll auction properties are sold on a “as is,
where is basis”. Clause in the Proclamation of Sale stating “Prospective Bidders are advised to inspect the subject property and check on the issuance of separate individual titles/strata titles, seek Legal Advice on the Conditions of Sale, conduct official parent Titles search at the relevant Land Office and make the necessary enquiries with the Developers and/or other relevant authorities on the terms of consent to the sale prior to the auction sale”.
9. Buy in Areas where Accessibility is being Upgraded
Example: Old Klang Road, Kesas, new Guthrie highway, etc
How You Can How You Can Retire a Retire a
Multi- Multi- MillionaireMillionaire
via Propertiesvia Properties
Goal:Goal:Become a Millionaire by
the time you Retire by
a) buying 1 medium cost Apt worth RM100K every 5 years
with
b) Zero to Positive Cash Flow with the Potential for Long Term Appreciation.
Assumptions:Assumptions:1. D/P = 25K (25%) so that C/F=0
=> Saving of RM416/mth x 5 years
2. Loans @ 8% for 20 years
3. First Apt @ 30 years is own use
4. 1 Apt bought for Investment every 5 years starting at age 35 until age 55 years
5. No Inflation & Compound Interest
Property Investment Time LineProperty Investment Time Line
Age: 30 35 40 45 50 55 60 FV
Own 1 F 250
Investment
2 F 225
3 F 200
4 F 175
5 F 150
6 F 125
1,125
RM69.90RM69.90 RM49.90RM49.90
RM39.90RM39.90
Prices of Milan’s Books:Prices of Milan’s Books: